Tom Poje

well, as part of my otherwise drab presentation, this was one the songs from the ASPPA Conference. This group wrote a song about a defined benefit plan (there have always been rumors they used drugs) and they were foolish enough to name themselves after those types of plans. D Beatles (Tune is Let it Be) My 401(k) it is in trouble And I just turned age 50 How can I save up quickly? A D-B. And in my hour of darkness The solution’s right in front of me Yes there’s an easy answer A D-B. A D-B, a D-B, a D-B, a D-B A great big tax deduction A D-B. And when the broken hearted people Living in the world agree Yes there will be an answer A D-B. For though the company defaulted Still there is P-B-G-C Yes there will be an answer A D-B A D-B, a D-B, a D-B, a D-B A great big tax deduction A D-B. And when the night is cloudy There is still a benefit for me Yes there will be an answer A D-B. I’ll wake up to the sound of money Monthly checks are mailed to me Yes there’s an easy answer Annuity A D-B, a D-B, a D-B, a D-B A great big tax deduction A D-B.

I did ask one of the document/legal gurus at the ASPPA conference about eliminating a required match when the plan was already satisfying the ADP with test with teh 3% SHNEC. the response was that as of this time the IRS has only approved modifying a safe harbor document in only a few ways (e.g. adding a Roth, etc). in addition, of course we have eliminating a safe harbor feature. there are no provisions for amending eligibility (e.g. allowing more people into the plan) or other such things. I think the conclusion being you can't eliminate a required non-safe harbor match without possibily creating a time warp or something otherwise nasty until we get futher guidance.

1.415(j)-1 (d)(2) application to short limitation year ...a fraction, the numerator of which is the number of months (including any fractional parts of the month).... that's good enough for me to apply same logic elsewhere. I can't see using fractional logical for 415 limitation but whole months for other limitations. but dang it, you made me look something again. How the heck am I going to make sure I get all my safe harbor notices out the door if you keep doing that. maybe see you at ASPPA Conference if you go, whoever you are.

k2retire- unlike the scarecrow, my brain doesn't always work properly. you are correct of course. I think the safe harbor rules have created a bit of an unintended anomaly as this example situation points out. I have a required match which meets all the requirements of a safe harbor match, and since I have provided a SHNEC what do I do? For the past X years I have treated it as a safe harbor match. but am I required to do so? My reading of the code says no, but rather if you meet all the requirements you can take advantage of this option. (Unless I guess in your safe harbor notice you specifically state it is intended to satisfy the safe harbor) but if true, then the section in the 401(m) regs pertaining to eliminating a safe harbor match make little sense since you never had to treat it as such in the first place - unless that only pertains to a match used to satisfy both ADP safe harbor and ACP safe harbor. I don't think it reads that way, but what the heck. in either case you have to do ACP testing, the only issue is whether you can simply stop the match or provide a 30 days notice. I haven't heard the issue addressed in a nonsafe harbor required match if you have to provide 30 days notice, so I am not 100% sure. oh well, maybe if I get a chance next week at the ASPPA Conference I can snag one of the IRS agents and ask them.

was this a required match or a discretionary match? if discretionary, then it wouldn't meet the safe harbor because it matched greater than 4% of comp. If required match, then the match could have been a safe harbor, and I'd say you follow the regs of 1.401(m)-3(h) follow...e.g. you have to give 30 days notice, you have to run the ACP test, etc.

I thought the rule was you HAD to disagregate the union from the nonunion folks. But you still have to run an ADP test on the Union folks (ACP is an automatic pass)

component rules are found as 'Plan restructuring' under 1.401(a)(4)-9© in particular, (2) says that the ER may select the group of employees used for this purpose in any manner and the composition may be changed from plan year to plan year. every employee must be included in one and only one component plan under the same plan for the plan year. so you can put people into whatever groups you want hello and welcome to the board.

well, on my census reports I use 3 different items: category code (probably better named status code if I was to match Relius namimg, but these reports were created years ago and then modofied - (I don't like print 'active' so I blank that out if {RPTEE.EEPLANSTATCD} = 'A' then '' else if {RPTEE.EEPLANSTATCD}='I' then 'Ineligible' else if {RPTEE.EEPLANSTATCD}='X' then 'Inactive' ineligible code if {RPTEE.EEPLANSTATSUBCD}= 'A' then "Age" else if {RPTEE.EEPLANSTATSUBCD} = 'H' then "Fails Hours req." else if {RPTEE.EEPLANSTATSUBCD} = 'S' then "Fails Service req." else if {RPTEE.EEPLANSTATSUBCD} = 'D' then "Excluded Division" else if {RPTEE.EEPLANSTATSUBCD} = 'E' then "Elects Out" else if {RPTEE.EEPLANSTATSUBCD} = 'Q' then "QDRO recipient" else if {@new ee}=1 then "New participant" else "" ok, so if I have someone with an entry date that is equal to or greater than the report from date it will print 'new participant' and then status definition, which is what I listed the other day, e.g. 'terminated, etc."

I use if {RPTEE.EEJOBSTATCD}='T' then 'Terminated' else if {RPTEE.EEJOBSTATCD}='D' then 'Died' else if {RPTEE.EEJOBSTATCD}='P' then 'Disabled' else if {RPTEE.EEJOBSTATCD}='R' then 'Retired' else if {RPTEE.EEJOBSTATCD}='L' then 'Leave of Absense' yeh, a real pain having to modify all the reports I had.

if you keep the odd items in your Plan Limitations tables updated, I have the following for 2010 Bend Point 1 761 bend point 2 4586 pbgc premium 35 Cafeteria HSA Sing Deduction limit 3050 Cafeteria HSA Family Deduction limit 6150 National Average Wage (2008) 41,334.97

even if the plan allowed for more than one loan, as Masteff indicated, the defaulted loan is still an 'open loan' accruing interest [in other words you are supposed to keep track of things on 'paper'] the maximum new loan is recuded by an outstanding loans, so depending on the individuals balance and the amount of the defaulted loan, it could very well be the individual would not be able to take a new loan.

Curiosity got the better of me, so I tried gooooooooogling paired pension plan and the following popped up: (ok, so I was waiting for a print job and had nothing better to do when trapped at the desk) http://www.retirementdictionary.com/definitions/pairedplan •Revenue Procedure 2000-20 defines "Paired plans" as follows “ … either a combination of two or more defined contribution standardized plans or a combination of one or more defined contribution standardized plans and one defined benefit standardized plan (for example, a money purchase pension plan, a profit-sharing plan and a unit benefit or flat benefit pension plan), so designed that if any single plan, or combination of plans, is adopted by an employer, each plan by itself, or the plans together, will meet the nondiscrimination rules set forth in § 401(a)(4), the contribution and benefit limitations set forth in § 415, and the top-heavy provisions set forth in § 416. Paired plans must have the same sponsor. In addition, only one of the paired plans that an employer adopts may provide for disparity in contributions or benefits that is permitted under § 401(l). If one of the paired plans is a defined benefit plan that includes a final pay limitation as described in § 401(a)(5)(D), then the paired defined contribution plan(s) may not provide for disparity in contributions.” •Under Revenue Procedure 2005-16, paired standardized plans are discontinued as separate categories of master&prototype plans

David: From what I read (copied from http://www.socialsecurity.gov/OACT/COLA/latestCOLA.html), it would simply be a one year increase: What is a COLA? Legislation enacted in 1973 provides for cost-of-living adjustments, or COLAs. With COLAs, Social Security and Supplemental Security Income (SSI) benefits keep pace with inflation. No COLA There will be no increase in Social Security benefits payable in January 2010, nor will there be an increase in SSI payments. How is a COLA calculated? The Social Security Act specifies a formula for determining each COLA. In general, a COLA is equal to the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one year to the third quarter of the next. If there is no increase, there is no COLA. COLA Computation For the December 2009 COLA, we measure the increase (if any) in the average CPI-W from the third calendar quarter of 2008 to the third quarter of 2009. These averages are 215.495 and 211.001 for the third calendar quarters of 2008 and 2009, respectively, and are derived from monthly CPI-Ws developed by the Bureau of Labor Statistics. Month CPI-W for 2008 2009 July 216.304 210.526 August 215.247 211.156 September 214.935 211.322 Total 646.486 633.004 Average (rounded to the nearest 0.001) 215.495 211.001 [sorry, I cut and pasted, I don't know how to line the table up so the values in neat columns] Because there is no increase in the CPI-W from the third quarter of 2008 through the third quarter of 2009, there is no COLA. I see that they compare one year to the prior year (unlike plan limitations which is one year to a base period of 2001 [or whatever base period, since catch-ups would have a different base]) I did not realize that. so, my logic would say the plan limits could have actually decreased, but since 415(d)(2)(B) kicks in they stay the same.

mbozek my problem with the statement "There is nothing to interpret because IRC 415(d)(1) only allows adjustments for increases in the cost of living" is that the code says you adjust the limit for increases by comparing to a base period (e.g. 2001) as opposed to adjsuting it for increases to the prior year. Thus, I could understand the argument that you could never drop below the base period amounts. While it is true if you used the formula the limits would decrease from last year, they would still be an increase over the original base amounts - and that is what you are adjusting. Even the IRS says the amounts will remain the same because of 415(d)(2)(B) which says "adjustment procedures which are similar to the procedures used to adjust benefit amounts under section 215(i)(2)(A) of the Social Security Act". I assume these say you can't decrease the SSRA amount.

If so, hopefully this will not be the typical compromise something like "If I add a non-reduction to pensions to my health reform package, will you guys finally vote for it?"

Interesting. I wonder where exactly it says it can't decrease. I think everyone has been waiting to see how they will interpret things. Of course, things could have decreased if the sunset provisions had kicked in a year or so ago, and in 1994 the comp limit was cut way back, so there are times when things have been reduced. I did find the following on CNN regarding Social Security, so the TWB will not change: Since there will be no COLA for benefits, the law also prohibits the Social Security Administration from increasing the maximum amount of earnings subject to the Social Security tax. This year and next, the first $106,800 of a worker's earnings is subject to the 12.4% Social Security tax. Workers typically pay half of that and their employers pay the other half.

the Sept CPI-U value has been released so we have for July - Aug - Sept 215.351 215.834 215.969 (of course I have a bit of an inability to type correctly. the excel file I posted earlier had 215.384 instead of 215.834) so, if you go by a strict reading of the code/regs we will have the following for 2010 unrounded rounded Catch up 5479 5000 Deferral 16,437 16,000 Comp 242,700 240,000 DC 415 48,540 48,000 DB 194,160 190,000 Key 157,755 155,000 HCE 109,664 105,000 this would mean a drop in the limits

are you saying despite how bad things are, the HCE still deferred at the beginning of the year? no deferrals, no top heavy, or maybe put another way, at what % of comp do the key people have?

The preamble to the final 401(k) regs says: One commentator asked for clarification of the interaction between these timing rules and the rule under the regulations that treats a self-employed individual’s earned income as being currently available on the last day of the individual’s taxable year and whether this last day rule precludes a partner from making elective contributions during the year through a reduction in the partner’s draw. The restriction on the timing of contributions is not intended to prevent a partner from deferring amounts that are paid to the partner throughout the year on account of services performed by the partner during the year, and the final regulations have been modified to clarify this point. However, self-employed individuals who take advantage of this opportunity to defer amounts during the year must make sure that the amount contributed during the year will not exceed the limits (such as the limits of section 415) that will apply to the individual, based on the individual’s actual earned income for the relevant period. [emphasis mine] that might be as close as you can come to finding a comment on the issue. certainly the comment implies there can be a violation of the 415 limit, but doesn't addrees the issue of negative income. lets suppose the indivudual in question deferred $5000 and instead on negative income had $1 in positive income. Is the implication from the other commentator means that because the individual has positive income then 4999 can be treated as 415 violation? I'm personally a bit uncomfortable in saying that because the person had $1 instead of negative income it changes everything.

which nondiscrim test are you talking about? for coverage, once a person meets the eligibility requirements (and entry date) they are includable and not benefiting. if they are excludable from the plan, then they are not included in the ADP test or acp test. (this would be no different than someone who fails the last day or hours requirement for a matching contribution - they are not included in the ACP test either) there is no such exception for nonelective contributions, so they would be a 0 for the avg ben % test as well as any rate group test.

in 2010 there are some special rules that allow you to spread the taxation over a few years. there are a number of articles in regards to this. this would be one of them (but you should be able to google search for planty more): http://www.goodfinancialcents.com/2010-rot...nversion-rules/

this spreadsheet has the values over the last few years. The spreadsheet automatically calculates the values if you imput the Consumer Price Index (CPI-U) factors. In 2 weeks the Sept factor (CPI-U factor) will be released and once input into the sreadsheet you will have the 2010 numbers as well. No one is sure if the limits can drop - a strict reading of the regs implies yes, but we will know shortly.

the famous last words, as long as you can pass nondiscrim you are ok. since the max anyone receives is 9%, then the 3% safe harbor is enough to satisfy the gateway. now, lets suppose only 70% of the NHCE receive the additional 6% while all the HCE receive the additional 6%. if you were test on an allocation basis, the plan would pass - technically I guess you could say you don't need to do rate group testing since the formula is uniform and at least 70% of the NHCE received the same rate as the HCEs, but it is a moot point, since if you tested rate group on an allocation basis you arrive at the same square. so when the govt says you don't need to test its because you would pass if you tested anyway.

yeh, but it is interesting that the losing pitcher for Detroit yesterday was named Lyon. so technically a 'Lyon' still lost actually we always called them them the "Ions", not because they are superchareged, but because they get the "L" knocked out of them each week. Hey at least the Tigers won the nightcap.

only one test. gateway has to be on a definition of comp that satisfies 415, but can be from date of participation. testing has to be done on a definition that satisfies 414(s). if you limit comp (e.g. exclude bonuses) but that passes the 414(s) comp test, then you could use that in testing.