Effen

 1.401(a)(4)–5(b)(3)(ii). What makes you think it might have been revoked? The Code says, "After taking into account payment to or on behalf of the restricted employee of all benefits payable to or on behalf of that restricted employee under the plan, the value of plan assets must equal or exceed 110 percent of the value of current liabilities, as defined in section 412(l)(7)." The "problem" is that Section 412 no longer exists and therefore the reference to "current liabilities" is undefined. Through dialogue between actuaries and the IRS (Gray Book), "any reasonable and consistent method may be used for determining the value of current liabilities and the value of plan assets.”

1. Is it correct that the legacy top-25 restricted payment rule does not apply in an HCE-only plan? NO, Top 25 rule applies to all DB plans. There are no exemptions. Also, just for clarification, the rule is 110% funded AFTER the distribution. 2. How would you view the risk of allowing distributions in a less than (110%) funded HCE only DB plan. The plan sponsor is risking plan disqualification. If you are an actuary, you cannot recommend or condone that they do something illegal. Their attorney can explain the risks and the sponsor can make an informed decision. 3) More generally, is this just a known but acceptable feature? Not sure what you mean? The top 25 rule is a statutory rule required to be in all plan documents. It is not a left over "legacy" issue that was accidently left in the document. 4) Is it still legally required to not allow a top 25 paid employee to take his full lump sum? YES This is a really good example of where good actuarial consulting is required and sponsors need to understand what they are getting involved with. Cash balance plans, including market based cash balance plans, can still be underfunded and it can cause these types of problems. They can also be overfunded in which case you will be having the participants wanting their benefits increased to capture the excess, which is also problematic. There are other designs (variable plans) where these issues can be minimized, but the Top 25 rule can still be a problem even for those. One consideration is that there is no clear guidance related to what the 110% funded requirement is measured against. It isn't necessarily the sum of the benefits. There are other liability measurements that possibly could be used to satisfy the 110% rule. Another answer is to pay the lump sum over time or to pay it to an escrow account that the plan could attach if it terminated without sufficient assets. Not saying any of these are easy, but there are options in the regs.

Our firm might be able to help. I will send you a PM.

fmsinc - Hugh? OP said NRD was 62 w/ NRD 3/1/25. Since he didn't receive his benefit as of 3/1/25, it must be actuarially adjusted to reflect the delayed payment. (This assumes he was not working in suspendable service after 3/1/25 and timely received a Suspension of Benefits Notice.) If he was terminated as of 3/1/25, or if he was active but didn't receive an SOBN, an actuarial increase is required. First you need to adjust the accrued benefit to reflect the delayed payments, then apply the lump sum factor at the age of distribution. This has nothing to do with a DC plan, no idea what you are referring to with those comments.

Thank you for the perspective. Since you are receiving the small pension from the other company, it may have never been reported, or it might have been removed once you went into payment status. Either way, glad to know you are receiving all of your earned benefits.

Just observing that you edited your OP, but the thread doesn't say "edited", which I find odd? The way you have it worded now, does not look as much like a scam as it did previously. Hmm, I edited my first post to remove the name as you did, but it doesn't say "edited" either. I guess they changed that functionality. Anyway, I think not filing a 5500 could cause the PBGC to assume they missed an MRC. Also, if their funded ratio was low, the PBGC considers quarterly contributions to be "required minimums". Years ago they put a lien on one of my clients for missing quarterlies.

Is "A" actually your client? Do they have a missed MRC? Looks like a scam to me. Did it come from a specific person? Any correspondence I have received from PBGC has been well written and comes from a specific person w/ numerous others cc'd.

Not always "regrettable" since you do get a higher combined plan deduction limit with PBGC coverage, but yes, another layer of requirements, especially upon plan termination.

You can start a new plan whenever you want. You can also have 2 plans at the same time. You will need to account for prior distributions when looking at 415 limits and applicable non-discrimination rules.

Wow, some brutal reviews. Thanks for posting. When I saw "Blustar" I thought you were getting into a Bud Fox pump and dump scam (See the movie Wall Street), but that was Bluestar. 🤣

Your frustrations are certainly justified, but they may be misplaced. It sounds like the plan sponsor is trying to correct the problem, so the delay may be related government entitles as Lou suggested, but more like they are related to the actuary - either the original one who provided "bad advice", or the new one who may be looking for a viable solution that the sponsor is willing to accept. Or, the new actuary just might not be great with deadlines. Unfortunately, there are a lot of different business models for actuaries and TPAs and some of those models are not the most efficient. Did you receive a Summary Plan Description (SPD)? If not, you should request one. It is typically 10-20 pages and will explain the plan provisions. I agree with Lou that you should file a claim for benefits. The SPD will contain specific language about how to do that. Is it common or acceptable for a DB plan sponsor to take over a year to finalize calculations for 7 or fewer employees? No, typically benefit calculations can be prepared within a few week. Does switching actuarial firms justify months of silence with no updated estimate or election paperwork? No, but it happens. At what point does this become a breach of fiduciary duty or an enforceable ERISA violation? Unfortunately litigation is very expensive and likely not worth the effort. What recourse does a participant have when the plan sponsor won't respond, and DOL appears to be passively monitoring? You can keep calling, maybe hire a lawyer to send a letter, keep the DOL on them. Just generally be a pest until they respond.

Might I propose that you articulate your query forthwith, and rest assured that an appropriate interlocutor shall furnish you with a cogent and satisfactory response—ideally accompanied by a brief exposition of the real-world conundrum you seek to resolve.

Seems fine to me, assuming is satisfies all the nondiscrimination rules, including 1.401(a)(4)-5. As Cuse said, "Accrual rules get applied to an amendment as if it had always been in effect". What particular rule are you concerned with?

Sorry, but not sure what you mean by "fresh start" and how it would impact the deductible limit? Are you asking about a potential benefit increase, or are you thinking about terminating the plan and starting a new plan? Are there NHCEs in the plan?

Slight alteration to what John said, the combined deduction limit for both plans is the greater of 1) 25% of eligible compensation, or 2) the greater of a) the minimum required contribution (determined under IRC Section 430) with respect to the DB plan or b) the excess of the funding target over the plan's assets. For both 1 & 2 you can ignore the first 6% of pay contributed to the defined contribution plan (count all employer contribution types but not salary deferrals). I just wanted to clarify that if the DB contribution exceeded 25% of pay it was still deductible and the sponsor could contribute and deduct an additional 6% into the DC plan. Also, the OP asked about "testing both a 401(k) and Cash Balance" together, which I don't think it actually impacted by the 6% rule. The 6% limit comes in for deductions, not testing.