How long has cross testing been available?

[TBob]

I am curious as to when cross-testing became available or at least, when did it become widely used in the industry as a plan design format. I am looking at an existing profit sharing plan and trying to determine if the plan design was appropriate at it's inception since it is clearly inappropriate now. This may be due to changes in demographics of the sponsor's workforce but I am not certain. Any thoughts from the EB veterans out there?

[Tom Poje]

see 1.401(a)-4 Q-6

...for rules applicable to plan years beginning after 1/1/94 see 1.401(a)(4)-1 through 1.401(a)(4)-13.

so 1994 was when thenondiscrim rules were 'official' for the latest batch of plans.

[Belgarath]

I don't have any recollection of the formal date, but I do recall generally 1994 and later. As I recollect, 1994 was the year the final 401(a)(4) regs kicked in, but I'm not sure all that many people started generally doing cross tested plans until later on. The IRS was really a PIA on the "definitely determinable" issue for quite some time on those early plans.

[MWeddell]

Code Section 401(a)(4) was substantially revised by the Tax Reform Act of 1986. Proposed regulations were first issued in May of 1990. My recollection is that it was during a ALI-ABA videoconference in 1991 that Jim Holland of the IRS demonstrated the power of cross-testing that was in the proposed regulations, and that event really opened up practitioners' eyes to the possibilities of cross-tested plans. So I'd date their popularity from 1991.

[rcline46]

Crosstested plans began in the late 70's. To clarify the rules, the IRS issued Rev Proc 81-202. The plans gained in popularity through TRA 86, in which Congress directed the IRS to rewrite 81-202. This gets us up to 1990 as mentioned in a previous post.

[TBob]

You guys are all showing your age...er...uh...experience! Thank you all!

[imchipbrown]

I guess Target Benefit was the most "Comfortable" cross tested plan, audit-wise. Then Age-Weighted PS Plan became superior in some respects. Took several years for IRS auditors in SF area to accept a New-Comp Plan. Problem is, New-Comp is calc-intensive, and no one wants to give you the $ to run the calcs.

Just my $5 (look up "Inflation").

[AndyH]

My $4 says that a target benefit plan, done properly, is ++50% more work than a new comp plan because of the need for comp averaging and prior year data tracking.

[Guest Pensions in Paradise]

What's a target benefit plan?

(Just joking of course.)

[AndyH]

A target benefit plan is one that, for example, might allow allow one to get to Hawaii and drop the pension "habit".