Mike Preston

Well, if you go back and listen to my presentations during the early years of the cash balance era, you will find that, as stated by Calavera, a potential solution (which of course assumes that there is a problem) is to limit the past service benefit in the first year to aproximately 75% of what the maximum is so that future years would satisfy the 133% rule. I recently discussed this with somebody who was adamant that for 411 purposes, the past service benefit [and current year's benefit] could be aggregated, thereby solving whatever problem might have existed.

Disagree. Have to follow plan terms, even if those terms could have been drafted differently.

A typical billing system (like Section 430!!!!) will automatically apply receipts to the oldest outstanding amounts. So, a current invoice will include charges related to unpaid prior invoices. Maybe my liberal bias is oozing.

I'm confused. How is the accrual in the second year greater than 133.33% of the accrual in the first year?

This is balderdash. Totally inconsistent with having each group satisfy 410(b).

Am I the only one who thinks the language is permissive with respect to any and all prior periods and is specifically exclusive only of future periods beyond 12 months?

Have you checked against the other two rules in 411?

Yes, the penalties would be that harsh. I've never seen a documented case as you describe. I'd like to think that nobody is stupid enough to try it.

Are you looking for proof that it doesn't work such as a documented case where somebody got caught and went to jail for fraud?

I'm sure there are a gazillion messages on BenefitsLink that describe the pitfalls associated with selectively deciding that one or more otherwise eligible participants get $0 in one or more plan years.

Well, it can.

No.

I think it is pretty clear that for purposes of testing compliance with 410(b) relative to matching contributions you must only include those eligible for a match. In your case that means treating everybody in Plan 1 as benefitting and everybody in Plan 2 as not benefitting. You already acknowledged this so I'm not saying anything that is inconsistent with your initial post. As you also point out in your initial post you have to test the separate tiers of the matching formula under the "benefits, rights and features" (BRF) rules of 1.401(a)(4)-4. BRF rules are not well understood and include a facts and circumstances component. All I can say is that you need to read 1.401(a)(4)-4 in detail to determine if your tiered matching runs afoul of 1.401(a)(4)-4.

I read the question to say that one plan has no match at all and the other has a matching formula. The matching formula is written into the plan. That is, it is not discretionary.

Agreed with everything until the last line. Withdrawing the excess doesn't mean anything with respect to the top-heavy minimum.

Uh, Tom.......... The OP says that each plan is a 3% non-elective Safe Harbor. Does that change your answer?

Only one return is required: the final one.

I think the suggestion was based on the supposition that *IF* it exists, it should be a bit easier to prove that it wasn't disclosed and should have been.

Look up the definition of a Required Aggregation Group. I think you will need to have plan B re-determine its TH status for 2018.

I thought B was getting the allocation?

The short answer is no (don't see any problem so don't have different thoughts). The long answer is that one needs to be careful when determining coverage in these circumstances. Are you passing using a 70% threshold or are you passing using the safe-harbor percentage? Are you treating those in A who would be otherwise excludable because they terminated in the plan year with less than 500 hours as not otherwise excludable?

Thanks, Dave!

Can you post a link to that discussion?

No.

I think any use of the account balance at the end of the prior year is limited to DC plans. If you substitute the amount distributed during year of plan termination (the sum of the six monthly payments plus the remaining lump sum) for your end of prior year account balance I think you are probably safe.