What to do now? -- plan sponsor prospect wants to set up a new compara

[Guest SPollock]

I have three prospects that I spoke with late last year that now want to set up new comp plans. Based on the recent IRS review of these plans, would it be prudent to wait until we receive more guidance before setting these up? I am working with a TPA firm (I am a broker and definitely NOT an expert in these plans.) for these plans and they keep telling me that there will be no or limited changes and that I should go ahead and set up the plans. My understanding is that there has been no guidance on what will or will not be acceptable. Has the IRS given any time frame in which they will let us know what, if any, the changes will be? If it is important, all of the plans I have proposed allocate a minimum of 5% to all of the NHCEs and max out the HCE. Any and all information will be very helpful. Thank you!

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[Lorraine Dorsa]

Our firm will continue to recommend new comparability plans and install them in appropriate situations.

We have always disclosed (for all plans, not just new comp) that the rules may change in future and that we will work with them to adjust the plans to comply with the laws as applicable. In light of the proposed IRS review of new comparability plans, we're making our disclosures more complete and detailed. (This is exactly what many TPAs did in 1994 when there was proposed legislation to kill new comparability plans.)

For those sponsors who want a guarantee, new comparability plans were never, and certainly are not now, an appropriate choice.

For those sponsors who want to take advantage of what is currently available, with the understading that the rules may change (and what tax laws are not subject to change?), these plans make sense.

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[Earl]

You could always have them wait till the end of the year to determine plan design, however the possibility that the IRS will resolve this review this year is a good joke.