A DB plan is not subject to the 436 restrictions but is restricted from distributing lump sums to HCEs. We have the following for a participant who was age 60 in 2006:
Compensation 2006: 200,000
2007: 165,000
2008: 90,000
Employee terminates 1/1/2009. Employee is NHCE in 2009 so may have benefit distributed in a lump sum. However, if employee defers election (to say 2010) and 401(a)(4) HCE restrictions still apply, employee becomes Former HCE in 2010 and therefore cannot have benefit distributed in a lump sum.
Any disagreement?
Full Version: Former HCE
QUOTE (Andy the Actuary @ Apr 10 2009, 07:53 AM) 
A DB plan is not subject to the 436 restrictions but is restricted from distributing lump sums to HCEs. We have the following for a participant who was age 60 in 2006:
Compensation 2006: 200,000
2007: 165,000
2008: 90,000
Employee terminates 1/1/2009. Employee is NHCE in 2009 so may have benefit distributed in a lump sum. However, if employee defers election (to say 2010) and 401(a)(4) HCE restrictions still apply, employee becomes Former HCE in 2010 and therefore cannot have benefit distributed in a lump sum.
Any disagreement?
Compensation 2006: 200,000
2007: 165,000
2008: 90,000
Employee terminates 1/1/2009. Employee is NHCE in 2009 so may have benefit distributed in a lump sum. However, if employee defers election (to say 2010) and 401(a)(4) HCE restrictions still apply, employee becomes Former HCE in 2010 and therefore cannot have benefit distributed in a lump sum.
Any disagreement?
Assuming the participant terminated employment in 2009, I agree that the only way this participant is not a HCE is if lump sum is paid in 2009. If not paid in 2009, pariticipant will become a Former HCE.
Thank you. This is a very strange and convoluted result.
QUOTE (Andy the Actuary @ Apr 10 2009, 09:27 AM)
Thank you. This is a very strange and convoluted result.
Yes, this is a bit of a loophole in the HCE issue. I think there have been some threads on this board about this issue in the past couple of years.
I had searched but didn't find any -- likely a problem with my keyboarding!
QUOTE (Andy the Actuary @ Apr 10 2009, 06:53 AM)
A DB plan is not subject to the 436 restrictions but is restricted from distributing lump sums to HCEs. We have the following for a participant who was age 60 in 2006:
Compensation 2006: 200,000
2007: 165,000
2008: 90,000
Employee terminates 1/1/2009. Employee is NHCE in 2009 so may have benefit distributed in a lump sum. However, if employee defers election (to say 2010) and 401(a)(4) HCE restrictions still apply, employee becomes Former HCE in 2010 and therefore cannot have benefit distributed in a lump sum.
Any disagreement?
Compensation 2006: 200,000
2007: 165,000
2008: 90,000
Employee terminates 1/1/2009. Employee is NHCE in 2009 so may have benefit distributed in a lump sum. However, if employee defers election (to say 2010) and 401(a)(4) HCE restrictions still apply, employee becomes Former HCE in 2010 and therefore cannot have benefit distributed in a lump sum.
Any disagreement?
This is new to me. Can you elaborate a bit? When exactly does "former HCE" status begin?
TIA. ... S
The year following the year of termination.
What is the cite on that definition?
Never mind. I found it winds up as the definition under 414(q). An interesting little loophole.
Never mind. I found it winds up as the definition under 414(q). An interesting little loophole.
QUOTE (Blinky the 3-eyed Fish @ Apr 20 2009, 03:22 PM)
What is the cite on that definition?
Try 1.414(q)-1T, Q-4
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