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Yes, it is possible and is done often. There are issues of possible additional administrative issues, costs, and headaches. The actual cost should also be reviewed, sometimes it is better to split the risk, other times it is not.

When you give up trying to satisfy the IRS on this issue, consider negotiating a change to NRD 62 with subsidized early retirement at what ever age you want. PPA funding can then be based on the actuary's best estimate and the deductions will not change. Good luck.

I have a few comments about this thread: 1. I agree with figure 8 about CBPs being the preferred DB plan type now that the IRS has come out with pre-approved plan documents. We stopped doing traditional DBs as soon as they started allowing 8905s for the exact same reasons he did. Using a traditional DB plan these days is making it harder for clients who don't make maximum income no matter what like the person in question. He could have a formula in a CBP that is dependent on compensation like 10% of pay up to $150k plus 900% of pay over $150k or something like that to allow him maximum flexibility. While that can theoretically be done in a traditional DB as well, it's much more difficult. 2. The interest crediting rate in a plan like this doesn't really matter. Why not pick 5%? In my opinion, there is no reason not to. But I also agree with figure 8 that choosing something lower only matters if the participant ever gets to be over Age 65. But still, asset return is such a small part of the minimum required contribution calculation, that we recommend 5% to all of our clients with no employees. 3. Regarding the timing of setting up a CBP, we recommend the following scenario for our young clients. Max out your profit sharing first because it is a use it, or lose it deduction. Contribute whatever is left in the 31% limit into your cash balance plan. If making maximum compensation, that's still just under 18% of pay (about $48,750). There is no need to limit profit sharing to 6% yet. After 5 or 6 years of running the plans that way, the plan sponsor can switch and start making 6% profit sharing contributions and much larger CB contributions for the last 4 to 5 years when the participant is older can take advantage of the prior years of participation available due to not maxing out for the first 5 or 6 years. 4. At the end of the day this poster should consult two very important people. First, his accountant to see how much of a deduction will even be helpful based on his entire tax situation, new tax law, etc. After he has done that and determined how much to contribute, he should talk to an actuary who specializes in small company plan design. While it may cost slightly more than a cookie cutter DB outfit, it is definitely worth the extra $500 - $1,000 per year.

Most important as frequently stated above: What does the plan say? Almost all plans address this situation. Most of our plans are drafted to permit ceasing a contribution (I agree.... there is no such thing as "suspending." ) anytime. Most are also drafted to permit restarting at any time but some plans do require that the participant reach an entry date (appears to be quarterly in this instance) to restart. Changing this requires a plan amendment because you will have to change whatever is in the plan now. The employer must follow whatever is written in the plan document!

Thanks. That is what I thought but wanted to confirm. Maybe they should give a CE class on how to interpret their CE requirements :).

The ideal client is the one that pays its invoices on time....