Leaderboard

Any settlement check should be paid to the original owner (the plan) and it is simply different money, still owned by the plan. It is not a contribution. Getting the investment company to recognize that may be the hard part.

They do have to clear their minimum funding requirement for the year determined as of the valuation date, which could be changing as a result of the termination. If they do that, then the plan document itself may address what occurs in a termination with insufficient assets. (Possibly the plan says to pro-rate, or perhaps if one of them is the majority owner then that person alone forgoes receipt.)

Maybe do an in-service distribution (if the plan allows) but still set the plan term date as 12/31/2022 to get the income for the year.

I'd be surprised if there wasn't *something* but I suppose the Plan Sponsor could adopt an amendment addressing it as they wish then.

Always.

EBECatty, obviously there are always more facts and circumstances, but based on what you have described I would consider trying to come up with what I considered a reasonable interpretation (including filling in any gaps if the document is flawed, as seems to be the case), and then getting the participant to agree that's all she or he is owed. Not ideal, of course. There is, in essence, a latent "bona fide dispute" about what is owed, of the type described in Treas. Reg. 1.409A-3(j)(4)(xiv).

Albany, assuming there is a refund, remind the HCE, that getting a refund isn't the worst thing to happen. The worst thing to happen is choosing to defer less and passing the test. Because that means he/she COULD have deferred more. Getting a refund means they deferred the maximum allowed by law.

Check the document and/or SERP agreement and/or any other related forms, a well-drafted set of documents would answer most of these. If the plan calls for full vesting upon plan termination then I don't see how you can discount for vesting probability. Interest and mortality assumptions play a big part as well and should be specified somewhere, even if through reference to a qualified DB plan, if any. For the 45-year-old, I would calculate the current (distribution date) LSPV of the accrued 5-year installment benefit payable at age 60 or whenever the benefit could actually be payable. Make sure you comply with the 409A plan termination accelerated payment rules, terminating all like plans and paying benefits within the specified window period.

If that initial DOH and 12 hours are not disregarded, which it appears they are not, I agree that DOP is 1/1/2023.

We've had this happen in the past and it's so frustrating because the client gets the impression we did something wrong. I've handled it by having a standard written reply faxed to the IRS along with a copy of the extension request. It's worked every time.