Proposed 415 Regulations

[Gary]

A plan was adopted 6/10/05 and its first plan year ended 5/31/06.

After looking at the regulations or at least the section related to the effective date it is not entirely clear if this plan could provide pre participation compensation in determining the average comp limit.

On the one hand it seems that plans in existance prior to 1/1/07 could use old regs until proposed regs are finalized.

On the other hand it seems possible that this option is not available for plans adopted after 5/31/05 and those plans have to apply the proposed regs immediately.

Any helpful knowledge out there?

Thanks.

[JAY21]

I thought PPA 2006 over rode the proposed regs on pre-participation comp and said you can use it. I thought that was one of ASPPA's lobbying effort's that paid off. Check the 415 section changes under PPA 2006.

[SoCalActuary]

The PROPOSED 415 regulations included a number of items that should be reflected, especially on the DC plan side. But the IRS knows they took a risky position on the DB parts of the PROPOSED regulations.

Jim Holland has publicly mentioned that the multiple annuity starting date language does not work, and the pension industry has given him plenty of examples.

PPA put the lid on the issue of pre-participation compensation.

There is still the issue to be fought over the fact that 415 does not refer to 401(a)(17) compensation limits, even though the IRS PROPOSED that it should be limited.

The message I leave you is this: What the gov't PROPOSES is not final until it is final, provided Congress and the courts don't change it.

Also, for that reason, I do not include the proposed 415 changes in my DB plan documents when new or restated plans are prepared.