Guest merlin Posted October 1, 2003 Posted October 1, 2003 What is the deemed allocation if the net increase in the account balance over the measurement period is 0 or negative, i.e., investment losses equal or exceed the actual allocations? Seems like it should be 0.
AndyH Posted October 1, 2003 Posted October 1, 2003 Merlin, that sounds like a very odd situation. You aren't counting income attributable to the balance existing at the measurement start date, right? See 1.401(a)(4)-2©(2)(iii) if you are.
Guest merlin Posted October 1, 2003 Posted October 1, 2003 OK, the light goes on. I was trying to follow Rich Bednarski's outline from the 1998 ASPA conference. The ERISA Outline Book says more clearly that gains/losses attributable to the opening balance are not recognized, but g/l on the allocations are. I'm sure this will give me a much more reasonable, not to mention correct, result Thank you once again, Andy.
AndyH Posted October 1, 2003 Posted October 1, 2003 You are welcome. I've been helped more than I've helped others. That is a good outline, BTW. I've used it as well.
Guest merlin Posted October 2, 2003 Posted October 2, 2003 One further question. For my a4 test I'm using a fresh-start date of 1/1/98 for my 12/31/02 year end. But it looks like I can't go back any earlieds than 1/1/2000 for my average benefit % test, per 1.410b-5e5. Am I reading this correctly?
Guest Roman Posted October 2, 2003 Posted October 2, 2003 I am sorry, but I thought the accrued-to-date method was to use the account balance divided by years of service and this is what you use as the "accrual" to be tested. Am I wrong?
AndyH Posted October 2, 2003 Posted October 2, 2003 Merlin, I don't think that reference says that at all. That paragraph just gives you another option; it doesn't limit you in any way. Roman, you are on the right track. You use the increase in the account balance during the measurement period divided by the years benefitting during the measurement period divided by average comp. If the measurement period were all years, then you would be right, but it does not have to be.
Guest merlin Posted October 2, 2003 Posted October 2, 2003 Ok, Andy, I think I see what you're saying. 1.410b-5d5 says that I use the same rates the the ab%t as I do for the a4 test. 5e5 says I can use up to a 3-year average rate even if my test period is one year. Is that it?
Guest Roman Posted October 2, 2003 Posted October 2, 2003 Thanks, Andy. Further question: Do you have choice of measurement period and should the average comp be over the measurement period?
AndyH Posted October 2, 2003 Posted October 2, 2003 Merlin, yes, except that I am not sure that (d)5 says you must use the same rates. It says that anything available under a(4) may be used for 410(b), it does not say must. Consistency must be among employees and among plans, not necessarily among tests, at least I don't see that.
Guest merlin Posted October 2, 2003 Posted October 2, 2003 Yet another example of the Burrows-Deutsch Principle!
AndyH Posted October 2, 2003 Posted October 2, 2003 Which is that the test never fails.......The client just runs out of money??
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