Plan Characteristic Code 2A

[401_noob]

Hello again Pension mavens! 

Quick question about the Plan Characteristic code 2A for DC Pension Features.

If the Plan has an integrated allocation would you list 2A as a characteristic code on the 5500? The description seems to suggest that you would since the allocation method provides for an additional rate on comp above the TWB threshold.

Thanks for your time!

[Bird]

No.  Instructions say to use 2A if "...the threshold or additional rate exceeds the maximum threshold or rate allowed under the permitted disparity rules of Code section 401(l)."

An integrated allocation is presumably one in which the permitted disparity rules are in fact followed.  (The term "permitted disparity" replaced the term "integrated" a long, long time ago.)

[401_noob]

Is there an example that you can provide of the threshold or additional rate exceeding the maximum threshold or rate allowed under the permitted disparity rules...? Just trying to understand where 2A would be appropriate for other allocation methods other than the obvious cross-tested.

I looked in the 5500 preparer's manual hoping to find an example, but no luck.

Thanks in advance

[Bird]

Back before the IRS caved in and allowed "everyone in their own group" allocations, we used to be concerned about allocation formulas being definitely determinable, and sometimes used "super-integrated" formulas which called for a rate of, say, 50% in excess of TWB.  Those allocations would in fact have to be cross-tested. 

Even the IRS in those instructions calls new comp an allocation method (they sort of clarify it by defining it as anything that uses an employee classification), but it's really a testing method.  2A is used to report anything that is not pro-rata or permitted disparity, or I guess the same dollar amount to everyone.

[BG5150]

But, only if there is an actual contribution that year.

[401_noob]

This was helpful, thanks for sharing this information with me!