Mike Preston

In a non-qualified plan you can do just about anything you want to do, as long as it isn't inconsistent with the plan, of course.

411d6 appears to require that once the participant is 100% vested due to a partial termination, that a subsequent rehire wouldn't unring the bell.

Questions answered in the order presented.

Back in the olden days (g), the IRS issued a Field Service Memorandum that required cross-tested documents to contain, within the four corners of the document, the precise mechanism by which it would satisfy 410(b) and 401(a)(4). While the Field Service Memorandum was rescinded, there may still be a document or two or more that contain that sort of language. If your document specifies the mechanism that the plan will use to satisfy 401(a)(4) then you can't use component plan testing to prove the plan would satisfy 401(a)(4), because while that might technically be correct, the plan would be guilty of not following its own terms.

Yes. No.

I thought the IRS was considering requiring the Trustee of a plan that accepts IRA monies be a qualified IRA custodian. Also, aren't they considering requiring qualified plans that hold IRA monies to issue the same annual statement that regular IRA's have to issue? I think it is the 5429? Is there any update on either of these?

What is the payout date? What is the plan year end? The answer to the second question depends on the exact language of the window benefit. If the increase called for determining both the erfactor and the age of the participant based on the additional five years, then what you describe would be consistent with the plan.

Well, how about a snippet from there? The reason I ask is that I think you may be misinterpreting what was written, based on my citation which I posted.

I don't think that HCE's are unprotected as far as ADEA goes, so Andy's comments are right on. However, I believe the key employees due to stock attribution may not be protected, so what about a class that is defined like that?

Yeah....what Andy said!

EPCRS says this is ok. I think you have to submit the amendment, though. Are you sure the person is not a participant? Check the eligibility computation language. If it says that it runs from date of hire to one year anniversary and switches to plan years, this person is eligible in 2002. Of course, I know you already said that you checked, but maybe check one more time!

I think the IRS takes the position that it was ok to have made those distributions even if the plan termination is later rescinded.

Merlin, can you clarify what the third group is getting? Are they eligible to defer but are not eligible for a match?

I found this in the TEFRA Blue Book: "A loan made with respect to an employee under a qualified plan, etc., which is not required to be repaid within 5 years, is treated as a distribution. For this purpose, the period within which a loan is required to be repaid is determined at the time the loan is made." Is that the section you were thinking of? Or is there a different section? I also found a reference to ASPA 1998 Q&A 14, which purportedly states that: "The five-year period begins on the effective date of the loan."

Can you post a snippet of the text?

The second part of the answer in 1999 appears to be inconsistent with the answer in 1993. That is, the IRS seems to be saying that with respect to a frozen plan, the only acceptable funding method is an immediate gain method. I've seen tons of frozen plans funded using a spread gain method using the future working lifetime of those who are still active to spread the PVFNC. I think the 1999 answer, at least the (b) part of it, is a bit of an overreach, don't you? In Blinky's case, however, there aren't any future years of employment over which to fund anything. I wonder if it might not be possible for the IRS to view it as the circumstances being a cause to effect a new path under the same funding method? That is, if the funding method was originally described as individual aggregate whenever future service is greater than 0, with the modification that if future service is zero there is then a base established to fund the difference between assets and PVB. This is not without precedent. Actuaries will frequently run into situations where the published description of the funding method does not contemplate a certain benefit or subsidy, and then, once implemented, the funding method is not deemed to have changed. If faced with this situation I might just call Jim Holland and see whether this might be viewed as acceptable. If so,then it isn't a change in funding method, just a change in the calculations to adhere to the funding method.

You are correct. I was reading 6.02(5) and thought I was reading 6.01(5). Any chance they can rescind the termination of the plan, so that the formal termination doesn't take place until the first day of the next year?

Your last sentence is what I had in mind.

6.01(5) only restricts 3.02 through 3.09, not 3.13. Does that help?

Would 3.13 help?

Only if the plan document provides for it. Does it? If it doesn't, there isn't anything that I'm aware of in the Code or Regulations that does.

Right.

I'd say it is from the date that the loan officially begins, and that is the date that interest is first charged to the participant. But that is without looking it up. Maybe there is a cite somewhere that defines it better.

Oh, I don't know. Obviously, the citation uses the term in-service distribution and then doesn't define it anywhere. Certainly, in-service distributions are prohibited in certain plans and plan termination distributions are an exception to that general definition. But that is the best argument I can make. Without a citation I think it is a stretch to therefore claim that a distribution to an active employee pursuant to a plan termination is NOT an inservice distribution, but the fact is that I'd like to find a more definitive cite, one way or the other.

Merlin wrote: "Every practitioner I know equates plan termination with termination of employment as far as the addback period is concerned. " Really? The Code seems pretty clear to me that an inservice distribution is kept around for 5 years. How is a distribution to an active employee not an inservice distribution?