Mike Preston

Earl, I disagree. The gateway can exceed 5% only if the plan in question is a DB/DC combination plan. Otherwise, it is no more than 5%. It's late on a Friday, so my brain might be fried, but that is what my notes say without looking it up.

Also note that the 415 regs specifically authorize the practice of pushing a DC account balance into a DB plan in return for an actuarial equivalent promise of an annuity. The annuity does not count against the defined benefit dollar limit.

You must follow the terms of the plan document. This person could have been excluded from a Safe Harbor allocation without violating the Safe Harbor rules. Coulda, shoulda, woulda, though, means nothing.

No, I don't think so. That was one of the arguments against second to die policies in plans. Essentially, the insurance is potentially for the non-participant, not the participant, so the IRS took a dim view.

Since it is correct, as far as 410(B) goes, why do you think it sounds like a bug?

Yes it is correct. Yes there are potential additional a4 requirements. If, when those that Relius is treating as benefitting are counted as not benefitting the group benefitting does not satisfy 410(B), then you must add back enough of those to satisfy 410(B). If, when you do that, you end up with a two-tier benefit structure, you must general test. If you pass the general test, all is well. If not, you must correct a failed general test.

Correct. Another tool in the arsenal against plan disqualification.

No. It can't be done. But, with that said, there is something that is sometimes referred to as the "bad boy" clause. In a nutshell, if the plan document calls for it (repeat: if the plan document calls for it), and if the conditions in the plan are met to define this individual as a "bad boy", then the plan can provide that the vesting schedule is modified to be the slowest allowed by law. However, if the plan already has a vesting schedule that is the slowest allowed by law, there is noting that can be done. If you really feel this is an issue, then the client should contact an attorney to see about implementing it. Problem is, the cost of deciding how to implement it will no doubt exceed the cost the client would bear to just ignore the issue..... unless there is the potential for a number of these situations to arise. Unlikely, but it is a client decision. Whether such a bad boy clause could be added after the fact to reduce a terminated participant's vested interest I can't say. My gut tells me no. Then again, I'm not an attorney.

It has not been addressed. I think it would be very difficult to do anything other than to follow the terms of the plan document.

You have restored my faith in plan documents.

Never tried it, so I don't know. I would be somewhat surprised, however, if an adoption agreement gave you the ability to split the issue. Seems to me you would be talking about an individually designed plan in such a case. If so, then you could always submit it and see what the IRS has to say about it. In a case like this, though, where the issue is more of a pure ERISA-related item, I sometimes wonder if having the IRS issue an LOD does all that the Plan Administrator wants. That is, the DOL could still come in on audit (or a participant could ask a court to decide) and conclude that the provision wasn't consistent with ERISA and you'd have a can of worms on your hands. Hence, if breaking ground like this appeals to the client, I would suggest not only an LOD but a consultation with an attorney steeped in ERISA-type issues.

I agree with you. "A full tank of conjecture". I like it. Sounds vaguely actuarial.

Yes, in jaemmons case that was posited there is a crosstested plan involved. So, as you noted, you must test the rate groups counting the bodies of all in the controlled group. In the second case,where the formulas are safe-harbor, there is no 401(a)(4) testing to be done once the plans are shown to satisfy 410(B). I think we are doing it the same way, but I find the phrase "each plan would be tested on its own population for 401(a)(4)" a bit of a misstatement in the sense that there really isn't any 401(a)(4) testing. This is semantics, because I understand that one can use the existence of a safe-harbor formula as the mechanism one uses to satisfy the 401(a)(4) test. I usually resever the word "test", though, to mean something that I have to prove numerically. Ignore my ramblings, I know that you and I are on the same page!

There is nothing that can be done to reduce the owner's benefit, per se. However, if the owner being strapped for cash indicates that he, like many others in the US, have reevaluated their retirement horizons, it may be appropriate for the actuary to assume a later retirement age than was used in a prior valuation.

You have the cite wrong. It isn't 408(B)(4). It is 408(p)(4). There is no exclusion for age.

It is more complicated than that. A bit much to put into a message here, as I'm tied up today, but you also need to look at things like whether the person was cashed out, how many years they had in the plan to begin with, what the vesting schedule was, what the reitrement age is/was. But you have the basics pretty close. Maybe somebody else with more time can elaborate today, or I will try to get to this a bit later.

Probably yes, maybe no. Sometimes plan documents indicate that HCE's can be restricted to a uniform percent of pay by action of the plan administrator without the need for formal documentation to the plan. If that language exists and if the Plan Administrator issued such an edict, it is possible that the impact would be the same. Worth taking a look.

tcunagin - getting back to your original question, if we accept the fact that each plan satsifies the coverage rules (section 410(B)) then you can definitely test each separately under 401(a)(4). However, sometimes testing under 401a4 will require you to collect information on plans not being tested. For example, if you need to know the results of the Average Benefits Test you will almost always need to collect information from other plans. There is an exception to the exception, by the way. If one entity has a defined benefit plan and another entity has a defined contribution plan, you can test entirely separately even under the Average Benefits Test. If you lay out the specifics of what your groups look like and what the plans look like, a quick determination may be possible.

jaemmons - yes.

There is no prohibition on imputing permitted disparity on TH contributions. Hence, if your allocation meets the terms of the plan, the permitted disparity piece appears to be fine. Whether it meets the terms of the plan or not only you can tell.

I think the Plan Administrator is responsible. If the asset sale took place after the end of the year,then the Plan Administrator was clearly the prior firm. They no doubt have a clause in the sale agreement that binds the seller to its responsibilities up through date of sale. I would ask the buyer to inquire as to the seller's intent. If they don't intend to live up to their end of the bargain, then the buyer can invoke whatever remedies exist in the sale agreement.

I prefer the rule of parity. The one year holdout rule is somewhat difficult to deal with at times because it calls for retroactive entry as of date of rehire once the year has been successfully completed. That can cause problems with 410(B) testing, 401(a)(4) testing, ADP testing, ACP testing and just about anything else that is non-discrimination oriented.

I hope you are right. But something tells me that you aren't. The QNEC language usually has a reference of sorts that at least implies how the allocation is supposed to be handled. Care to post the language from the plan?

I agree. The most likely scenario is that the plan was amended to preclude deferrals from those who are key employees in an attempt to reduce the top-heavy percentage over time. If it was just a desired result, as opposed to a result brought about by formal amendment, I would have concerns about amending W-2's.

Yes.