The ol' multiple use test

[Bri]

Happened to walk by my old DC-2 study guide and saw those words flip by and wondered if I remembered what it meant.

Luckily yes.

Anyone got any favorite no-longer-rules they miss?  415(e) perhaps?

[Belgarath]

Family aggregation! Less affectionately (but more commonly) known as family aggravation. 

[Bri]

Loved that one, my first pension job had my prior, non-pension, employer as a client so I got to see myself aggregated with my dad as an HCE (even though I maybe earned 15k) in the ADP/ACP tests!

[BG5150]

No loans to owners.

[Bri]

How about, partnership match amounts count as deferrals?

[Bill Presson]

5 hours ago, Belgarath said:

Family aggregation! Less affectionately (but more commonly) known as family aggravation. 

This was my "favorite" and I couldn't come up with aggregation last night. I kept thinking "attribution" and I knew that wasn't right.

[imchipbrown]

I don't remember something called the "1.4 rule".  I'm retired so it doesn't matter 😎

 

[ESOP Guy]

I actually missed the "wild west" days of being able to do bottom QNECs.  We had a client in the ''90s that refused to say no to their HCEs and refused to do refunds for failed ADP tests.   But they didn't really want to put money in the plan to pass.  We would do these crazy bottom up QNECs that would give people who quit in the first week of the year 100% of their deferral as a QNEC that would quickly get us a passing test for a fraction of the cost of a flat or consistent percentage to everyone QNEC.

 

I had a boss in the early days of Age Based PSP plans that wrote crazy formula like we would allocate 3% of pay on the first $100k of comp and 75% of pay on all comp over $100k.  Throw in those very loose age based rules in the '90s and you had a passing plan. 

And my land some of the perpetually refinanced participant loans I used to see! 

 As far as I can tell some of the early TPAs I worked for are the reason there are so many rules regarding how not to abuse the rules.   😁

[Bird]

10 hours ago, ESOP Guy said:

allocate 3% of pay on the first $100k of comp and 75% of pay on all comp over $100k

"Super integrated"  I kind of miss the creativity and cleverness (?) of having to do that, as opposed to having everyone in their own group.  

[Belgarath]

"Super integrated" to me always conjured up an image of laundry detergent. I have no idea why it brought that image to mind...

[Bri]

I just thought of one - once your balance goes over the forceout limit (of 3,500!) you can never be forced out later even if your balance/PVAB drops below the threshold.

[Kac1214]

I luckily started the year after the 1/3 2/3 test went away. I guess it was the precursor to the ADP test but I never had to do one. Anyone know what it was?

 

[Bill Presson]

On 1/7/2022 at 12:04 PM, Kac1214 said:

I luckily started the year after the 1/3 2/3 test went away. I guess it was the precursor to the ADP test but I never had to do one. Anyone know what it was?

 

Basically just splitting the census into the top 1/3 and bottom 2/3 instead of HCE/NHCE.

[mming]

Frozen initial liability.

[shERPA]

Entry age normal, RR 81-202, excess only integration allocations.  

[Bill Presson]

Class year vesting

[Peter Gulia]

In 1985, I designed a worksheet and software to calculate something 403(b) salespeople called the “maximum exclusion allowance” or “MEA”. (I wasn’t alone in this; many workers for annuity insurers and mutual-fund custodians and their intermediaries did similar work.)

The Technical Amendments Act of 1958 enacted § 403(b) of the Internal Revenue Code of 1954. With other conditions, it set a new limit on before-tax contributions to an annuity contract.

The statute’s text spoke in terms of what one could exclude from gross income, looking to contributions that had been made for a tax year that had ended. One of the allowance’s elements was includible compensation. That element excluded the portion of annuity contributions properly excluded from gross income.

The tax Code’s text had enough internal logic if one was acting only as an individual taxpayer filling-out her tax return based on known facts after a year ended. But people wanted to know what “the max” would be before an employer did the contributions. An employee needed to know this to plan her contributions. An employer insisted on knowing this so it would restrict contributions so as not to fail to apply Federal (and State) income tax withholding on a portion of the employee’s wages for which withholding was required.

Some of us remembered enough elementary algebra to recognize the task was one of simplifying the equation to isolate the variable to be solved for.