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Hi all,

I’ve been learning about CB plans for a sole owner/employee S corp and have several questions I haven’t been able to find out or confirm with research. Hoping you can help.

1) If one overfunds a CB plan (more than the allowed frontload amount) for the first year, can that entire amount be deducted as a business expense that year from the Scorp?
 

The rep from a company that does these plans (as a TPA but not custodian) is telling me the overfunded amount would never be deductible- neither in the year it was deposited nor in the following years (even if the eventual W2 added up allows it). I understand that it all adds up to the lifetime max and therefore anything overfunded will have to be underfunded in the future to make up for it. But it doesn’t make sense to me that the amount overfunded would be lost forever- otherwise why would anyone do it?

2) the 6% rule (when having a DB plan and 401k) doesn’t apply when the DB plan is subject to the PBGC. I understand that a plan in this scenario doesn’t require PBGC coverage but is such coverage optional? As in- can one voluntarily pay PBGC premiums (presuming they don’t cost much- like $30 a year for a plan this size) to avoid the 6% limit? Or does this just not work?

3) the discrimination rules require contributions for all employees to my understanding. What if an employee already reached their lifetime maximum? Does a contribution need to be made for them to not violate these rules? (In this question I’m referring to possibly adding the spouse of the solo owner as the additional employee).

Thank you for the help!

We have a failed 2023 ADP test that was not corrected timely. We are now correcting under ECPRS using the one-to-one correction method. Plan is also Top heavy for 2023.
QNEC allocated under one-to-one correction can be used to off-set top heavy minimum allocation? 

The SECURE 2.0 final regs provide Plans are not required to add Roth provisions to continue Catch-up contributions in 2026; they also provide a "safe harbor" provision that can be added to the SECURE 2.0 Amendment for Plans that do not offer Roth contributions, to avoid tripping over the Universal Availability requirements (similarly situated employees for Catch-Ups) where the Plan Sponsor is Self-Employed (or Partners) and does (or could?) have a Non-Highly Compensated Employee (50+) who is a High Paid Individual ("HPI") for purposes of the 2026 Roth Catch-up rules. To avoid discrimination, the Plan can essentially "prohibit any HCE with any "compensation" in excess of the HPI FICA threshold from contributing Catch-up contributions in the following year. In doing so, you avoid the discrimination issue.

My questions are:

1. Can this "safe harbor" provision state it is only effective for the Plan Years in which there exists a Non-Highly Compensated Employee (50+) who is an HPI? If so, can the HCE owner therefore contribute pre-tax Catch-up?
2. Can or must an S-Corp Plan Sponsor incorporate a similar "safe harbor" due to the nature of S-Corp "control" over W-2 wages (albeit they should be reasonable) and dividends?
3. Can the spouse of the S-Corp owner continue to make pre-tax catch-up when prior year W-2 is less the HPI FICA threshold?  It seems to me they can since income is not "attributed" (therefore no effect on whether or not they are an HPI).

Thank you.

The only NHCE requirement found in 45E seems to be in the definition of Qualifying Expenses for the admin expense credit.  If thre is not at least one NHCE in the plan, then the start-up costs are not "Qualifying."  That requirement seems not to apply to the 45E(f) credit for employer contributions.  So assuming these examples set up a plan and otherwise qualify (i.e., no plan in prior 3 years) are the following statements correct?

1) A sole propritership or partnership with no employees should be eligible for the credit regardless of what their earned income is because they have no FICA wages; and

2) An S-Corp with no employees that pays the owner 104,000 in 2025 (less than the threshold in 2025) should be eligible for the credit as well.

Oddly I can't find any articles clarifying that the employer contriubtion credit has an "at least 1 NHCE" requirement.  Of course none indicates that there IS such a requirement either...

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When a plan in merges into a PEP, as we know, it needs to  be shut down with a final year compliance testing and 5500 filing. 

It has become more common where as soon as the current TPA is notified of the intent to merge into the PEP, they stop their service and fail to complete the final testing and 5500 filing.

What recourse does the client have to ensure the current TPA completes the shut down, especially since the fees have been paid for that service ?

Besides the new TPA completing the final work, are other solutions available ?

Thanks for your time.

If a plan has the Rate of Return pegged to something like the S&P500, and the S&P goes down 20% in 2025, but then goes up 10% in 2026 , what happens to participant hypothetical accounts?  For example, if someone's hypothetical account was $10,000 on 1/1/2025, it stays at $10,000 through 12/31/2025 because the benefit can never go down.  My big question is will there account still be at $10,000 at 12/31/2026, because the 10% return in 2026 was not enough to make up for the losses in 2025? i.e., is it a cumulative tracking?  Or is the ROR always just pegged to the ROR specified in the doc for that year, with all prior returns (or losses) ignored? 

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Hi,

A PBGC covered plan received the following email from the pbgc...

This letter is to inform you that the Pension Benefit Guaranty Corporation (“PBGC”) was notified that a Reportable Event has happened.  According to the information we have received, "A" Corporation (the “Plan Sponsor”) has failed to make the required minimum contributions

1. Who are they referring to when they say they were notified? Who could have notified them?

2. The minimum required contributions that they are refering to are the possible  MRC that would be shown on the 5500 (that were not filed for a few  years) or are they referring to the pbgc annual.premiums that have not been paid?    Thank you as always for any insights. 

A client whose plan is terminating needs to locate the beneficiaries of two deceased participants.  One participant has a beneficiary designation on file; the other does not.  The employer is located in Pennsylvania.

Any recommendations for a commercial locator service?

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I apologize if this type of question has been answered previously, i could not locate it.

Is it best practice to carryforward Beneficiary data from a prior plan during a Plan Merger or Plan Takeover client, or to require all participants to re-enter their Bens in their new account?

Notice 2025-67  just released, with the official retirement plan limits for 2026.

This is been a problem for a long time and I haven't asked this question in a while: 

What is the easiest way to find old terminated employees to try and pay them out? 

Thank you.

Hello.

Participant is looking to take a loan to purchase a primary residence.    He is purchasing a house.  However, he is not planning on moving in right away, as he has a lot of repairs to do. 

Is there a time frame to consider this his primary residence?   

Thanks!

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