Cross Tested Money Purchase Plan

[Lynn Campbell]

I am wondering what vendor provides documents for a Money Purchase Pension Plan that uses the "tiered" or "classification group" allocation method. Thanks for all input.

[Ervin Barham]

I'm not aware of any provider that provides a cross-tested M/P plan. The ones that I have done (or seen done) have just been re-written.

In general, the contribution formula can be amended to say "X% for Group A and Y% for Group B or you can use a modification of a super integrated formula.

The danger in CT M/P plans is that if your margin in passing the 401(a)(4) tests is slim, then you may end up having to amend the formula each year and I don't think the IRS particularly cares for that (at least that's what I've been led to believe).

[Guest ERead]

Corbel has model language that they have provided to me in the past. I called and asked if they were providing, and the response was "no", when I mentioned that it was for a MPPP then they didn't have any problem with providing the language they were providing prior to discovering there were issues with "definitly determinable" forumlas in PS plans.

Give them a call - as for the formulas - I've recieved LOD's in the past on a fomula that specifies - $xx to group A, and a % to group B where a is the HCE's to maximize.... symantics is the name of the game.

Good luck.

[Guest Tom Geer Daily Access Concepts]

I agree that amending the formula every year creates problems, of various sorts. What you can do is define the benefit for the insider group, then define the benefit for the rest as a ratio of that based on the relative ages of the youngest insider and the NHCE outsider who is the key testing person (i.e., who ends up being in the critical testing rat group base on the mid-point percentages).

[richard]

I agree also that amending the plan each year causes problems. And we've all heard that for several decades.

How often do these plan amendments have to be before they cause "problems?"

And then, what problems would be caused? Disqualification? Treatment as a profit sharing plan (so contributions over 15% of payroll wouldn't be deductible)?

What would be the IRS' authority for this.

Finally, does anyone have any specific situations where the IRS (or perhaps DoL) challenged a money purchase plan for too frequent amendments? And what was the result?