Mike Preston

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.

I think you'll probably need to have the make-up include an interest component, too. But the contribution sounds to me like it be related to the prior year. I think this is one of the benefits you get from filing the application with the IRS.

It also would be subject to the top-heavy rules that Simple plans escape. I don't see the need to provide 30-days advance notice in the case where a plan is providing, for every contribution level, an increased or the same match. But, if it is decreasing anything, including vesting on the match, I agree that 30 days and the opportunity to change one's election is a good idea.

You can always buy the tape.

IAWR. This was one of the questions addressed from the podium by Jim Holland and Dick Wickersham at the 2001 ASPA Annual Conference. The forfeitures do not retain their MP character.

It is tax years starting in 2002. If the plan year and the tax year are coincident, then you are talking about the 10/1/02-9/30/03 year.

Doing my best Richard Hochman here: "Whhaaaaat?" You didn't like my last response in this other thread: http://benefitslink.com/boards/index.php?showtopic=14849

DURANDO v. U.S., 76 AFTR 2d 95-7464 (70 F3d 548), 11/16/1995 , Code Sec(s) 404

KJohnson, what is your take on 415(f). It seems like the language of EGTRRA that was added might result in the "one at a time" aggregation we have been discussing. But for periods prior to the effective date of EGTRRA, I'm still having a hard time coming to the conclusion that anything other than aggregating all plans was the rule. That is, unless the interpretation is that the changes under EGTRRA were two-fold: a) codify the regulation 1.415-8(e). That is, it isn't really a change, just official recognition that it has always been this way. Of course, I didn't see anything that specified this. Was there a Blue Book comment on this? b) create the new rule that aggregation only extends to the dollar limit, not to the percentage limit. I don't think anybody is going to argue that this was in place pre-EGTRRA.

Well, I might just have the pefect case to submit to the IRS on plan termination to see what their position is. It is right on the cusp of the 415 limit if the single is aggregated with all of the multis. With a little tweak here and a littel tweak there, it should satisfy 415 even if aggregated with all. Maybe I won't tweak it and just submit it on the basis of non-multi-multi (g) aggregation, recognizing that if they balk I can then tweak. See a problem lurking that I'm missing?

I like your conclusion. I see the logic, too. Are you saying that this type of aggregation was in existence before EGTRRA? Or just that this was created with EGTRRA? Does anybody else have an opinion?

You will need to access, at a minimum, the plan's Summary Plan Description. If that doesn't answer your question, you will need to get a copy of the actual Plan Document. I tried to reconcile your comments about a 30-year pension with the information available on the website that had the SPD for the CWA negotiated plan. Here is a link to the definition of service under that plan: http://www.cwaitu.com/NPPSPDotherfea.html However, that may not be the plan you are in, because there is no 30-year retirement option specified, nor is the crediting of service anywhere close to what you have described. Maybe if you identify the exact plan somebody can get a hold of the SPD somewhere off the web and help you to understand the retirement date you are being quoted.

Everything I've found so far deals with increased likelihood of reversion solely in the context of defined benefit plans. That doesn't mean that the line of reasoning doesn't apply to money purchase plans, just that I haven't found anything on point, yet. My conclusion is the same as in my prior message, however. As far as I can tell, the only escape from 100% vesting upon amendment to a 0% formula in a money purchase plan would be to demonstrate that the cessation of contributions is intended to be temporary. I can see two ways of doing that, neither of which seem to be present in the OP's quesiton. First, immediately merging the plan into a profit sharing plan that provides for substantial and recurring contributions. Second, somehow argue that the formula is intended to be lowered only for a temporary time period, as in the case of business hardship likely to reverse. OK, maybe that's the ticket. Was the OP's plan amended to zero in 1998 as a temporary measure? If so, maybe it it time to reverse it or to admit defeat and fully vest. I'd be willing to float a letter of determination application on plan termination which attempts to avoid full vesting retroactively if the circumstances leading to the amendment in 1998 were such that they supported the concept that the lowered formula was intended to be temporary. Same thing applies if the plan sponsor now wishes to modify the fomula to something other than zero. That is, submit the new formula to the IRS and argue that the prior amendment was, based on all the facts and circumstances, intended to be temporary. Now, of course, we have proof of that because it is in fact being amended. In some business circumstances I could see justifying both the original amendment to zero and maintenance of the zero formula for a number of years, without requiring full vesting. But I would think this is precisely the case where competent counsel is a must.

I guess it depends on one's definition of "as soon as possible." I have never seen the IRS make the leap from that phrase to: "if you have forfeitures that would otherwise not be allocable because of a plan limit as to allocations, you must amend your plan so as to avoid being unable to allocate those forfeitures." You continue to posit that plan sponsors have some duty to provide benefits in accordance with a standard that I'm not aware of. While I don't disagree with you that the Plan Sponsor might consider all the things you mention, in the absence of the Plan Sponsor coming to the conclusion that they want to avoid administrative expenses paid by the plan I don't see any reason to disuade them. BTW, there are typically no schedule B costs associated with a money purchase plan, as that schedule is required only money purchase plans that have a deficiency and for defined benefit plans. Even when a money purchase plan has a deficiency it should be noted that the schedule B is filed without the need of an actuary's signature, so the additional adminsitrative costs are insignificant. Notwithstanding the above, I'm more and more convinced that if the document wasn't changed to provide that forfeitures are allocated in addition to the required employer contribution (which was 0), the appropriate correction in this case is to retroactively consider all participants 100% vested at the time that the plan was amended to have a 0% formula. And if this requires EPCRS in some form or another, so be it. I seem to recall that there is a ruling dealing with partial terminations that requires full vesting if the plan in question is amended to increase the likelihood of a reversion. A money purchase plan that does not fully vest participants, does not provide that forfeitures will be used to increase allocations and provides for a zero percent formula would unquestionably provide for an increased likelihood of a reversion.

Here's the thread with the first post about it: http://benefitslink.com/boards/index.php?showtopic=12907 There is also a post somewhere that talks about how the IRS has informally changed their position. I think it cites a Gray Book response which conforms, a bit better, to the rationale cited in the thread referenced.

mbozek, can you provide the cite where you got the "as soon as possible" language? I've seen many a plan carry forfeitures over more than 1 year due to formula restrictions. I've never heard the IRS argue that such a plan needed to be amended in order to prevent the forfeitures from remaining in suspense. While the IRS might object to a 0% formula; if they have a Letter of Determination on that formula, I am hard pressed to see where there is a requirement to increase the formula. There may be valid reasons why the plan isn't being terminated. And the use of forfeitures to pay administrative expenses (if allowed by the plan document) is not, in my opinion, a violation of the exclusive benefit rule or imprudent in any way. And that includes hiring an attorney (or other plan advisor) to provide options when the Plan Administrator finds the document unclear. Seems to me that retention of a plan's qualified status is far from imprudent. Admitedly, this is a question from a TPA, not from a Plan Administrator, but it doesn't change the rationale, it just means that the Plan Administrator needs to get advice somewhere other than from this TPA, because this TPA is unsure. One other point. The reg cited is a bit on the ancient side. Wasn't there a change in law that allowed pension plans to specify that forfeitures are allocated in addition to the formula based contribtuion, rather than requiring the forfeitures to reduce future contributions? If so, the reg is not consistent with current law in that respect. And, if so, the amendment to the plan might be as simple as selecting that option. In fact, maybe that option was elected when the plan was frozen in 1998 and the answer to this whole thread is really: RTFD. (read the fantastic document).

I don't think you can generalize between a correction concept and a non-correction concept. In order to get into the correction concept mode, one must have done something wrong. I can imagine there are certain circumstances where the IRS might object to intentionally doing something wrong and then using a correction method that involves a retroactive amendment. Now, if the plan were administered as if the people were eligible and then it was discovered later that it shouldn't have been so, then if one felt that following SCP or VCP was appropriate, it would be possible to correct.

I'm not saying I agree with it, but TAM 9735001 is pretty clear, isn't it? "Whether section 411(d)(6) is violated by a retroactive amendment of an allocation formula under a discretionary profit- sharing plan adopted after the end of the plan year, but before the due date for the employer's return for the corresponding taxable year, resulting in lower allocations for some participants than the allocations they would have received under the allocation formula in the plan during the plan year. " Now, I have been railing against this for almost 5 years. But one should at least be aware of its existence and the IRS position. Now, I admit that the facts of the TAM are not "good" and that in the absence of such a case, the IRS may never have seen fit to clarify the issue. But this is clearly the IRS position on this at the moment. The precise second that anybody has a right to share in an allocation according to a specific formula (where for this purpose I include identification of the bodies that share as part of that formula) it is a violation of 411d6 to modify the formula so that somebody gets "less." About the only way I can see the referenced plan escaping this web would be if the provisions of the plan had a maximum allocation of 15% and the addition of participants was done in such a way that the original folks still got their maximum. But if it is just a regular profit sharing plan, the real limit is 25%, not 15%. The artificial deductible limit doesn't mean much in this situation.

Nah. It can't be done. The IRS takes the position, as jpod noted, that it is a violation of 411d6. I disagree with the assertion that the employer is making the maximum contribution. It was always able to contribute more, it was just that some would be non-deductible and subject to an excise tax. But it wouldn't violate the qualification rules to make such a contribution. Hence, the adoption of an amendment after the end of the year that would change the allocation of those funds by diverting some of them to newly designated participants vilolates 411d6. Now, I should point out that I consider the IRS position in this to be unfortunate, if not downright wrong, from a moral perspective. In a discretionary contribution plan there really should be no prohibition on this. But that is not her position.

I always get them confused unless I look them up, but I think you might be dealing with one of the types of partial termination to the exclusion of the other. I'm referring to the horizontal and vertical partial terminations.

If this gets posted twice, I apologize in advance. It depends on what the definition of compensation is in the plan. If W-2, it is recognized in the year when paid. If 415 comp, you can treat the compensation as on behalf of the prior year, as long as you do so consistently for all. See 1.415-2(d)(5)(ii). The advantage of using W-2 is easy to spot. The disadvantage is that the terminee who is paid their last check in 2002 needs to be "handled" in some way that makes sense. I tend to include them in the subsequent year, but I see the point about not including them because their employment relationship has ended as viable. Although I am concerned that allowing the deferrals might be inconsistent. OTOOH, I don't see how I can tell the participant that the deferrals won't be allowed from their final check. The 415 comp method gets rid of the administrative complexity associated with the terminee, but adds complexity for all the other participants in the plan as to what year the first payroll of every year applies to. Most plans use W-2, in my experience.

Indeed she does.

You've obviously never seen me on skates (actually, most of the time I wear skates I'm resting on my gluteous maximus, so it may not be technically accurate to ever state that I'm "on" skates). So, yes, I'm sure I don't play hockey. As has been noted there is no way that the Guilds will ever allow union based talent to be compensated without having that compensation subject to the collectively bargained benefit. So, at some level, the multis will get their monies. Whether the entity forwarding the monies to the multi indicates that the talent was paid based on a 1099 or a W-2 doesn't concern the multis, as I understand it. That is a tax consideration that the multis just ignore. And it is going to take a major earthquake in the way the multis (and union benefits in general) are treated by the IRS before the multis change their position on this. So, if the holy grail you are looking for is viewed in this light, it is far less holy as it entails giving up benefits which somebody has paid good money towards. The problem we have on this board discussing the multis is that there is a political piece to this that just is incomprehensible to us. We want to see rules. We want to see clear and consistent interpretation of those rules. In this area, if there is a dichotomy, it will be resolved in favor of the status quo and no amount of arguing will change the practical implications. So, I reiterate my simplistic position, in case it has gotten lost. A loan out coroporation can provide a benefit to its owner but must take into consideration the benefits provided by the multis when doing so. The question is whether, when doing so, it must aggregate all multis at once, or whether each multi gives rise to a separate and distinct calculation. My reading is that it must aggregate all, but I'd love to hear or see something that supports the opposite view.