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Excess Asset from Suspense Account Allocation in QRP


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Does the owner of a sole prop need to have current year income to have the Excess Asset from QRP Suspense Account Allocated to him over seven year?

There is some mention of the 415 applicability to limit the amount allocated (see attached).   But I didn't find anything that tells me if an owner of a sole prop needs to have current year income to receive allocation as the case would be if it was not from QRP.

irs_plr_2008-36034.pdf

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I think what AdKu is trying to ask is, is an allocation from the suspense account in a QRP considered an annual addition?  The answer is yes. If the sole proprietor's net earned income for the year is 0, then their annual additions limit is 0, and they may not receive an allocation from the suspense account.

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  • 2 months later...

In our plan doc (FIS) the Plan allows the suspense account to release an amount which will be treated as an employer profit sharing contribution, which is a part of the annual addition. Since the profit sharing contribution limitation is 25% of pay, then the maximum amount that may be released can't exceed 25% of the salaries for the participants. This assumes no other annual additions. This puts a considerable constraint on the ability to delete the suspense account in 7 years. 

Consider a plan with $400,000 of DB excess assets transferred to the suspense  account, 2 participants earning $80,000 each and no other additions. 1/7 of $400,000 =$57,143. The maximum amount allocated as a PSP is $40,000, so the most that can be removed is only $40,000. Since the plan doc states that the minimum release is 1/7 of remaining balance, is this an operational defect?

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Allocation from the suspense account is not constrained by the 25% deduction limit.  It is only constrained by the 415 limit, which is min ($57,000,100% of comp).

The client may need to forgo cash contributions until the XS is allocated, but in your situation you could allocate at least $114,000/year and easily absorb it within 7 years.  

If they are over 50, they would be able to make catch up contributions.

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Effen--I found another PLR that makes this quite clear and in agreement with your remarks. So TY for the response.

For reference  the PLR--which is very long-10 pages- is 201147032 and issued Aug 10 2010. I can't attach to this message but you can look it up.

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