Dave Baker Posted October 25, 1999 Posted October 25, 1999 Sal Tripodi's TRI Services web site (http://www.cyberisa.com) explains that the new $85,000 number (up from $80,000) would apply in 2000 to a calendar year using a prior-plan-year lookback definition such that, for a plan year which begins January 1, 2000, the $85,000 compensation limit will be applied to compensation for the period January 1, 1999, through December 31, 1999. Has anybody heard anything different?
MWeddell Posted October 25, 1999 Posted October 25, 1999 Watson Wyatt received the same answer when we posed the question verbally to the IRS. The $85,000 amount applies to 1999 compensation when one is identifying highly compensated employees for plan years beginning in 2000.
Guest mo Posted October 25, 1999 Posted October 25, 1999 Although I personally agree with both of the above, one of our ASPA conference attendees has reported back that Jim Holland insists that the $85,000 applies to 2000 wages, as reviewed in 2001.
Guest bk Posted October 25, 1999 Posted October 25, 1999 I've heard that Dick Wickersham has also indicated that the $85,000 applies to 2000 compensation, not 1999.
Guest ak Posted October 26, 1999 Posted October 26, 1999 The Holland/Wickersham comments seem to be correct if you look at the HCE regs Q&A 3©(2). They provide that the dollar limit for a look-back year is the limit for the calendar year in which the look-back year begins.
Guest GregSelf Posted October 26, 1999 Posted October 26, 1999 Check the cyberisa.com site again. It's been updated.
Dave Baker Posted October 26, 1999 Author Posted October 26, 1999 Thanks, Greg! Sal's revised description of the way the lookback rule and the new $85,000 limit applies now lines up with the earlier Dick Wickersham comments, as noted at Sal's "what's new" page ( http://cyberisa.com/erisa_new.htm )
Guest GregSelf Posted October 26, 1999 Posted October 26, 1999 Stop the presses! Apparently there are still IRS officials who disagree with Holland. Watson Wyatt has requested a Letter Ruling on this issue. I'm sure we'll hear more about this. Man! What an EXCITING field we work in!
Guest ak Posted October 27, 1999 Posted October 27, 1999 Man, this is exciting but why all the confusion. It seems that for once the issue is pretty clear based on the language in the HCE regulations. What's the need for the letter ruling and why don't the IRS officials just look at their own rules. Unless they are going to invalidate the applicable regulatory language, this seems like a wast of time. Am I missing something here?
MoJo Posted October 27, 1999 Posted October 27, 1999 The IRS look at the regs? Naaaaaaaa! That wouldn't be sporting!
Guest MelG Posted October 27, 1999 Posted October 27, 1999 Dave Baker - -You should print something under What's new column regarding the 80k vs 85k controversy for year 2000 testing.
Guest mo Posted October 28, 1999 Posted October 28, 1999 I think the argument is that the 414(q) regs predate SBJPA. To add another wrinkle for a calendar year plan, there was always the calendar year election for the lookback year. I don't think those regs can be applied literally at this point.
Guest Ben Posted December 7, 1999 Posted December 7, 1999 It looks like the IRS has finally responded to Wyatt on this issue. In the What's New section of BenefitsLink today there's a link to a Wyatt newsletter article on pension reform. Within that article there's a boxed item on the HCE issue - here's the link - http://www.watsonwyatt.com/homepage/us/new..._99_12_02.shtml This item indicates that after some internal debate, the IRS reached a conclusion. It says that, in a letter to Watson Wyatt, the IRS indicated that the $85,000 limit for 2000 applies to compensation earned during 2000, which should be used to determine highly compensated employees for the 2001 plan year. Has anyone seen this letter from the IRS to Wyatt (presumably it is something like a general information letter)?
Guest slt Posted December 9, 1999 Posted December 9, 1999 Note that this still does not resolve the issue with respect to fiscal year plans that have made the calendar year election for determination of their look-back year.
MWeddell Posted December 10, 1999 Posted December 10, 1999 Yes, I've seen the letter. It was distributed internally to Watson Wyatt associates yesterday. I'm not authorized to post company stuff on the web (and don't e-mail me either unless you're a client I consult with). However, I'd guess that it'll be generally available very shortly. BNA Daily Tax Report already picked it up. Yes, it looks like a general information letter, signed by Martin L. Pippins, Manager, Actuarial Group 2. Answering the question raised in the above post, the letter addresses the calendar year data election from 97-45: "f the calendar year data election is made for a plan with a non-calendar plan year beginning in 2000, the compensation limitation for determining HCE status is $85,000."
Guest Ben Posted December 15, 1999 Posted December 15, 1999 RIA has reproduced the text of the IRS General Information Letter online. There's a link to it in the What's New section of BenefitsLink today. The address of the RIA item that contains the text of the General Information Letter is http://www.riatax.com/weekly/pension.shtml
IRC401 Posted December 16, 1999 Posted December 16, 1999 I agree with Mo. The regs are based on prior law and are not applicable. I know that this is a radical notion, but read the law. The law seems very clear that employees with compensation in excess of $85,000 in 1999 are HCEs for 2000. Holland seems to have a knack for aggrevating an entire profession when there is no legal or policy reason to do so.
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