Mike Preston

I'm not sure why you are bothered by the language you cite. If the adoption is not "pre-certified" (which is interpreted by me to mean a mass-submitter plan, such as a prototype or a word-for-word adoption of a volume submitter plan) then I would expect the IRS to require submission. That is definitely the way it worked for TRA. What is it about this that bothers you?

Try this: http://benefitslink.com/boards/index.php?showtopic=12907

Tom, my reading of "no way OUT of excluding it from a4" was exactly opposite of what you meant! Now it is clear, so thanks for the clarification. Andy, isn't this the same issue that comes up every once in a while? I know I wrote a long message about this a while back. Do you still have it? This issue is the one that has been addressed by the IRS from the podium in recent years, and they started off with the incorrect interpretation and have since modified their position. That is, if you test 410(B) separately, you have two ABT tests. But I don't have time to look up my old message today. Maybe somebody else can?

Man, this is getting confusing. Fred, I agree with Tom that it depends on whether you are testing separately under 410(B). If you are, then your testing group is 20, for all purposes. You do NOT increase from 3% to 5% any of the group of 10 just because you use the ABT on the other 20. Tom..... Huh? SHNEC contributions do triple duty: a4, k and TH, don't they? Huh? Why wouldn't I be able to separate the entire group into two separate groups? One that meets statutory eligibility and one that doesn't?

Lots of questions...little time....but.... Yes, if someone is not an excludable amployee and they benefit, then in your example they must get 5%. Those who at one time satisfied 21/1 and who terminate are not excludable for this purpose. I admit that I don't have a clue what the above is stating. A larger contribution under a4 to pass the ABT? If so, you need to give it to somebody. Anybody. You want to give it to the a4 eligible? Fine. You want to give it to the k-only eligible? That's ok, too. Who do you want to give it to? If you have decided to do a single ABT with not only those who satisfy the 21/1 requirement but also those who do not, then you have a single group. Or am I misunderstanding your concern?

Tom, I strongly disagree. See prior message.

While I agree with PAX that an amendment seems like the course of least resistance, in some respects, I can see how a plan sponsor might interpret the language of the plan, and the previously published methodology that is used by the Commissioner to determine the increases, to call for $180,000 in 2002. Any potential ambiguity in the plan can be resolved by the Plan Sponsor and this is a situation that if called upon in 2005 to review what somebody did in 2002 I would hope that using $180,000 would be ok.

Gee, I don't think I said that. Did I? I said that by adopting the amendment to eliminate PBGC after 12/31/99, you can use the same time frame to determine your GATT rate that you used to determine your PBGC rate f you want to avoid 1 one year period where you must provide for 411d6 protection. Under the regs, I think you can also use a one month or a two month lookback and still avoid 411d6. But if you want to use a 5 month lookback, you will have to provide a one year period where participants get the best of both worlds.

Yes, they have until the deadline associated with their prior provider to adopt ANY plan, yours, theirs or MINE!

What kind of document doesn't reference 401(a)(17)?

One can NOT pay out on the basis of GATT prior to the amendment being adopted and effective.

Change the 401(k)/ps to a pure 401(k). Change the PS to a MP. Now you can put in 401(h) contributions, withiin the appropriate limits, to the MP plan.

I'd go with the former.

See 1.402(B)(1), which states in relevant part: "If, however, the surplus of $50,000 had been accumulated as a result of a change in the benefit provisions or in the eligibility requirements of the plan, the $50,000 could not revert to the employer because such surplus would not be the result of an erroneous actuarial computation. " An amendment which changes the 417(e) rates to the GATT rates is clearly a "change in the benefit provisions".

You are correct in that it precludes amedments that reduce benefit accruals, even if those amendments do not violate 411d6. But the cessation of benefit accruals is not impacted. The modification to GATT, if it causes an increase in the reversion is an amendment prohibited by 401(a)(2). I think it is pretty clear based on the wording of the statute. I know I've heard the IRS say the same thing at conferences. I'm pretty sure something was issued in early 95 that identified this issue. However, you don't really need a ruling to be issued for the IRS to state that they intend, should the occassion arise, to apply a statute as written.

It is a violation of 401(a)(2) to adopt an amendment which increases (or creates) a reversion. The IRS is right.

It is a violation of 401(a)(2) to adopt an amendment which increases a reversion, even if that amendment would otherwise be given protection from violating 411(d)(6). The IRS is right.

As I recall, it is based on reasonable expectation. Since the interest rate would need to be less than 3.5% for it to be less than 10 years, I think you are pretty safe. If you are really concerned about it, you could submit a PLR. Seems like overkill to me, though.

See my message in the link that I cited earlier in this thread. 99-23 and the regs only allow you to eliminate the PBGC rates under certain conditions. IN other conditions you must retain the old basis against the new basis for a 12 month period.

I just don't see any discepancy whatsoever. 99-23 (and subsequent guidance) extended the RAP. Period. Nothing more. The reg is clear that an amendment made at any time through 12/31/99 is afforded complete 411d6 protection with respect to the replacement of the PBGC rate with the GATT rate. It didn't say the end of the RAP. So there is nothing to update in the reg to make it consistent with 99-23. If the amendment wasn't made by 12/31/99 the reg provides alternative 411d6 protection, which is not as complete but certainly not insignificant. The fact that the reg provided guidance with respect to amendments adopted after 12/31/99 tells me that the IRS knew that the RAP wouldn't necessarily end on 12/31/99 when they first published the reg. (4/5/95 in proposed form and 4/7/98 in final form). In the Treasury Decision that published the final regs the IRS states: "Several commentators requested that the regulations be amended to provide unconditional section 411(d)(6) relief for plan amendments adopting the applicable interest rate and applicable mortality table rules of RPA '94 regardless of changes in the time for determining the applicable interest rate. The IRS and Treasury have determined that providing some additional flexibility to employers in determining how to transition between the PBGC interest rate and the applicable interest rate and applicable mortality table, as discussed above, where the transition is combined with a change in the time for determining the interest rate, strikes an appropriate balance between the practical concerns of employers and the rights of participants. "

Somehow I still think the reg is clear and has not been updated. Hence, the only way you get 411(d)(6) protection with respect to a lookback period of more than 2 months is if the amendment was adopted before 12/31/1999. I don't see anything in RP 99-23 that changed this.

What provision are you thinking about?

I have yet to find anybody willing to issue such a bond. I'd be interested in knowing where it came from. But, don't leave your comfy seat for me, as I don't have anybody chomping at the bit for it. ;-)

John, have you identified anywhere that bonds over $500,000 can actually be obtained. I haven't been able to, although since I don't have a client that needs this at the moment, I admit to not having tried very hard. In fact, one bond broker out here is so out to lunch that he sent me an email in response to my inquiry as to the availability of bonds in excess of $500,000 stating: I kid you not!

I would be very surprised if the plan didn't need a bond to begin with. Hence, an audit looks required, as far as I can see. What form has been filed? EZ or 5500? Why? May want to consider amending to zero percent money purchase plan to avoid qualification requirement of substantial and recurring contributions. Maybe you can split the plan into two? One with the non-qualifying assets, where the only participant is the 100% owner. Then neither plan would need an audit.