-11g and discirmination

[Bri]

Looking for some confirmation on my thought train here:

Client has a cash balance plan and a safe harbor 401(k) plan.  Because the owner is over 70½, he's been taking in-service distributions of his entire vested benefit so that he can use the DC method and have a smaller RMD while the rest of his benefit goes to his IRA.

The plans are general tested - DB plan has a $100k credit for the owner against 3% of pay for the staff, so the staff gets the rest of their gateway on the PS side (and the owner's also getting maxed out there in this PBGC-covered setup).

Now, because of all the great deductions they've been taking, they've got basically no room for a contribution for 2018.

Of course, an -11g amendment would allow the plan to increase benefits, but they must be done in a nondiscriminatory manner. 

I think that means, if they want to dump more money in, then the corresponding benefits must pass 401a4 on their own - meaning there's going to be a brand new additional gateway requirement to pass, just on the new amounts, such that anything they may have already received doesn't count.  I don't expect the new gateway to be an additional 7.5%, but depending on how much more the owner's benefit might be, could I be looking at such a second minimum?

And, does an amendment like this actually open up new deductibility on the DB side?  Isn't there something where the deduction rules are determined by the plan's provisions as they already were in effect on 12/31, rather than what they're being amended to?
 

Oh right, and basically I need an 'amendment for both plans, right?  Is it okay to increase benefits in one plan that are discriminatory, if the other plan's increased benefits take care of the overall 401a4?

Thanks in advance for any insight or experience with this.

--bri

[Effen]

What non-discrimination test failure are you looking to correct with an "11(g) amendment"?  I don't think you can amended the plan now (in April), to increase benefits for 2018 and recognize it in your 2018 funding valuation.  I think -11g is only used to correct a failed non-discrimination test.

Am I misunderstanding something?

[C. B. Zeller]

No comment on the nondiscrimination issues, but if the plan is a small plan, then amendments adopted in the last 2 years which increase benefits for HCEs may not be included for purposes of the maximum deduction. See 404(o)(4)(A).

[Bri]

There's no actual failure of nondiscrim, but it's not required to do an 11g amendment.  (Been to enough seminar sessions on the topic to have that committed to memory.)

I do realize the 2-year rule could be an issue, though.  Thanks.

[Mike Preston]

1 hour ago, C. B. Zeller said:

... if the plan is a small plan, then amendments adopted in the last 2 years which increase benefits for HCEs may not be included for purposes of the maximum deduction. See 404(o)(4)(A).

Small correction: the increase is not taken into account for purposes of calculating the cushion.  Otherwise, it is taken into account.