Leaderboard

The portion of the accrued benefit derived from employee contributions is not subject to 415(b). The employee contributions are considered annual additions subject to the DC limits. 1.415(c)-1(a)(2)(ii)(B) and (b)(3).

I just had this conversation with a doctor who was upset that she couldn't do this in the practice she just joined. The numbers don't work at all for them. "well my brother works for Facebook and they can do it, do we just have to get a plan from the same place they do and then I can do it?" ?

How old is the person..please show your math as well..

Useful for owner-only/HCE-only plans. Otherwise fuggedaboutit!

Did he take an RMD from the 401k plan before the rollover? If not the amount of the RMD was an excess contribution and must be returned with earnings, because RMDs are not rollover eligible. In fact, the 401k plan should have distributed the RMD itself before allowing a rollover over of the balance. Retirement account RMDs are always based on the year-end balance at the end of the previous year. So the amount of the eligible rollover to the IRA is not subject to an IRA RMD in the year of the rollover. It will be included in that year's year-end balance for the next year's IRA RMD.

Read your plan's definition of a Break in Service very carefully. Most plans simply say a BIS is any year a person works <501 hours. Some plans I have seen say any year terminated and works <501 (rare but I have seen it). If it simply says a BIS is any year a person works <501 hours I think this person had a BIS all the years they worked. So this person has 5 BIS in 2019. That has been my understanding of these rules. I have a number of staffing firm clients that can have many people do what you describe and we have consistently said you can work in a year and still have a BIS. It seems odd but I think it is true. It will be interesting to see other people's take on this.

Rev Proc 2017-57, sec. 3.02: So, I think this would have to be considered a change in funding method (since it's not a change in data or actuarial assumptions), and I also think it would probably qualify for automatic approval, assuming you meet all the requirements of 2017-56 4.02. The only way to know for sure though would be to apply for approval for a change in funding method. Edit: I went back and re-read your original question. I had been thinking that you were asking about switching from assuming mid-year to using exact dates, but I realize now you were actually asking about going the other direction. That could present an issue for automatic approval, since 2017-56 4.02(5) requires that the new software be "designed to produce results that are no less accurate than the results produced prior to the modifications or change." Assuming all cash flows occur mid-year would seem to be, by design, less accurate than using exact dates.

Change in vendor is probably the most common case, but I don't see why it couldn't also be used for internally-developed software. A spreadsheet certainly counts as software. There is a requirement that the new software "generally will be used by the enrolled actuary for the single-employer plans to which the enrolled actuary provides actuarial services" so it sounds like you only get the automatic approval if you start using the new spreadsheet for all, or mostly all, of your plans. As to the question of how minor is minor, the rev proc provides a concrete numeric test. The FT, TNC and actuarial value of assets must be within 2% of the value computed with the old software (or 1% if you changed software and used the automatic approval in the prior year). Since a change to the method used to calculate ROR would not impact any of those values, I think that you could argue that a change to any reasonable method of calculating the ROR would be acceptable at any time. A more cautious approach would be to consider that the credit balances are part of the plan assets, and show that the carryover balance and prefunding balance calculated under the new method are within 2% of the amounts calculated under the old method.

Well, for whatever it's worth, I see no need to give such late adopters an extra break on filing deadlines. The whole thing (allowing plan adoptions after the end of the year) is a dumb idea IMO and smacks of the "oh poor baby" mentality pervading our country. Like the world's gonna end because someone didn't have the foresight to establish a plan by the end of the year. Good grief. I've never had a problem shrugging my shoulders and saying "no you can't do that" to a host of ideas/questions. It's putting another straw on the back of the complexity camel.