May 7, 2003 (PLANSPONSOR.com) - President George
Bush has announced his intention to nominate Howard Radzely
to the position of Solicitor for the US Department of
Labor.
The move comes as more of a formality, since Radzely has
been serving in the post since January, when Eugene Scalia
stepped down (See
Scalia to Leave DoL Post)
, according on the White House Web site.
Scalia is the son of Supreme Court Justice Antonin
Scalia, for whom Radzely served as a law clerk following
his graduation from Harvard Law School.
The junior Scalia has been in the middle of controversy
since President Bush appointed him to the position through
a recess appointment in January 2002 (See
Bush Bypasses Senate, Appoints Scalia to
DoL)
, and when his recess appointment expired in November of
last year, he was designated acting solicitor by the
President. Bush first tapped Scalia as labor solicitor in
spring 2001, but Democrats who controlled the Senate
blocked a vote on his nomination over union objections to
his opposition of workplace safety regulations during the
Clinton administration.
Then in July 2002, the judge in the Enron bankruptcy
case asked for the records of conversations between Scalia
and Robert Walls, Enron’s general counsel.
Judge Arthur Gonzalez said the decision held relevance to
the case in determining who should be responsible to
trustee fees paid to State Street (See
Enron Judge Checking for Motivations in
Trustee Pay Switch).
June 29, 2001 (PLANSPONSOR.com) - The Internal
Revenue Service (IRS) has issued final regulations (TD 8954)
that allow defined contribution and combined defined
contribution/defined benefit retirement plans to satisfy
nondiscrimination requirements based on plan benefits, rather
than contributions.
The final regulations kept the elements of proposed
regulations on cross-testing, or so-called new
comparability, plans issued on October 5, 2000.
These programs are designed to provide higher
profit-sharing rates to highly paid employees. New
comparability plans are cross-tested on a
projected-benefits basis to meet nondiscrimination
rules.
Current rules allow employer contributions to be tested
on either a present-value basis or cross-tested on a
future-value basis that involves projecting benefits that
would be payable at retirement. Cross-testing lets a
defined contribution plan be tested like a defined benefit
plan, essentially focusing not on the current rate of
contribution, but on what a particular contribution for a
given employee is projected to be – with interest – as an
annual benefit paid when the employee reaches age 65.
The primary addition in the final regulations is a limit
on the minimum allocation rate that combined plans are
required to provide to nonhighly compensated employees
under one cross-testing requirement.
Combined Plans Cap
According to BNA, the proposed regulations allowed
combined plans to satisfy cross-testing requirements if
they are:
primarily defined benefit in character
consist of broadly available separate plans, or
pass a minimum allocation gateway
That gateway occurs when:
each nonhighly compensated employee in the plan has
an allocation rate that is at least one-third of the
allocation rate of the highly compensated employee with
the highest allocation rate (if the highest rate is less
than 15%, percent)
the allocation rate for all nonhighly compensated
employees is least 5% (if the highly compensated employee
rate is between 15% – 25%) or
the allocation for each nonhighly compensated
employee is least 5% plus 1 percentage point for each 5
percentage point increment (or portion thereof) by which
the highly compensated employees rate exceeds 25%
The final regulations said the allocation rate that
combined plans are required to provide for non-highly
compensated employees need not exceed 7 1/2% of pay. The
imposition of such a limit was recommended as necessary in
order to avoid leading to the abandonment of defined
contribution plans by employers.
Proposed Rules Expanded
The proposed regulations allowed defined contribution
plans to satisfy cross-testing requirements if the plans
provided broadly available allocation rates, age-based
allocations, or an allocation rate for nonhighly
compensated employees that is at least 5 percent of
compensation or one-third the highest allocation rate for
highly compensated employees–referred to as the minimum
allocation gateway.
The proposed regulations also said a defined
contribution plan that makes each allocation rate available
to a group of employees that satisfies tax code Section
410(b), without regard to the average benefit percentage
test, would be treated as having broadly available
allocation rates and could use nondiscrimination
testing.
The final regulations retain these requirements, and
additionally permit two allocation rates to be aggregated
such that nonhighly compensated employees with a higher
allocation rate can be used to support a lower allocation
rate.
The final regulations also allow uniform target benefit
plans that do not comply with the safe harbor testing
method under Treasury Regulations Section
1.401(a)(4)-8(b)(3) to satisfy the age-based allocations
requirement.
In addition, the final regulations broaden the age-based
allocations requirement to accommodate plans that achieve a
smoother progression into higher rates based on the sum of
age and years of service.
