Dalai Pookah

The auditor merely asked for copies of the participants' driver's licenses to verify birthdates. I remarked that this must be a new requirement, since no auditor has boldly, gone there before.

For the first time, in an IRS audit, the auditor requested copies of participants' drivers licenses to verify dates of birth. Has anyone else experienced this? While this is a creative way to verify DoB, it seems to be sort of an itrusion as I don't berlieve most employers capture this information. They may visually verify the license when completing the I-9, but not capture the image. Just curious to see if this is a new ask, generally, or merely confined to one office.

The question is whether one can wait until NRA to get a step-up in vesting. The Basic Pre-Approved Document (relevant to this question) says must be employed at the time of reaching NRA. The regs only refer to a participant reaching NRA to become 100% vested. In my almost 50 years of dealing with this, I never understood that employment was a predicate. Now it seems that view was mistaken.

I've been posed a similar question recently and the regulations do not seem to provide a clear answer. Here, NRA is the later of 65 or the fifth anniversary of participation. Someone leaves at age 66 and after her third anniversary of participation. The question is whether she becomes 100% vested upon reaching her NRA. The only logical thing I can point to is the pre-approved (FIS) document, which defines Normal Retirement Age: "Normal Retirement Age" means the age elected in the Adoption Agreement at which time a Participant's Account shall be nonforfeitable (if the Participant is employed by the Employer on or after that date). Logic says that the IRS would not allow this in a pre-approved document, if it were contrary to the regulations. (I apologize for using IRA and Logic in the same sentence.) I find nothing in any regulation that makes this distinction.

And if that were the only NHCE? So we have to correct the ADP test first. This would be, potentially, a QNEC of 64% of applicable compensation. Same if none of the eligible NHCEs deferred.

The plan is now SH. Only dealing with 2020 and the cost of correction. Maybe a suggestion to revise §401(k)(3) to the effect that if the ADP of the NHCEs are greater than say 6.5%, then the ADP test is satisfied. [Typically, the 402(g) limit divided by the 401(a)(17) limit is roughly 6.7%] This may be the 401(k) equivalent of the Rule Against Perpetuities.

Thanks, Corey. I'm aware of the MDO. I'm focused on the failed ADP test. It may be that the VCP retro amendment is the only way to get a good resolution at a price of $3,000 or less. Either that or a $28,000 QNEC. It seems incongruous that you could have a situation where the NHCEs could defer the maximum and yet still fail ADP (understanding that this fact situation is not that).

Strange situation. Consider a self-employed husband and wife, each deferring $19,500 (2020) Their compensation turns out to be $65,000. Oh, and they have an employee that should have been eligible 7/1/20, but was overlooked an that was the only NHCE. It's too late for a refund, so a QNEC is required. The HCE ADP percentage is 64.93%:NHCE is 0%. 62.93% QNEC would be over $28,000. This would be higher than the §402(g) limit. My inclination would be to limit the QNEC to $19,500, but I can't be sure that this is right. A seemingly paradoxical situation is that had the NHCE deferred $19,500, it still would not pass ADP. Is there a way out of this dilemma?

That makes sense to me Lou. I don't know if it is SCP or VCP, so that question still exists. NRA62 with fully subsidized ERA would solve funding and if we don't otherwise have any VCP issues I might take the position that it is SCP correctible operation issue.

Takeover. Many issues. DB with document stating NRA age 50. This would violate §401(a)(14) and §1.401(a)-1(b)(2). We can correct late restatements under SCP, but can we also change the NRA to 62 under SCP as well? This appears to me to be a document issue, which cannot be corrected under SCP. Thoughts? Also, assuming we have to do this from inception, would we also have to redo the actuarial valuations using the correct NRA (likely resulting in some past non-deductible contributions) or just look at open years?

If a DB plan is non-compliant (either a discriminatory benefit formula or failed 401(a)(4)) may it still terminate under PBGC if the assets are sufficient? We understand that a plan may potentially be disqualified, but does the PBGC care or is it only concerned with sufficiency? Case in point floor/offset plan, but the sponsor did not correctly fund the DC plan to meet aggregated testing. They want to terminate the DB plan. We are reluctant until they get the combo compliant. They dispute the need for additional contributions to the DC plan in order to terminate the otherwise sufficient DB plan. If we warn the sponsor of consequences, will the PBGC allow the termination without regard to testing?

We have a CB plan terminating with excess assets. The CB benefits are offset by a DC plan. Upon plan termination, excess assets will be allocated in a non=discriminatory manner. The question is how we properly account for DC balances in computing the allocation of the excess assets. I would think, that so long as the allocation of the excess could be reflected in a formula that would still pass 401(a)(4), taking into account the offset, it should pass. The alternative would be to allocate assets to all participants, even those who never had a positive benefit in the CB plan due to the offset. Guidance on this seems sparse or non-existent. Thoughts?

A defined benefit plan purchased an annuity from Prudential for one of its participants. The plan is terminating and the participant is willing to either take a distribution or purchase the annuity from the plan. The annuity has a Highest Daily Lifetime 6 Plus Rider, which Prudential is saying will terminate if the annuity is transferred to the annuitant. this rider provides the major value of the annuity. Examining the rider, there is nothing to indicate that a transfer to the annuitant is not allowed. I have little experience analyzing these annuities, but it does not make sense that an annuity sold to a qualified plan would have provisions negating its provisions if the ownership of the annuity is changed from the Plan to the annuitant. This is what we expect would happen either upon termination of employment or termination of the Plan. Prudential is being opaque. They keep saying the transfer will not be allowed to maintain the rider, but will not offer language in the rider (or elsewhere) that supports this assertion. Can anyone offer insight and guidance here?

Thank you. That's what I thought, but there was precious little to confirm. I just wanted to be sure I wasn't missing anything. Belt and Suspenders (for us old timers).

This regulation, published in 1991, purports to have us consider HCEs together with those who are HCEs by attribution considered as a single HCE for purposes of 410(b). The regulation refers to §414(q)(6). §414(q)(6) at that time was removed from the Code in 1995. The regulation was not updated. We have a plan with and HCE and his two children, who are also employees, but do not benefit. For 410(b) purposes must we consider them as one HCE or can we consider 1/3 HCEs as benefiting? Please cite any references. Thank you.