Dougsbpc

Suppose you have a DB with a flat excess benefit formula that provides 25% of FAC plus 18.75% in excess of covered comp all multiplied by YOP / 35 years. The maximum disparity percentage is the lesser of the base % or 35 multiplied by a factor from a table based on the participant's SS retirement age. This amount is further reduced if the normal form of benefit is anything other than a straight life annuity. For example, life + 20 yr certain has an adjustment factor of 78%. Does anyone know what the adjustment factor is for a 100% J & S normal form? I seem to recall 66%?

Thanks again for all the input on this. Our 401(k) VS document allows us to have a delayed effective date for salary deferrals and a delayed effective date for safe harbor NECs. If they adopt this plan now with a retro effective date of January 1, 2009, delayed salary deferrals and SHNEC effective 9/1/2009, we would have a plan that started out as a profit sharing plan and therefore not subject to any short plan year restrictions. If the employer wishes to provide 3% of full year salary, they can provide SHNEC and an additional PS contribution.

Thanks everyone for your input. As Kevin mentioned, our VS document also contains the same limitation year language. Also, the document allows for a delayed effective date for safe harbor provisions.

A small employer has a calendar year. They have never had a plan and want to adopt a safe harbor 401(k) plan for 2009. 1. It is our understanding that if the plan is actually adopted 7/15/2009 as a new plan, safe harbor notices can be provided just before that date. 2. Must the effective date be 7/15/2009 or can it be 1/1/2009 with safe harbor provisions effective 7/15/2009? In this case SH NEC's would be based on salary for the entire year. 3. If the plan is adopted 7/15/2009, must comp limit and 415 limit be pro-rated for the short year? Thanks a million!

Suppose you have a small DB and 401(k). The employer would like to have a higher benefit for certain HCE's in the DB (say 6% of pay per yr) and provide 2% of pay to all others. In the 401(k) they will provide 7.5% of salary employer contributions every year. Could the 2% of pay benefit each year be used to meet part of the 7.5% gateway in the 401(k) plan?

It is actually a volume submitter document. Over the many years we have rarely run into any limitations of this document. This may be one of them but I will carefully read article I again.

If a modification is made to a volume submitter plan (even if minor) is it then considered individually designed? If so, it would seem the plan could be submitted for an individual determination letter. If it were not submitted for an individual DL, that would not necessarily mean you have a disqualified plan correct? It would just mean you could not rely on the volume letter.

Thanks Blinky Unfortunately, Article I does not contain an option to provide or not provide an actuarial adjustment. The suspension of benefits provision of the document really talks about participants who retire and are in pay status and then return to work. Can a suspension of benefits notice be used to effectively eliminate an actuarial adjustment for a participant who is past the NRA but has not retired and was not in pay status? In this case it would be the key employee.

Thanks Effen The plan is already frozen and has been for a few years. I did not think an actuarial adjustment could be eliminated. We are using a volume submitter document with the variable provisions in article I (like an adoption agreement) and the non-variable provisions in articles II through XIII. Article V states that " Unless the suspension of benefits notices are provided, the benefit paid to a participant on or after his or her normal retirement date shall be the greater of the benefit payable at normal retirement age recognizing additional service and compensation after normal retirement date or the actuarially increased benefit payable at any earlier retirement age." With a volume submitter plan, I believe an amendment can make reference to a non-variable provision, but I don't think a non-variable provision can be changed.

We administer a 30 participant DB that had recent investment losses. The corporation that sponsors the plan is 100% owned by a family trust. The four beneficiaries (the kids) each have a 25% interest. I believe each are then deemed to own 25% of the corporation. Only one of the siblings (James) is a participant in the plan, and he is age 68. He is entitled to about 60% of the benefits. The business will be sold at the end of next year and it is unlikely the plan will have sufficient assets to pay benefits. If he were a greater than 50% owner he would have no problem waiving a portion of his benefit. Given the fact that the trust owns the corporation, that will not be possible. Could James (with spousal consent) execute a suspension of benefits notice to stop receiving an actuarial adjustment in the meanwhile and thereby stop the bleeding? He has never been in pay status.

We inherited a DB plan with Life Insurance. This plan is sponsored by a small corporation with 10 participants. The Death Benefit under the plan is the greater of Insurance proceeds less cash value or the present value of accrued benefits. The document indicates the face amount of policies shall be 100 times the anticipated monthly benefit. With an on-going plan the face amount for each participant is their projected monthly benefit X 100. Does anything change if the plan is frozen? In this case there were 2 new entrants in 2008 who accrued benefits. The plan was then frozen 1/1/2009. Must policies be based on their projected benefits even though the plan is frozen? The goal here is to make sure all participants have the proper amount of insurance. Speaking of the proper amount of insurance, the 100% owner of the corp (and only key employee) only has insurance of about 50 times his monthly benefit. Could he waive (in writing) the remaining amount that the plan would ordinarily purchase for him?

Does the top heavy benefit continue to increase in a frozen plan if participant salaries continue to increase after benefits are frozen?

Is there a certain format that must be used for a plan sponsor to elect use a COB or PFB to reduce the minimum contribution? If so, does anyone know where I can find a sample?

Have a small DB plan where the 2008 and 2009 AFTAP is <80%. A terminated participant has a lump sum benefit of $1,400. Even though restricted, I believe lump sum benefits of under $5,000 can be distributed under WRERA. Question: Must it be an involuntary cash out to qualify for this? Can lump sums of < $5,000 be made to any terminated participant?

Thanks for the reply Andy. I was thinking that benefits were not distributed within one year of the termination date. Generally this means that the termination did not take place and you had an active plan. However, now that I think about it, his divorce, division of property (including the plan) prevented benefits from being distributed in 2008. So perhaps you are right, PPA 436 would not apply.

We administer a small DB plan that terminated 12/31/2007. However, the client failed to provide us with necessary information to complete the termination in 2008. He was divorced and had medical problems. This also lead to no AFTAP as of 10/1/2008. The plan has only existed for 4 years. We sent the client the notice of benefit restrictions to provide to the 4 participants including his former wife. The plan would have had a 2008 AFTAP of 98%. However now the plan has lost about 45% and any 2009 AFTAP will surely be less than 80%. We received a QDRO ordering the plan to distribute benefits to the Alternate Payee as a lump sum. They cannot do this due to the AFTAP < 80%. Has anyone run into this problem yet?

Thanks Mike

Is it possible to bring in ineligibles to pass 401(a)(4)? Have a cross-tested 401(k) plan where they have provided nonelective contributions of 10% of salary to employees and whatever it takes to get the owner to the 415 max. They want to do the same this year but fail 401(a)(4). Would it be possible to bring in ineligibles who worked more than 1,000 hours during the plan year and give them a 10% allocation with an 11g amendment? In this case they would have 5 ineligibles, but 2 of those ineligibles worked more than 1,000 hours in 2008. If it can be done, it is those two who would allow the plan to pass 401(a)(4).

Thanks for the replies David. I guess my question is would a 1 participant DB plan be considered non-compliant (and disqualified) if it terminated December 31, 2008 without formally adopting any language to comply with WRERA? I think WRERA was signed into law in late December.

What it really comes down to is that we administer a 1 participant DB that terminated 12/31/2008. We usually get a DL on termination but in this case the plan sponsor does not want to get a DL. Usually we would insist on it but this has been a very straight forward plan that has been properly amended all along. It seems that WRERA only provides relief. Would a plan be considered non-compliant by not adopting a WRERA amendment when in operation it never employed any of that relief? What about a plan that terminated earlier in 2008?

Does anyone know if a small DB plan that terminated December 31, 2008 needs to be amended for WRERA?

Does a small calendar year DB plan need to adopt a WRERA amendment if it terminated 12/31/2008? I think WRERA only provided relief.

Thanks Sieve I would think the 415 compensation matter is a not an issue in a safe harbor only 401(k) plan. Even if you had a short year of 4 months it would be $245,000 x 4/12 = $81,666. maximum salary deferrals and 3% of annual compensation would be far less than $81,666.

A calendar year company wants to adopt a new Safe Harbor 401(k) plan for the 2009 year. The notice will be considered timely if provided when participants become eligible. The plan document will be signed shortly, Safe Harbor Notices will be given and salary deferral elections will be made all effective March 1, 2009. Does this preclude the plan from being effective 1/1/2009? In other words does a retroactive effective date automatically mean that the safe harbor notice was not timely? If we do need to make salary deferrals effective 3/1/2009, are we required to pro-rate the 402(g) limit? Thanks.

Have a small DB plan with a minimum contribution of $41K and a prior year carry-over balance of $61k. I think the employer can elect to reduce the minimum required contribution by the carryover balance. I think the plan must be more than 80% funded for the prior year after subtracting any pre-funded balance. However, just the pre-funded balance and not the carry-over balance must be subtracted. Correct?