Josette

Yikes. My first comment is that this is a mess. They need an accountant to unravel all these errors. First, the administrator should not have accepted the excess contributions unless provided by the plan document. This could be a disqualification issue depending on the plan provisions. Second, the administrator should have returned the contributions directly to the executive. The company should not have returned them. I am afraid they could be construed as an additional payroll payment to the executive Third, the administrator could have kept the excess contributions, but the executive could not have deducted them and instead paid the appropriate taxes. Of course, the plan would have to permit excess contributions. Fourth, I am not sure that the earnings should be returned to the company. I believe they belong to the assets of the plan and should be distributed among plan assets. I can also see an argument that the earnings on the excess contributions should be distributed to the executive, but taxes withheld. There are errors due to actions by the executive, company, and administrator and I don't have the answer as to who gets what when unwinding this mess. The main goal is to be sure that all participants are not hurt. At this point I will revise my advice to they need an accountant AND attorney to unwind this mess.

I do not think that the correct dates are shown on the original question. DOH = 10/21/20 DOT = 8/25/20 (assume that this is a typo and the DOT = 8/25/21)? DORH = 11/1/21 DOT = 4/25/22 With this change, there are no years of service for the period beginning 10/21/20 to 12/31/2020. Assume there is a year of service from 1/1/2021 to 6/30/2021 (assume 1,000 hours or more in the 6 months). She enters the plan on 7/1/2021 and terminates on 8/25/2021. Assume a month of service for July and August. She was rehired on 11/1/21 and has a month of service for November and December for a total of 10 months of credited service. (No service for September and October). Terminates after 4 months of service in 2022. In summary, 2020 - no service, not in the plan. 2021 = enters the plan on 7/1, total service for the year is 10 months. No information was provided on the vesting schedule or accrued benefit formula. 2022 = terminates with 4 months of service, No information how the partial year is treated. Was there additional vesting? accruals? And no, I would not advise the plan sponsor not to rehire her. For all you know there is a medical reason like having a baby or a stroke. I don't want to be responsible for the plan sponsor being sued, do you?

You need to check the definition of compensation in the plan document. I can see two options. First, the bonus amount is included for the plan year in which it is paid. In other words, the bonus for 2022 is actually paid in March 2023 and will be taxed in 2023. This would be considered 2023 compensation. On the other hand, the plan could be written so that the 2022 bonus is included in the 2022 compensation. This would seem to muddy the waters, but it would be permissible. I would expect this for some high-level employees, such as members of the board of directors, who are covered by a non-qualified plan / executive plan.

See regulation 1.416-1, question T-23. Each plan independently determines the present value of each accrued benefit as of the plan's determination date. The present values as of the determination dates that fall into the same calendar year are aggregated. You would then have one combined test for each calendar year.

My opinion is that there is no plan. The CPA should be revising the tax returns reflecting that the contributions are not deductible as a pension expense. I would rethink whether or not I want to work with that CPA in the future as it doesn't appear he has control over his client.

Defined Benefit plan. Actuarial Assumptions for all purposes (not just lump sums) : mortality rates = applicable mortality table. interest rates = applicable segment rates. The stability period is the calendar year. Normal retirement age = 65 and NRD = 9/1/2015 Participant's actual retirement age = 73 with a commencement date of 3/1/2023 Benefits were frozen before the participant reached age 65. The plan states that benefits are actuarially increased with interest and mortality from normal retirement date to date of actual retirement. Assuming the life annuity at age 65 is $1,000 per month, what is the monthly amount beginning at 3/1/23? I have seen at least 3 methods - based on the 2015 rates, based on 2023 rates. or based on a different rate for mortality and interest for each year. As an aside, how would you determine the lump sum at age73? Do you start with the first five years or year 9? Of course these rates should match the rates used for any optional form. Thanks to anyone who is bold enough to answer because I'm so confused at this point.

First, what type of plan is this? Recall that during Covid, DC plans were permitted to suspend RMDs whereas DB plans were not. Is it possible that is why he stopped and never restarted? Or even worse did he have a DB plan and stop? I cannot tell you how many investment managers told our DB participants they didn't need to take their distributions during Covid. One HCE did just that and got caught during the plan termination. I'm sure your ex-HCE didn't just wake up one day and say I'm no longer an HCE so I'll stop taking my RMDs. Someone told him this. That person needs to be liable. Typically all professionals have liability insurance. Also, can anyone just stop receiving their RMDs? Seriously, if I am no longer working and begin getting RMDs and then am hired after a couple years, can I stop the payments? I really don't think this is permitted and would be surprised if a status change from HCE to non-HCE would change the distribution amount. Having said this, he absolutely needs an attorney. That was our advice to the HCE that was caught and the investment advisor had to pay the fines.