A plan sponsor adopts a new defined benefit plan effective 1/1/09. The plan's benefit formula grants prior service credit. As such, each eligible participant has an accrued benefit as of 1/1/09. The purpose of granting prior service credit is to create a cushion amount and increase the maximum deductible contribution. Lets assume the following:

Funding Target as of 1/1/09: 200,000

Target Normal Cost for 2009: 0

Assets as of 1/1/09: 0

Shortfall Amortization Balance as of 1/1/09: 200,000

Since the plan grants prior service credit, the benefits are accrued as of 1/1/09 and there is no target normal cost for the year. In this case, each participant accrues 1/10 of the 415 dollar limit as of 1/1/09.

Two questions -

(1) Does it make sense that the Minimum Required Contribution is the amortization of the $200,000 shortfall amortization balance (or lets say about $40,000)? If the plan had not granted prior service credit, the Minimum Required Contribution would be $200,000.

(2) The AFTAP as of 1/1/09 is 0% (0/200,000). Is there an exception for new plans or would the plan have benefit restrictions the first year?

Under a partial plan termination, vesting of the affected participants is required TO THE EXTENT FUNDED. I take this to mean that vesting is granted to non-vested affected participants only if the plan's assets exceeds the Priority Category 5 plan termination liability. Is this a correct interpretation? If so, I would guess that in the current environment, not much extra vesting will be happening. Or said another way, if the assets are below the PC5 liability, who cares if a partial plan temination has occurred?

Does anyone have or know of any spreadsheets that show all the calculations for cross testing a dbdc combo. We are trying to create one for plan design use and thought maybe we wouldn't have to invent the wheel all over again.

Has anyone dealt with the situation where the actuarial value of the remaining distributions to a DB plan participant is not sufficient to recoup an overpayment? Our participant has been overpaid by almost $30k. The actuarial value of the remaining distributions is only enough cover about half of that.

I know EPCRS generally permits a fiduciary to recoup overpayments by reducing future benefit payments, but does this include reducing them to $0? If not, any thoughts on where the floor is?

Our options seem to be either: (1) start paying the correct benefit amount and try to recover the $30k from the participant, or (2) cease paying benefits altogether and try to recover the $16k from the participant.

Thoughts?

I have a client who forgot to default a loan during 2008. They discovered this and want to know how to correct. Can they issue the 1099R in 2009 showing the correct amount of the loan default, or do they have to do a late 2008 1099R and have the participant revise his tax return for last year?

Plan currently doesn't allow for a distribution prior to actual retirement or separation from service even if the participant has attained normal retirement age.

One of the partners in the firm has attained normal retirement age and would like a distribution. If the plan is amended to allow for in-service distributions upon attainment of normal retirement age, is it an issue if no one else has attained normal retirement age? Is that a benefits, rights, and features issue?

Why does the IRS insist upon pain of sanction that one may not maintain a model SEP alongside another retirement plan?

If any? COBRA?

If 2008 AFTAP (using 2007 data) was above 80% but when preparing the 2008 schedule SB you can "see" your 2009 AFTAP (using 2008 Sch. SB data) will be below 80% and burning the CB will bump AFTAP back above 80% (less restrictive category);

Do you burn the 2008 CB before using any CB to reduce the 2008 minimum funding ?

OR

Do you burn the 2009 CB before using any CB to reduce the 2009 minimum funding ?

Assume 2009 AFTAP not formally prepared or certified yet if that makes any difference.

We used the Carve Out Method to run the ADP test which eliminated the

"otherwise excludable" employees from the test. The ADP % for the 15 NHCE's

(the main NHCE group that was not carved out) was 4.14% (there were 4 ee's

who were carved out)(Total NHCE's were 19)

Question

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When using the QNEC correction method, does the excludable employee group

need to be taken into account in determining the new NHCE % after the QNEC

is made? (ie does the test have to be re-run without using the carve out

method and use that ADP% which will be even lower to base the QNEC

correction on?) 2. If we can base the correction on the ADP test which only

included the 15 ee's, does the QNEC correction need to take into account the

"otherwise excludable" ee's?

In 2007 the employer accidentally submitted several payrolls twice resulting in an over deposit of the 2007 deferrals. Can they remove the excess deferrals from the EEs accounts place into forfeiture account and then reallocate as a PS contribution at year end?

Other options?

I'm preparing my first SB and was hoping to get an answer to what may be an obvious question. Regarding the weighted average retirement age (line 22), in a small plan where both participants' NRAs are 65 (the document defines NRA as age 65), is the attachment described in the instructions needed? Are the instructions implying that it's only needed if particpants retire at different ages? All help is greatly appreciated.

Running a 1/1/2008 val (just switched from EOY val since 2008 contribution too high). A deemed election will occur to bring the AFTAP to 80%. Say this deemed election reduces the carryover balance by $30,000. So, carryover balance is reduced from $50,000 to $20,000.

Is the remaining $20,000 carryover balance used to calculate the 430(f)(4)(B) assets for the shortfall amortization payment? I would think so but just checking.

Wow, for some reason I'm just drawing a blank here. New plan is adopted this year, for employer with EIN ending in 6. So the Cycle A deadline ended on 1/31/07. What is the deadline for filing for a determination letter for this employer? Is it 1/31/2012, or is it some earlier date? I looked through Revenue Procedure 2005-66, and I'm sure it was there and I skipped right over it.

Thanks!

I know Notice 2007-6 did not provide guidance on the maximum allowable fixed interest crediting rate a plan can provide. What do most people consider to be a safe fixed crediting rate? I think 6% might be pushing it but 5% is probably safe.

Also, can you tie the interest crediting rate to an index but provide a floor and a maximum? As an example, the interest crediting rate will be the 10-year Tresuries with a min of 2% and a max of 5%?

A client filed late in 2006 and wrote letters each year to the IRS they got a letter. They got another letter this year that says they owe $15,070.85 for the late filing.

My question is can they go through the DFVCP and pay the $750 or is that option only for sponsors who didn't file for a previous year? Thanks.

Does a pbgc covered plan have to terminate with the pbgc approval or can it just be terminated and paid out?

Client restates Plan for EGTRRA in October and then calls me says business is so bad he wants to terminate Plan. Resolution to formally terminate Plan dated and effective 12/29/2008.

Safe harbor contribution made for 2008 plan year and 5500 filed (indicating resolution to terminate Plan made during the year on Schedule I) recently. We explain that distribution paperwork will be sent out to all participants this week and he now wants to keep the Plan................... Business is better I guess?

No contributions have been made in 2009. Could I establish a new 401(k) Plan today and since the distributions from the original Plan would no longer be eligible for rollover due to the successor Plan rules, directly transfer all the balances from Plan 001 to Plan 002?

How about merging the Plan into a new 401(k) Plan with the same provisions. Obviously Safe Harbor is out for 2009.

All balances transferred would be 100% vested. I am just looking for a way to keep a Plan going without having to wait 12 months after distributions actually occur.

Any thoughts? I know I could just have hime set up a Simple IRA for 2009.

Thanks

Got a multiple employer plan. Most of the employees from ONE of the employers were let go.

So, the question is: Do apply the partial term rules at the "employer/controlled group" level or at the plan level. I would have to assume it is the employer/controlled group level, but thought I should throw this out there.

A new client has apparently provided a timely 2009 safe harbor notice (plan year-end is Dec 31) which states that the safe harbor match for 2009 will be $1 per $1 up to 6% of comp. The client is now interested in reducing the safe harbor match mid-year to $1 per $1 up to 4%. If the safe harbor match is lowered for the last six months would the plan still maintain safe harbor status for the full calendar year and, if so, what notice requirements might be required?

Thanks.