Forgive my ignorance--I'm an employee/plan participant, not an actuary.

Accrued benefit is defined under my plan by the fractional method. Suppose accrued benefit (defined as the normal Age 65 benefit) is $1000/mo. Suppose retiring at Age 55 yields $700/mo. Suppose retiring at Age 56 yields $650/mo. (I pulled these numbers out of thin air so don't pay much attention to them specifically). If I'm reading the IRS code right, you are entitled at Age 65 to the higher of the Age 65 accrued benefit or the early retirement benefit at any earlier age. Thus, the benefit in this example would be $1000 if you retired at Age 65.

But, suppose you want to retire at Age 56. Why should you receive a lower benefit than if you had retired at Age 55? Yet, the plan administrator says that because the Accrued Benefit--defined as the normal retirement benefit at Age 65 by the fractional method--is the same for both of these, there is no cutback of accrued benefits between Age 55 and Age 56. Is this correct? It just seems wrong to me that you should receive less after another year of work!

Beyond the fact that there is an absolute dollar reduction from Age 55 to Age 56, you also have one less year of receiving the benefit. Why shouldn't you at receive the actuarially equivalent benefit? i.e., why wouldn't you be entitled to the greater of either (a) the actuarial equivalent of the Age 65 Accrued Benefit at your early retirement age, or (b) the actuarial equivalent of the highest early retirement benefit? (In this example, then, if you retired at Age 56 you would be entitled to the actuarial equivalent of the Age 55 benefit. Or if it was higher, the actuarial equivalent of the Age 65 benefit. But you wouldn't get stuck with the low-ball Age 56 benefit).

Is the law/plan just stupid, or is it me? I'd be grateful if you could clarify/explain the rationale for this to me.

Thanks for the help!

have been contacted about a one person plan where assets>250K in 2012 for first time. filing has not been done. question is whether filing late with a reasonabe cause of reliance on third party professional who failed to advise client has any merit. or would it be better to go dfvc using 5500sf and pay the $750...that woud be my recommendation.. any thoughts are appreciated.

Anyone had experience with the IRS disqualifying an entity that sponsored a DB plan?

DB plan was established in 2012, funded in December 2012. The IRS reviewed the company in 2013 and determined that the entity was a nullity for tax reporting purposes due to changes in tax law requirements. They went through a Voluntary Disclosure program for the entity to make the corrections, pay taxes and penalties.

Not sure if 1099's need to be issued for the gains in 2012 (very nominal amount), and 2013 (large amount)? Taxed as ordinary income or can it include capital gains?

Any thoughts/guidance on this issue appreciated!

I probably won't even ask the question right, but here goes, using, as you will see, grossly hypothetical numbers just for the sake of illustrating the concept. I'm used to exposing my ignorance when it comes to DB calculations.

Suppose you have a sole prop, who had a defined benefit plan that was terminated in, say, 1999. At the time, his income was much highr than now, and he had accrued a benefit that was close to the 415 limit. Let's just say that his 415 limit at the time was 1,000 per month, or $12,000 per year, which equated to a lump sum of $100,000. His accrued benefit was $950 per month, or $11,400 per year, leaving him under the 415 limit by $50 per month, or $600 per year, and his lump sum payout was $95,000. This $95,000 lump sum amount was paid to him and rolled to an IRA.

Now fast-forward to 2013. He is still a sole prop, and has to be considered in a DB plan due to controlled group/minimum participation. His salary is now quite low.

When calculating his 415 limit under the new plan, I know that the old plan must be taken into account for 415 purposes. If the new plan 415 limit, (assuming he never had a prior plan) based upon age, salary, participation, etc., is, say $150.00 per month, or $1,800 per year, how do you calculate his 415 limit in the new DB plan? Is it only $50 per month, because his "old" 415 limit was higher than what his new limit would be, and there was only $50 per month available under the prior plan? Or is it done in some other manner - for example, since his prior benefit was higher than the current 415 limit based solely upon his current income, is his 415 limit in the new plan zero? Or is something altogether different from either answer?

Thanks!

In order to offer a compliant health FSA in 2014 is it enough that the FSA participants be offered ACA compliant group coverage or do they have to actually be enrolled in the group coverage?

Has anyone seen, or had personal experience with, a plan change where it was decided to do away with a profit sharing contribution only to increase the match formula? What was participant behavior after the change? Did many participants increase their deferral to the new match max?

We're doing analysis now to do away with the 3% PS but to increase our match from $/$ on 4% to 125% up to 6% but to cost it out for our finance group, it's nearly impossible since participant behavior is tough to predict.

Looking for guidance on whether a 5500-SF can be filed even though a Schedule A is available. Example - John Hancock plans

A friend visiting his physician was told (by the receptionist) that the physician does not participate in the insurance plan that covers the patient. The patient is ready to pay the physician's full fees (and to do so without seeking a reimbursement from the insurer), but the receptionist said that the Affordable Care Act prohibits the physician from accepting any cash payment from someone who is insured. Is that right? If there is a restriction, does it apply differently between those who are Medicare-covered and those who are younger?

SIMPLE plans are not my bailiwick, with that said here is my question...

I have a financial advisor who has a few SIMPLE plans and he asked me what he needs to do to move the assets of the plan from one custodian to another. What he has been doing is placing his SIMPLE plans with a large mutual fund who prepares all the paperwork for the plan. These simple plans are not going to essentially change at all. He simply wants to move the assets from the mutual fund to individual investment accounts somewhere else to offer a wider range of investment choices.

Thoughts... suggestions?

Thanks

The SB instructions state that "minimum funding standards apply until the end of the plan year that includes the termination date." Is this true for a plan that terminates on the first of the year, where, clearly, the minimum funding requirement will be $0?

Any help would be appreciated!

The SB instructions state that "minimum funding standards apply until the end of the plan year that includes the termination date." Is this true for a plan that terminates on the first of the year, where, clearly, the minimum funding requirement will be $0?

Any help would be appreciated!

Partner in a Partnership has SE Income of $200K before deducting his $50,000 PS contribution. CPA wants to deduct the 50K in the year funded. Does that mean that for testing purposes I get to use $200K for nondiscrimination testing (only a 25% contribution vs. a 33% contribution)?

Or let's say the Plan has a 3% Safe Harbor Contribution only. Will the owner get 3% of $200,000 instead of 3% of ($200,000 - Safe Harbor)?

In year, it might well pay to take the deduction in year 2. Is there a requirement that Earned Income be reduced for the current year contributions?

Think I'm right that if a class of employees is excluded from a plan (assume no 401b problem) they don't get top-heavy minimums or 3% non-elective safe harbor.

But what if an employee make an old fashioned irrevocable waiver of participation, same result?

Thanks

A plan currently is stated using only the adoption agreement and other standard documents of a preapproved volume-submitter plan.

An employer would like to amend its plan to specify a time limit on a claim for a benefit - a provision not stated in the volume-submitter base plan, and not available as a choice in its adoption agreement.

If the employer makes the amendment, does doing so end its reliance on the volume-submitter IRS approval?

Or is there an argument that this added provision is "administrative" and so does not end reliance?

An individual would like to buy an individual health insurance contract that does not cover physician visits. She pays her physician an annual retainer. Her physician never accepts any payment from a person other than his patient.

Is such an insurance contract available now?

Will such an insurance contract be available a few years from now?

(Assume that a premium tax credit is unavailable. Assume that the individual does not object to incurring the IRC section 5000A tax for failing to maintain minimum essential coverage.)

This is probably a simple question with a simple answer, but I wasn't able to find it anywhere else. I am submitting several cash balance plans for favorable determination letters using Form 5300. Our document system still uses the April 2011 revision although the 5300 was revised again in December of 2013. The instructions to the new 5300 don't give a date on which I need to begin using it. I did find a guide on the IORS webiste, Tips to Expedite the Determination Letter Process, that says to use the current form. Since it is easier for us to use the form generated by our document system, am I still able to use the 2011 form or must I use the 2013 form for these dubmissions? Thanks for your help and advise.

Hello all. Happy 2014!

Since I have received a few e-mails asking about whether the Excel add-in I uploaded at the link below has been updated, I thought I would just post this message.

The add-in has been updated with the 2014 and 2015 mortality tables issued in IRS Notice 2013-49, and there are now 66 mortality tables available in it. These tables are documented in the first sheet of the attached sample applications Excel file.

As before, the add-in is distributed “as is” and with no warranties. However, for what it’s worth, the add-in has been in use by many different users since 2009, and I have yet to encounter or be informed of any errors or unhappy users.

http://benefitslink.com/boards/index.php?/topic/44228-excel-custom-functions-for-ppa-annuity-factors/

If you happen to have been using the add-in and are interested in the updated version (or just have questions about it), please e-mail me at doug.goelz@phoenix-benefits.com.

Best,

Doug

PENPROG Functions - Sample Applications 2013-1.xls

My understanding is that this box should be checked if an employee is an active participant in a 401k plan, meaning if they have employee or employer contributions are allocated to their account for the plan year. If the only contribution is a year-end employer contribution, then employee would be considered an active participant for the year.

In the case where a person is not contributing but receives a discretionary company contribution (i.e., QNEC), what if the company elects not to make a contribution after the year end earnings are calculated? If we have already checked the box and then the company ends up not contributing a match it would seem to create a problem.

What to do in this situation?

Does anyone know if a 1099 is required for the transfer of surplus assets from a terminating DB plan to a qualifying replacement plan?

Any help would be appreciated!

Does anyone know if a 1099 is required for the transfer of surplus assets from a terminating DB plan to a qualifying replacement plan?

Any help would be appreciated!