Age Weighted Calc

[No Name]

I'm running some numbers on a sole-proprietor age-weighted profit-sharing contribution. The document is a prototype with a grafted-on amendment to the allocation formula (essentially individually-designed). (Have some dashes!)

Owner is 70. When calculating "points", what does your software do? Use current age (no discount), premium (age 65 - current age, an increase)?

I shouldn't have to ask, except that I wrote the software and spreadsheet. I can't double-check against myself.

Document says discount from NRA to current age. Silent on what happens after NRA is attained.

[mwyatt]

Hey noname, I'll give you a "generic" answer. If you look in the regs, you will most likely find that you stick with the Immediate Annuity Factor at the participant's NRA, and obviously no "discounting" from NRA to AA.

And BTW, warmed my heart today to see Petey do great and then have the Mets bullpen implode... as they said on EEI, he maybe should have traded some "respect" dollars for a decent reliever to follow.

[No Name]

Before the Code was written!

For the first time in their 129 season openers, the Reds finished one off with a homer.

[Tom Poje]

I'm not sure its a matter of looking a the regs, but rather at the document. And if the document is silent...hmmm.

If you use the APR at current age this would result, for example, in 'discrimination' between 2 ees both making the same comp, but one at age 65 and one at age 70 and the one at age 65 would receive a larger contribution.

to get around this, documents I have seen say to use the same APR for both ees, resulting in the same contribution for both ees. (Apparently yours does not say this, but worse says nothing one way or the other)

if you were to test for nondiscrim in this scenario the older ee would end up with a larger E-Bar because you are suppose to use the APR at current age if you are past NRA.

The 'out' so to speak, is in the regs...

"This would seem to raise the possibility of failing nondiscrimination testing.

However, a plan will not fail discrimination testing merely because allocations are made at the same rate for employees who are older than their testing age (determined without regard to the current age rule in paragraph (4) of the definition of testing age in Treasury Regulations Section 1.401(a)(4)-12) as they are made for employees who are at their testing age. [Treas Reg § 1.401(a)(4)-8(b)(3)(ii)]"

[i had written an example of this very scenario with E-Bars and everything else, so I have my 'quote' handy]

[mwyatt]

Now back at the office and checked one of our documents generated using the Relius Volume Submitter system. Pretty clear that the Immediate Annuity Factor used is the factor at the Participant's NRA, not Current Age, and (obviously) no discounting past NRA. So in effect once you are literally at or over NRA, the value of your 1% benefit for weighting purposes is the value at NRA.

[nancy]

We also just had this come up in a plan. The one HCE is age 66. His "points" are calculated based on NRA (age 65) but EBAR is based on age 66 which appears to cause the test to fail. I'm going to reread the reg that Tom referenced. It appears we may be ok.