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My understanding is that it is cumulative, that the preservation of capital requirement applies upon distribution unless the terms of the plan dictate otherwise, such as a zero percent annual floor. Using actual ROR can cause high 401(a)(26) minimums when there are low or negative investment returns and can cause low 415 lump sum payout limits when there are high investment returns, so be careful out there!

First, I did not think you could tie your ICR to an equity index like the S&P500 but had to tie it to a specific S&P500 index fund. Second, as John stated, it is cumulative. The account balance goes up or down annually per the ICR and can and will be negative until such time as it gets paid out. Assuming future pay credits of $10,000, a 12/31/2024 first year balance of $10,000 has negative interest of $2,000 after the 20% loss and gets $10,000 pay credit at 12/31/2025 for balance of $18,000. 10% gain in 2026 yields interest credit of $1,800 and $10,000 pay credit makes balance $29,800 at 12/31/2026, and so on. However, if this person left and was getting paid out, they would get $30,000 ($10,000 x 3 years) - unless the plan has defined ICR floor as may be permitted by the regulations, as John noted.

1) For example, if the actuarial valuation report says maximum deductible contribution is $200,000, and the S-corp wants to contribute $300,000, can it be deducted? No. Might it be deducted in a future year? That's a question for the company's accountant. There are (or were last I knew) excise taxes for making nondeductible contributions to a qualified plan. The income passes through to the owner regardless, so why do it? Maybe such earnings can be retained by the S-corp and contributed and deducted later - again, involve an accountant. Also, owner's W2 may serve to determine/increase their 415 limit but does not directly limit (or provide "room") for the corporate deduction. 2) A plan either IS or IS NOT covered by PBGC based on the facts, there is no opting into or out of coverage. 3) Nondiscrimination requirements come into play when there are employees that are NHCEs. It looks like you are confusing the minimum participation requirement, where if you have two non-excludable employees (e.g., owner and spouse) you must cover both in defined benefit plan. An employee who does not benefit under a plan for a current year because they have reached their respective 415 limit is still considered covered and benefiting for minimum participation purposes is my understanding.

Even if an employer learns what it believes to be the new mailing address for a terminated employee with a balance, doesn't that participant have to (must) take action to provide instructions to the employer or recordkeeper to change their mailing address? Otherwise, there could be privacy violations, etc.?

You should review the many prior discussion threads for more ideas and concerns. A search term of "missing" might be helpful. Probably an important part of this process is interviewing current and former employees who know/knew the missing employee. Perhaps interviewing former neighbors. This step is likely undertaken by the employer (not by any TPA). Because the plan sponsor wants a real answer, do not be sucked in by the "last known mailing address" excuse; this is (in very practical terms) a "cop-out". And the sponsor should eventually be prepared to deal with a response similar to "returned to his/her home country".

Do they have to be "old" terminated employees? What about "young" or "middle aged" terminated emplolyees?

https://pbinfo.com/locate-missing-participants/ This is one that we use.

There are companies that provide this service (of finding terminated employees). I don't recall any names, but your TPA/Service Provider may have some names handy.