Mike Preston

(B) or (f)? What year? Governmental 457 or not?

It will be the same for any plan that is a safe-harbor plan. Of those you mentioned, I would be surprised if the cash-balance were a safe-harbor.

IMO, the date of transfer is the effective date of the establishment of the Alternate Payee's separate entitlement under the records of the plan. That is, it is whenever the Plan Administrator sets up the AP as an individual with an account balance. I agree that the participant is being hurt by this. I would only reject it was felt that the Participant's account would need to be negative in order to retain the AP's account at $100,000. Even then I would interpret it as providing for 100% to the AP.

It isn't. Except in the most unusual of cases.

It may not be a big deal mathematically, but a participant that gets a benefit statement showing that their vested interest is 43% will most assuredly ask questions. I would keep the sources separate on the benefit statement if I were to do this. But I would still expect it to take longer to explain.

Whether or not to reject the DRO is up to the plan's counsel. However, nothing that you have stated bothers me too much in a pooled fund. In that case, the term segregation is typically used to establish the AP's account on the books of the plan, not to establish a separate asset pool that can be directed by the AP. If that is the case, the interest through date of segregation is, by definition, zero, since no interest is allocated between valuation dates. I would be tempted to write a letter to the lawyers involved and give them a numeric example of how your interpretation of the DRO will affect each individual's benefits under the plan and that if they don't like it, they can go get the DRO modified. I just don't see any reason to punish the DRO drafter for not having a complete understanding of the connotation associated with the word "segregated".

Keep in mind that the match is not exempt from ACP testing, unless the match is a safe-harbor. Therefore you would want to look at the document to see what gets cut back, the match or the employer contribution. It may have an impact on a4 testing.

If the originator wouldn't mind, perhaps it could be posted here on BenefitsLink?

Wick reiterated this at the ASPA Summer Academy a couple of months back.

I think I'd rather see a document change than rationalization.

In addition to the military issue, the proposed regs implement the requirement that a participant not take more than 2 loans in a single year.

No, I'm not aware of any other cite off the top of my head. Why would the FFL not be applicable? Do we really need a specific cite? I know that this issue has been discussed from the podium before. Maybe not in the context of the flip-flop method, but I'm pretty sure that Jim Holland has mentioned the fact that includible contributions don't override the FFL before.

That is probably the "proper" way to do it, but I might give some consideration to having the single form amended into the filings that were supposed to take place. Call somebody at the DOL. I would think that since the entire asset pool was reported you have at least some chance of getting them to go along with it.

The consequences is that the client goes into the IRS in a voluntary correction to get the darn thing retroactively qualifed. Otherwise, as you indicate, it is disqualified back to the effective date of the first disqualiffying provision. Probably 1997.

Tell the truthy now, is "Blinky the 3-eyed Fish" a non-del-plume for my wife? Probably not, but you seem to have similar reactions to my meanderings. ;-) No matter. What I meant to say, but probably didn't, is that the includible contributions rule you mention most assuredly comes up. I certainly agree with you there. But just because a contribution is includible doesn't mean that it is necessarily deductible in the next year. The 404 limitation in the next year is limited to the lesser of the regular 412 minimum (which includes the includible contribution) or the ERISA/OBRA FFL. Take a case with $500,000 of assets on 12/31/20002, with a 412 required contribution of $100,000. Assume the next year's 412 is only $75,000. Now, the next year's 412 is based on a higher asset pool (no other reason why the cost would decline to $75,000 is being considered). But let's say that the increase in the assets would normally lead to an ERISA FFL of $X in the year where the 412 minimum is $75,000, where $X is less than ($100,000 + $75,000). Now, if X is less than $100,000, you have to put in the $100,000 to satisfy 412 for year (YYYY), but you can only deduct $X in year (YYYY+1). That situation is not likely to come up, but when it does, it is painful.

I agree that you will probably need to consult with counsel before this is all said and done. But it seems to me that you have two issues. 1) A flawed ADP test (and therefore flawed corrections) 2) Monies deposited into a plan as a mistake in fact (finally, a real mistake in fact, at least it looks that way). 1) Redo the ADP test, considering the correct deferrals only. This will probably lower the required refunds to not only this HCE, but all other HCE's who deferred more than the resulting allowable dollar amount. The likely result from this is that for each HCE (other than this particular HCE) who has their refund affected by the results of the modified test you have made an over-correction. Get it back from them, or have the employer make the plan whole. For this specific HCE, the same thing goes, but you have an additional amount to collect from him (the $1,500). See the latest incarnation of EPCRS to see what options you have. If corrected soon enough, it sounds like it would qualify for SCP, but you'd need to decide that in conjunction with counsel. 2) Once the employee is ready to return the money you then need to decide who that money is returned to. You don't indicate whether that $1,500 was really intended for another participant or not. If so, it gets even more complicated. Of course, if the employee won't return the money, you have more issues. And, if the investment of the funds by the employee has resulted in less money now than when it was given to him/her, that is another kettle of fish to deal with. Just some thoughts to help focus the issues.

You'll have to look at the specific language in your plan. However, without seeing the language, I would think the "normal" (whatever that is!) result would be that service before 1/1/98 is not taken into account. Hence, the first "year" of vesting service under your plan is completed 12 months from 1/1/98. In other words, in the absence of language which makes this unambigously false, I would treat everybody who was hired before 1/1/98 as having an employment commencement date of 1/1/98 for vesting purposes. I would be very surprised if your plan was drafted and approved by the IRS in such a way as to have recognition of your hypothetical employee's first year of vesting service pushed back to 7/1/99.

I believe so. Have you read 412(l) lately? Maybe 412(l)(6)©?

The language you are referencing, Blinky,. has to deal with a situation that is just not likely to exist in a flip-flop. I'm a big proponent of them, and with that, I only have a handful. But, back to the language in question. What they are saying is that if your 412 minimum for year one is $100,000 and you don't deduct it, and then it turns out that instead of having the 412 minimum (including the includible contributions from the prior year) be $200,000 (or thereabouts) it is ZERO (remember when assets used to go UP between valuation dates? sure you do!) you have the joy of a minimum funding violation for year 1 if you don't make the contribution, or, alternatively, a non-deductible contribution if you do! Another reason that flip-flops are not for the faint at heart.

There is no prohibition on filing an amended return with an alternate Schedule P. However, since the purpose of the Schedule P is to start the statute of limitations, filing multiple amended returns may be less than productive.

In answer to the question asked: yes, deferrals count towards establishing the 3% th minimum even if refunded. Further, they count as distributions during the period when returned when calculating the top-heavy ratio. Truly a double whammy.

If the amounts deposited are contributions, you are correct. It is highly likely they are contributions. There are some minor exceptions for interest free loans to cover short term cash flow issues, but I wouldn't think they apply in this case.

I don't have time to do an exhaustive review of the relevant sections, but it seems to me there is a bit of a confusion created by the language used in the regulations. Nonetheless, I agree with your conclusion at first blush. Maybe somebody else has the time to review the regs, especially the interplay of 1.411-5b3 to 1.413-2a2ii.

Those that have been paid out need to be told that a portion of the monies they received are not eligible for rollover.

Yes.