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If a 3-year average W2 compensations was established already, you may not need any current compensation for a defined benefit plan. However, you may need a reasonable compensation paid for services, but this is the question to an accountant/tax advisor.

That § 72(p)(2)(C) condition calls for the amortization, not necessarily the payments, to be level. It might be possible for an amortization to remain level even while periods’ payments vary if each payment is enough to extinguish the period’s accrued interest and to pay the constant portion of the principal. Black’s Law Dictionary (12th ed. 2024) defines amortization as “[t]he act or result of gradually extinguishing a debt . . . , usually by contributing payments of principal each time a periodic interest payment is due.” That definition’s subentry defines negative amortization as “[a]n increase in a loan’s principal balance caused by [periodic] payments insufficient to pay accruing interest.” An adjustable-rate loan sometimes changes what interest is due under the loan’s terms. If every payment is enough to satisfy the then due interest, the amortization might be level. We might never know whether a loan with interest adjustments meets the § 72(p)(2)(C) condition because, as noted above, recordkeepers and third-party administrators don’t offer services regarding such a loan. This is not advice to anyone.

It depends on whether they were a 5% owner in the year that they attained the applicable age. If they were a 5% owner at any time during that calendar year, then they must take an RMD. If they were not, then they can delay RMDs until their actual retirement. Age 75 in 2024 means DOB was in 1949, which was the SECURE transition year. If the DOB was on or before 6/30/1949 then it is age 70-1/2 and the applicable year would be 2019, if was on or after 7/1/1949 then the age is 72 and the applicable year would be 2021. Regardless, the 2024 RMD would be zero, since as you note, the 12/31/2023 account balance was zero.

Looks to me like Plan A does not pass ratio percentage (I get 55%). If the CG can satisfy average benefits then you could test A separately on ADP and the PS appears to be a safe harbor (depending on comp definition). If you do not pass average benefits then you MUST aggregate A with B to satisfy coverage and then must also aggregate to satisfy nondiscrimination (ADP, 401(a)(4)). Since B is cross-tested, you may very well have to run average benefits for the CG anyway, so you'll have your answer on the above. Note if you do not HAVE to aggregate, you may permissively aggregate and do so independently with regard to 401(k) and 401(a). If you want hasenpfeffer sometimes you have to go down that rabbit hole!

Because the Plan needs a Cycle 3 restatement by 3/31/2024 and they are on their list of maintained documents. It seems this TPAs implementation, document, administration, client communication, and actuarial services appear to require a bit better coordination.

Appreciate all the comments. We talked to the Administrator for the National TPA. Learned that they outsource the Actuarial work. The Administrator was under the impression that a 5500 wasn't needed until the assets got to $250k. Again, the client, a law firm, has employees. The Administrator checked back with his team and responded to us via email. Please take a look at his reply below in bolded italics and let me know your thoughts: Our firm is required to file a form called "Volume Submitted Defined Benefit Plan" with a list of plans on an annual basis to the IRS. This form includes a list of DB plans that our firm has assisted with during the year. Since this plan was adopted in 2021, it would have been reported to the IRS on our Volume Submitted in 2021. Ultimately, the decision on how to proceed rests with the plan sponsor. However, to properly address the situation, we recommend the following steps: Obtain a restoration quote to bring the plan into compliance for all plan years since 2021. Make the necessary minimum required contribution and address any penalties for unpaid minimum required contributions. Amend the plan to declare plan termination and distribute the plan assets. Please let me know if you would like us to provide a restoration quote or if you prefer that we proceed with our firms resignation. Our firm will be unable to continue with the plan administration unless the plan sponsor is willing to bring it up to compliance. I think he's a little confused (or maybe I am)? I talked to an Actuary friend with 30 years experience and he's not aware of a list of plans needing to be sent to the IRS. He also heard an ERISA Attorney one time say that there was a precedent that said "Plan was never funded, so the trust didn't exist, so the Plan never existed." Yea, I've heard of Volume Submitter Defined Benefit Plan, but he's saying Volume SUBMITTED Defined Benefit Plan?

The TPA's "blame" is a very wide range of outcomes in this scenario. From little to none at all if the client was non-responsive to their requests for information, though as pointed out earlier in the thread, perhaps they should have resigned if that was the case, to what were they thinking putting in a plan and not following up with the client?

Sweeping it under the rug is one option. Not sure that's the best or most ethical option but it is one option. they can fix it correctly which is probably going to be expensive, or they can pretend it never existed but I don't think I'd want to be involved with that decision or that potential client if sweeping it under the rug is the their answer. You can let them do that in conjunction with their attorneys advice. If you are an actuary, you're going to be bound by a code of ethics for your various organizations which would make it hard to have them as client and look away at the same time. And sure the Plan Sponsor who originally signed the document probably deserves the lion share of the blame in this.

I like to look for practical solutions...Not sure all the blame goes on the TPA as the plan sponsor apparently chose to ignore it as well, or have they been making contributions? Sounds like you have a signed plan document, but "never implemented" (not sure what that means), never communicated to anyone, never funded, never filed, no 5500, no SPD, no AFN, no bills, no one at the DOL/IRS/PBGC knows it exists, no participants no it exists ,,,seems to me the practical answer is, shred the signed doc, go forth and sin no more, but I would not put that in writing. I think what you can do is only agree to work on a newly adopted plan. You don't want anything to do with the "old" plan as trying to fix it will be a black hole of lost revenue for everyone.

Ask if the form to report the K-1 income is from Schedule K-1 (Form 1120-S Shareholder’s Share of Income, Deductions, Credits, etc.) This is different from Schedule K-1 (Form 1065 Partner’s Share of Income, Deductions, Credits, etc.) The Schedule K-1 (Form 1120-S) is used to report a shareholder's portion of the corporation's income, deductions... and it does not report dividends paid to the individual. Dividends are reported on Form 1099-DIV. See the instructions for Schedule K-1 (Form 1120-S) here https://www.irs.gov/instructions/i1120ssk and note the comment on the IRS website that says "Your share of S corporation income isn't self-employment income and it isn't subject to self-employment tax." Your understanding is accurate. It can be confusing where there are two different forms (1120-S and 1065 in this case) that use the same schedule name (Schedule K-1).

I had a client do this years ago. They paid the penalty, then contacted us a week or two later. IRS said no in that instance. Short version was something like: 1. you filed late 2. we issued a penalty 3. you had two options, pay the penalty or pay user fee for correction program 4. You paid the penalty. You cant correct via program because there is no longer anything to correct. We will not issue a refund because the penalty was legit. In my client's case there was only a small difference in penalty and DFVCP user fee (less than $1,000), so the client dropped it after the IRS said no.

no AFTAP certifications for 3 years either - not sure if there are any practical implications or not (< 5years), but let's add this to the list for fun.

Basically the same issue -- here is the response I received from someone on this board - I cannot remember who though so I cannot give credit:

That sounds ugly. Good luck. As to why now? Like I said earlier it probably got flagged as needing a Cycle 3 restatement and someone just realized they were missing 3 years worth of actuarial valuations, 5550s, and all the data. If they are going to fix it right they need actuarial valuations and testing for 2021, 2022, 2023. DFVC filing of Form 5500 for same years. 5330 Excise tax for failure to meet minimum funding for the same years. Oh and 3 years worth of contributions with penalties and interest. And this being December, they probably have accruals for 2024 as well.

Currently, yes, but you ultimately need a plan amendment to change the cash out threshold from $5,000 to $7,000 (and with a 1/1/2024 effective date) to do this - it's not an automatic the law says we must, it's an option the law allows the plan to say.

Lou is correct - and to clarify the amendment must be adopted by 12/31/2026 (extended from 12/31/2025) or the plan's termination if earlier.

That you do need a conforming amendment to adopt the $7K limit by the earlier of plan termination or the end of the remedial amendment period whichever comes first. But otherwise I don't see an issue.