PensionNewbee Posted March 13, 2003 Posted March 13, 2003 2001 PYE ratio was 53.80 2002 PYE ratio is 60.02 top-heavy 2002? the plan is top-heavy in 2003.
david rigby Posted March 13, 2003 Posted March 13, 2003 For clarity: - new plan? - what is plan year? - when you state "2001 PYE ratio", what date does it refer to? I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
Tom Poje Posted March 13, 2003 Posted March 13, 2003 and also, if the 2002 ratio at 60.02 is at 12/31/2002 is this value including ps contributions made in 2003 for the 2002 plan year?
PensionNewbee Posted March 13, 2003 Author Posted March 13, 2003 The plan started 1/1/2000. The 53.80% ratio comes from a Datair report (this is a takeover plan) run for the 12/31/2001 plan year. It states that "the plan is not top-heavy next year". The 2002 account balances reflect the 2002 PS contribution which was actually made in 2003. Does this make a difference? So much to learn!!!
Tom Poje Posted March 13, 2003 Posted March 13, 2003 it depends. the regs would seem to indicate you do not include ps contributions made after the plan year end. However at the 2002 ASPA conference when asked that question the IRS 'accepted the argument to include them in the balance' I think this is contrary to what most people have learned about not including the amounts. The IRS agents also stress that the comments at the conference reflect an opinion and do not necessarily represent an official position. Some of the people on the board here say the IRS is wrong on this one. I am unsure. So what's a body to do? Well, if they are going to make a contribution in 2003 anyway it doesn't make a difference. If you don't include it and the plan is still over 60% then it doesn't make a difference either, does it?
mbozek Posted March 15, 2003 Posted March 15, 2003 The TH provisions in the plan will determine when then plan is TH not the comments of IRS speakers. Reg 1.416-1 T-22 defines the TH determination date as the last day of the preceeding plan year (except for the first year). T-24 does not require inclusion of contributions due for a plan year which are not made as of the determintion date for such year. mjb
Mike Preston Posted March 16, 2003 Posted March 16, 2003 Saying that the plan will be determined to be or not be top-heavy based on the language of the plan itself is a statement that can't be argued with. However, if the plan merely references 416 or the regs thereunder in the determination of top-heavy ratio (as most pre-approved documents do) it doesn't provide much guidance. I am in total agreement that T-24 is quite clear that contributions made after the determination date in the case of a profit sharing plan are not counted in the top-heavy ratio. However, the fact remains that the IRS is now on record as saying that the individual that submitted the actual question at the 2002 ASPA Annual Conference (question number 49) had a reasonable argument as to why, if the plan wanted to, it could interpret the language of T-24 to support inclusion of contributions made after the determination date in a profit sharing plan. This means that practictioners seem to have a choice. This is usually a good thing.
Tom Poje Posted March 17, 2003 Posted March 17, 2003 I agree with Mike. There does now, at least seem to be a choice. and, at least based on the numbers given, would seem to make a difference. I would say I focus my attention on the comment 'the 'software' says the ratio is 60.02%', and exactly what contributions are included in that calculation. I suspect most software includes the contribution made after the end of the year. perhaps it is more of a warning about simply relying on software. And that is not meant to be a negative comment on the software - it might depend on how specs are answered, etc. Especially when you are that close to the magic 60% mark. Another example would be in regards to a terminee. Lets say he quit 3 years ago. You would not include his account balance. Now he gets paid out. I've seen software pick up on the distribution and include it in the calculation, under the rule that says you include distributions made within the last year. That wouldn't seem to make much sense since the ee hasn't performed services for more than a year.
PensionNewbee Posted March 17, 2003 Author Posted March 17, 2003 Sheesh. It isn't as cut and dried as reading the plan document or the regs, is it? The software I'm using is Relius. The software used prior was Datair. I do believe that Relius is including the contribution since the transaction posting it was done prior to running the TH test. If this is the case, do I reverse the PS contribution, run top-heavy, then repost the contribution?
mbozek Posted March 17, 2003 Posted March 17, 2003 I guess you have a problem if the soft ware being used does not conform to the determination for TH status as provided in the plan document. mjb
Tom Poje Posted March 17, 2003 Posted March 17, 2003 actually check the top heavy screen. with Relius there is a toggle something like 'include contributions made before trade date' so you might not have to rerun the transaction, just change the date on the screen and rerun top heavy. As I tried to indicate, it really becomes important to know how the software operates. Fun being a newbee isn't it. we all have lived through it. hang in there! as for distributions, I am not sure what it does. My gut feeling is that it writes the distribution into the top heavy screen in the year of the distribution regardless of when the ee quit. therefore some adjustment may be necessary. but I am not 100% sure. and when you are at 60.02% I can see where all this may make a big difference.
PensionNewbee Posted March 17, 2003 Author Posted March 17, 2003 the PS contribution was made on 3/11/2003. in the TH/ADP ACP data screen, I can just change the date to exclude that contribution and rerun the test rather than reposting the contribution, is that what you're saying Tom? Sounds like an easy thing... as I said before - so much to learn!!!
Tom Poje Posted March 17, 2003 Posted March 17, 2003 well that depends on how things are run. (If I understand things correctly) Since the screen is toggled on 'trade date' it doesn't do much good to change things if you don't have trade dates. (e.g. you aren't buying shares) I believe the default is 7 days into the new year (e.g. to cover deferrals, match deposits). Therefore, I would suspect that the profit sharing would not normally be included if you are running things with trade dates, since you probably wouldn't run the ps contribiution one week into the new year.
PensionNewbee Posted March 17, 2003 Author Posted March 17, 2003 that makes sense. I'll give it a shot and see what happens!
Archimage Posted March 17, 2003 Posted March 17, 2003 You could run the contribution in as a receivable. If I remember correctly, Relius will not include receivables for PSPs in the TH test.
PensionNewbee Posted March 17, 2003 Author Posted March 17, 2003 that's an excellent suggestion, Archimage - thanks!
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