Leaderboard

Many documents restrict the deferral amount to 92% of pay for just this reason. But my answer is that you can't defer money that you can't receive, and since the SS is mandatory, there's no option to receive $5,000, hence you can't defer it. For me, what passes as common sense. Doesn't mean I'm right...

Google "sham termination". It is edifying.

Agree with Belgarath. I try no to invoke "common sense" in pension discussions but just 'cuz the doc says 100% doesn't mean you really can; it's just not enforceable. Taxes take priority.

Take a look at Rev. Proc. 2021-30, Section 6(.06)(4).

Generally you can't waive participation in a DB plan - it is not an elective contribution. If you mean the irrevocable waiver of participation, that has to be done before the employee becomes eligible for any plan offered by the employer, and must apply to every plan ever sponsored by the employer. If they are already eligible for the 401(k) plan then it is too late. That's even if the plan allows irrevocable waivers, which plans are not required to offer.

DOB of 1/6/1951 means that 2023 is his first distribution calendar year and his required beginning date is 4/1/2024. If he takes a distribution during 2021 or 2022, it would not be subject to any RMD requirements, since neither 2021 or 2022 are a distribution calendar year. Of course, if he rolls it over to an IRA, he will have to start RMDs from the IRA by 4/1/2024. As an aside, you should be aware that whether someone is a 5% owner for RMD purposes is determined solely with respect to the year they turn 72 (formerly 70½, although the regs have not been updated yet). Meaning that if he sold the business in 2022 and he was not a 5% owner during 2023, he would not be subject to RMDs from the plan until he actually retired. RMDs have to start from an IRA regardless of whether you are retired or not.

Thanks to the comments. I simply told the gentleman that real estate has too many balls in the air and that my knowledge of real estate in a plan only allowed me to juggle one ball.... the "no real estate" ball. I told him to go find a good ERISA attorney. He was satisfied with that recommendation.

I think it depends on the individual situation. If they have a good relationship and aren't planning a divorce it can be handy to have both as Trustee in case one dies to be able to act on behalf of the Plan.

Also, plan documents often provide that distributions to terminated participants would be done as soon as administratively feasible. Usually past practice will be looked at for reasonableness, and I don't think the next day after termination is reasonable. If the terminated employee is rehired before an administratively feasible time period, then I think he is out of luck.

If they put in a new PS plan, they can keep the TH exemption for the existing plan as long as it continues to consist solely of deferrals + SH match. Then then can exclude this particular individual from both the CB and PS plans, and they won't need to give them a TH minimum. If that's too much trouble, they could exclude the individual from the existing DC plan going forward; they would probably still need to give them a 3% TH minimum for 2021 (assuming they are excluded from the CB plan), but after that, nothing.