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Agreed

Agreed, a tax exempt employer or government employer is not subject to the excise tax [IRC Section 4972(d)(1)(B)]. Because of this a tax exempt employer could exceed the IRC Section 404(a)(3) deductible limit for Profit Sharing Plans without having the excise tax imposed. However, the applicable dollar limits under IRC Section 415(c) must not be exceeded.

I agree with SSRRS. The 2022 RMD is based on the 12/31/2021 balance, and doesn't change for events occurring after 12/31/2021.

The merger documents can provide that the two trusts are effectively merged as of XX date without having to physically combine them. What if you were just changing the name of the trust? No way that happens on the effective date. It happens later, but the document says when it's effective.

Even if one were to believe it is 100% certain the Service would grant the requested relief, a practitioner’s fee for writing up her client’s explanation of its reasonable cause might be more than $500.

5500-EZ filers are not eligible for DFVCP. DFVCP is a DOL program and non-Title I plans, i.e. 5500-EZ filers, are not under the DOL's jurisdiction. Instead the IRS offers a penalty relief program for plans that failed to file 5500-EZ. You can read more about it here: https://www.irs.gov/retirement-plans/penalty-relief-program-for-form-5500-ez-late-filers I suspect you were already aware of this since you referenced the $500 fee for this program instead of the $750 fee for DFVCP. Regardless, this program is the relief offered by the IRS for plans that forgot to file their 5500-EZ. Without it, the penalty is $250/day with a cap of $150,000. If the 5500-EZ was originally due July 31, 2022 then we are already at $27,000. Compared to that, I would say that a $500 fee is very reasonable.

Next time draft it to say the plans are merged as of the stated date and the trustees shall transfer the assets as soon as administratively feasible. That's what we always do. Very important to keep it general, especially if the merger involves liquidation and reinvestment of cash.

Correct, person cannot get 402(f) notice more than 180 days before the annuity starting date, which in this case I think would be the distribution date. I don't know how quickly a DCP termination d-letter happens these days, DBPs usually take 9-12 months. I think they can't issue a letter any sooner than 145 days, so maybe send out forms after four months (120 days). Unless the plan is an ESOP, part ESOP, or has some crazy provisions, I would think you'd have d-letter in time to be within those 180 days. Just a thought.

This can often be a HUGE headache (and very expensive) for small terminating DBPs and especially if they have a general lump sum option like CBPs. Those in the small plan space know that having ANY annuity insurer option is a godsend. Effen - is this Midland National Life Insurance Company in Iowa that you reference? I'd ask if they could satisfy the DOL's safest available annuity option requirement, but if they're the only option then they are also the safest option. I see they are well rated anyway. Do you know in which states they are licensed to write contracts? I briefly checked their website but couldn't find. I know New York is a problem state. Thanks

seconded

If the plan allows expenses to be paid from assets and a recent invoice that could have been paid from the plan was instead paid by the plan sponsor, the plan sponsor can submit that invoice to the plan for reimbursement.

There's the minor issue of contribution flexibility. This is a pretty dangerous assertion IMO.

We have had luck using Midland for small cash balance accounts. You can contact them directly (on behalf of the plan administrator) or use a broker. If you prefer a broker, PM me and I will supply contact information.

I'm a little confused here, the thread title says "DB Plan" but the post says "vested balance" which would mean a DC plan - which is it? Assuming it's a DB plan, and the post actually meant to say "vested accrued benefit," then.... The portion of the benefit that becomes vested in 2022 is treated as accruing in 2022. Additional benefits that accrue in 2022 must commence distribution in 2023. See 1.401(a)(9)-6 Q&A-5 and -6 of the current regs, or 1.401(a)(9)-6(e) and (f) of the 2022 proposed regs. Assuming that the termination completes and the final distribution is made in 2023, then you can use the DC method to calculate the 2023 RMD, treating the total amount distributed as the account balance.

Isn't the 180 days technically measured from the date the participant gets the 402(f) notice?

Plans and trusts are two different things. The plans can merge as of a certain date - but then it simply has two trusts holding the assets until such a time as the assets can be moved/merged. We have even had situations where two recordkeepers are recordkeeping different parts of a plan, uuntil the records can be combined. We do this all the time..... One just has to keep in mind the financials/assets have to be combined for reporting purposes/Form 5500.

Yes... as far as I know, the distribution election form is only good for 180 days after execution.

Intresting question. However, what would happen if the sponsor in 22 decided to amend to 100 percent immediate vesting? The RMD would seemingly still based on the 12 31 21 value of 60% as the amendment occurred in 22. The same should apply for a termination that increases vesting to 100% during 22.

Interested to hear others' thoughts, but I would think the "objective, nondiscretionary formula" would be satisfied by the "10% of" piece of the calculation, not necessarily a concrete valuation method of the entire company. In contrast to a payment calculation of, for example, "a percentage, to be determined by the board in its discretion, of the total valuation of the company as established by an independent appraiser as of the date of the employee's termination from employment." You could make a similar argument about any unknown future amount. For example, if the formula was 50% of the employee's final base salary, you wouldn't necessarily have to spell out in the plan exactly how, from present date until retirement, the company would adjust the employee's base salary. It's also not an event-based payment, is not dependent on payments made to the employer, etc. so you get out of some of the more specific rules.

It is insane 🤡 to attempt a reasonable cause filing when a denial means you get a CP-283 notice, and you are no ineligible for the IRS late filer relief program under Rev Proc 2015-32. Pay the $500 user fee and be done with it.

Oh, I agree wholeheartedly! IMHO, a remarkably foolish risk given the potential penalties. If the building burned down, or was washed away in a flood, or in the hospital, etc., then it might be different, but changing jobs, or whatever, doesn't build a strong case as far as I'm concerned.

This is a great point and should not be overlooked. If you had owner or HCEs only and gave immediate vesting but now there are NHCEs coming into the Plan and you want to add a vesting schedule, that might be an issue.

The plan has to have entry dates and they are written into the plan. Typically they are the first day of the plan year and six months following (ie 1/1 & 7/1) but can be more frequent. So assume your person was hired 10/10/21. They complete their 6 months eligibility 4/10/22. They would then enter the plan on 7/1/22 and be eligible to defer on 11/1/22. The 11/1/22 effective date for deferrals means that's when deferrals are first allowed in the plan. Not uncommon for a new plan to specify a date on or after the plan is signed in existence. As to vesting, I'm going to give you the most common example and one exception. Your plan defines exactly how it is determined. You just look at the plan year and ask "did the person work 1000 hours"? If the answer is yes, they get credit for 1 year of vesting service. Hire dates and termination dates don't matter for this measurement. The one exception is if the plan excludes service before the start date of the plan. But, in my example, the plan year, the hours, etc could all be different. Read the document.

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