Mike Preston

I have never heard of anybody doing an audit for a qualified plan in connection with the filing of a Form 5500 who was not a CPA. Is that allowed?

From the 2002 ASPA Annual Conference, Q&A with the IRS: 29. An employer maintains only a profit sharing plan. The contributions under the plan do not satisfy any of the gateways under the cross-testing regulations. The plan passes the average benefit percentage test on a benefits (cross-tested) basis, but not on a contributions basis. In applying the general test to the amount of contributions, may the rate groups be tested by comparing their ratio percentages to the mid-point of the safe and unsafe harbors? Yes. In other words, may the plan use cross testing in the average benefits percentage test, even though it may not use cross testing in the 401(a)(4) general test itself? Yes.

The anti-cutback rules apply equally to HCE's and NHCE's. The issue is whether they apply in your case. Some take the position that you may amend a discretionary contribution plan up until the date that an allocation date is defined in a plan without violating the anti-cutback rules, even if somebody has met the requirements for an allocation before that allocation date (such as for a plan that requires only 500 hours of service to be eligible for a contribution for the year, but does not provide an allocation date until the last day of the year). Some folks cite TAM 97-35001 as the reason why a plan can't be amended before the end of the plan year, even in a discretionary contribution plan, but there are those at the IRS who vehemently hold to the position that 97-35001 only stands for the proposition that in a discretionary contribution plan an amendment AFTER the end of the plan year is a problem. And some are even more lenient than that: in that only an amendment after both the end of the plan year AND after a contribution has been made for the year.

AndyH, I don't think you are the only one. However,most plans that I've seen take the position that forfeitures reduce contributions. I think that language solves all problems as long as the contribution itself is well enough defined. Blinky, can you be more precise as to what session and what year you heard Wick indicate that the written requirement as to designation of contribution was eliminated? DIB, I know I'm coming late to the party here, but if I had noticed earlier I would have suggested that every time you had used the phrase "rate group" you replace that language with "allocation group". This stuff is confusing enough for those that are reliatively inexperienced with these issues without mixing the technical terms. A plan's rate groups are defined only by the testing under 401(a)(4), not by the plan's terms.

It depends on the plan document provisions. The plan can be drafted such that you are not required to begin payments for any individual other than a 5% owner until retirement. But it can be drafted otherwise.

In an attempt to bring some focus back to this discussion, I would like to ask GBurns a question: Assuming that austin3515 is asking the question from the perspective of a CPA involved in auditing a plan, are you saying that the CPA has no responsibility to confirm that the distributions reported were, in fact, made as indicated because the CPA receives no formal training on this particular issue in preparation for the CPA exams? If not, and it is later determined that distributions were fraudulent, do you think that the CPA is held harmless because of the lack of that formal training?

Thanks.

QDROphile, can you repeat that in slightly different terms? I can read what you wrote 3 ways and I'm wondering which one you meant.

Indeed!

Why are you shouting?

It is not subject to the bonding requirement.

While not necessarily easy to determine, if somebody has earned a right to a benefit today, it is because of termination due to death, disability or retirement. It IS possible to determine how much that person would have gotten based on the total contribution for the year, allocated in accordance with the original allocation provision. As long as the new comp allocation provides that same level, I think the amendment to new comp shouldn't be viewed as a cutback.

Compensation is not subject to discrimination rules. If the employer decides to bonus an amount to certain employees it should be ok. What would NOT be ok would be to say that if one deferred monies into the 401(k) plan the employer would provide a benefit (such as an increased level of compensation). That would violate the 401(k) rule that precludes basing something other than a match on employee deferrals.

I think the SH contribution can be 3% of compensation while a participant, while TH requires 3% of full year compensation. SH can also only be directed to NHCE's, while TH must be directed to those who are non-Key. Hence,there are differences. Sometimes those differences are significant. Sometimes not.

We have a threshold issue, I think. Your second paragraph doesn't leave open the possibility that a plan that has executed a certificate might adopt a non-word-for-word document and decline to submit. I know that was a requirement for TRA'86's extended RAP, but I thought they dropped it for GUST. If they dropped the requirement, then your only need is to ensure that the plan's language conforms to the law upon plan termination. That is, you can take advantage of the GUST extended RAP as to timing, no matter what form of amendment you make to the plan. The problem is that I *think* the IRS believes that its own slap on amendments are deficient. They were "good enough" before the IRS finished the LRM's and opened up the program for submission. But I don't think they are "good enough" now, without some serious scrubbing. Of course, since I've not attempted the scrubbing, it may not be that much, but with all the documents now available, why would you want to?

It is not.

jdubya, it really is impossible to answer your questions without a lot of detail that you haven't provided. I know this stuff is frustrating for you, but unless you have complete information available, asking questions like whether something is morally right or fair is, in itself, not particularly fair. To start, you need comparison numbers. With respect to question 1, what was the lump sum you could have taken at age 53? That might be zero (if you weren't eligible at that age to receive a lump sum). If you weren't eligible to receive a lump sum at age 53, did the plan estimate what your lump sum would be at a later age? Say, age 58? If so, what was that estimate? What was it based on? How does that number compare to the lump sum you say you are being offered now? You obviously have some pretty complicated issues to deal with, such as a prior early retirement subsidy and then re-employment with a successor entity that then froze the existing plan. What you haven't said is what the level of retirement benefit the new entity is offering you. If I understand you correctly, you started employment there and gave up your then $1,000/month pension. Was that required? Could you have maintained the pension while still going to work for them, or was it mandatory to stop receiving the pension once you were re-employed? In order to answer your second inquiry it would be necessary to know what you were entitled to, in technical terms. What was your Normal Retirement Age pension that you had available to you under the plan? What was your Normal Retirement Age? To what extent was the $1,000/month you were getting an "increased" benefit provided to you solely because you took advantage of the "5+5" option from your prior employer? What were you really presented with as options when you stopped your pension in 1998? You are not likely to get satisfaction from continuing this discussion here. If you think that something improper has been done, you need to engage a local attorney to help you sift through the issues. Good luck!

I have found that this is rarely a problem. Tell him or her that they were sacrificed at the altar of providing bigger benefits to the then more favored group. If they are, at that time, part of the more favored group they will appreciate the skill brought to bear on the issue currently.

I'm not sure I agree with the comparable plan interpretation. For clarification purposes though, I agree with you that the gateway minimum in the case where the individuals in the associates plan neither have any contributions nor forfeitures is zero.

I find it hard to believe that the IRS will accept a zero projection in the year when the PS contribution was not zero. The projection must be reasonable. That means whatever the IRS wants it to mean when the plan is audited.

Not related in this context means not only not related by being a controlled group, but also an affiliated service group or a management function group. The percentage you are looking for is 80%. Unless a parent-subsidieary situation exists whereupon 80% is reduced to 50%.

Chris, check the language of the plan very carefully. Usually TH minimum benefits are referred to "additional minimum benefits" required under certain circumstances. If the PSP provides for 3% or more, then the MPPP additional minimum benefits are, in fact, zero. But it depends on document language.

jdubya, Sorry about the delay, things have been pretty busy. Your post is a bit on the pointed side and asks some questions that would require a lot of space to fully respond to. In brief, under ERISA your longevity can be frozen as can your average compensation used to determine the benefit at the point in time that it was frozen. However, the value of your benefit must increase to reflect the time value of money. The age discrimination issue is a major hot-button these days. It can be argued both ways. Not what you wanted to hear, no doubt. I'm one of those that believes it is not age discrimination to freeze a benefit (or, in your case, to define a floor benefit beneath which a newly defined benefit can not be less than). Good luck.

Tom, see 1.416-1 Q&A 7. Are you saying that you think a plan can be aggregated for 401(a)(4) purposes and still not cause a gateway contribution for those that do not otherwise receive an employer contribution? I don't think that the preamble to the gateway rules specifically addresses this point, does it? I don't have time to look this up this morning, as I'm off to an all day meeting in a few minutes. Hmmmmmm, I'm thinking I like your position. Catch you later if I can.

Tom, if the plans are aggregated for Top-Heavy purposes, they are aggregated for a4 purposes, including the gateway requirement.