Effen

There are market based cash balance plans and variable investment plans that can be daily record kept like a DC plan. Participants can log in to a website and see their the value of their account at any time. The design can be cost prohibitive for smaller groups, but for larger groups, or HCE only designs, they work very well. My firm specialize in the variable design. This is not technically a "cash balance" plan, but relies on a different section of the IRC. There are some problems with market based cash balance - especially around NDT, which is why we prefer the variable design. PM me is you would like additional information.

You should talk to your ERISA attorney. They can quantify the risks involved. Keep in mind there is no requirement to submit the plan termination to the IRS for approval, and those sound like very minor amendments.

It's a little late now to have that conversation. I think they are stuck with 2025 MRC. May have time to reduce 2026 if they haven't already worked another 1000 hours. Can freeze it prospectively so post 8/1/26 comp doesn't count. If they can't make all of the 2025 MRC, and you can reduce the 2026 MRC, maybe they can spread cash payments out over over a few years and minimize excise taxes.

No. If the participant met the requirements to accrue that year's benefit, then it cannot be taken away. What are the requirements for an accrual? 1 hour? 500 hours? 1000 hours? elapsed time? Might it be possible that the participant did not meet whatever requirements are in place for earning the accrual? What are you actually trying to accomplish? Are you trying to reduce the 2025 MRC?

Lowering AE to 2% for lump sums simply raises the "value" of the benefit. It does not impact the maximum lump sum which is still restricted by 415 limits. The 417(e) rates are just the statutory minimum basis. You can always pay more if you want, as long as you don't exceed the 415 maximum. You could also just raise the accrued benefit for the same effect. Really no point to do it in an "owner only" plan as their ultimate benefit is restricted to the amount of assets in the plan. You really only need to monitor the 415 maximum and insure the assets stay under that amount. If the value of the assets exceed 415 maximum, lowering the AE to 2% won't help.

When you say, "met the audit requirement threshold", do you mean is had > 100 participants and required an audit, or it did not require an audit? Can you provide additional information? How many participants are in the floor offset plan? How many of those have cash balance accounts? What is the type of business? There is nothing special about a floor offset plan that would exempt it from PBGC coverage, but some take the position that only those with cash balance accounts are actually participants.

Micks - Thank you for your participation on the board. Always nice to see new contributors. However, I created a new topic with your most recent post. Please don't start new topics on old threads. It makes it very difficult to search in the future.

Ok, I think you are saying Plan A issued the 1099, but plan B actually made the payment. So, Plan A needs to re-imburse Plan B for the improper payment. Since Plan A issued the 1099, I think Owner 1 taxes s/b correct, even though he received the money from the wrong trust. He will need an ERISA attorney and his accountant to help him sort all this out, but seems to me: Plan B may have incurred a PT for improper payment to an HCE Plan A needs to re-imburse Plan B. This should include some interest adjustment so that Plan B is restored to where it would be if the improper payment was never made. There are probably a myriad of other issues the IRS/DOL could pile on if they wanted. Check the Self-Correction Guidance and work with attorney and accountant on the best way forward.

It's just an AFN. Do whatever you think is reasonable. Generally, we are putting on the most current information available, but I don't know if there is a clear rule.

Thank you, but that wasn't the question. Which plan issued the 1099?

These are separate and distinct plans. How he solves these problems is up to him, his attorney, his accountant. The 5500 should reflect what actually happened in each plan. Did he get a 1099? Which plan reported the distribution? If Plan A reported the distribution, then he m/b ok on the personal side, but not on the plan side. He should retain an ERISA attorney to help him sort all this out.

It is ok that they have 2 plans, assuming both plans comply with the applicable non-discrimination rules. Do they both cover at least 40% of the eligible workforce, or have at least 50 participants? 1) Definitely a problem. They will need to reverse this. Put the money back into Plan A, and take it from Plan B. 2) I know you think of contributions as "his" contributions, but they are corporate contributions. "He" didn't really deposit "his" contributions into the wrong plan, the sponsor made the deposits, so that part is ok. How were they reported on the SB? Is plan A overfunded and plan B underfunded? You cannot transfer money between plans, but you could merge the plans to equalize the improper contributions and avoid future MRD issues.

I have heard about plans that only credit annual interest, but I have always felt that would cause a 411(d)(6) violation. I would think you would need to credit interest to the date of payment, otherwise you have a declining accrued benefit. So, I would use the 5-year average for post 12/31/25 and credit interest to 6/1 payment date. Just my opinion, others may disagree.

You should consult with the plan's ERISA attorney. My personal non-lawyer opinion is that the inaction of the AP caused the delay and therefore the plan should not provide interest on missed payments. I would also argue that the PA had no authority to withhold the P's payments for such an extended period of time. Most QDRO procedures allow a 180 escrow period, after that, if no DRO is presented, the P gests the full payment until the AP provides a DRO. Therefore, I might be inclined to argue that the majority of the 11 years of retro would go to the P - and maybe they should receive interest on those "lost" payments since PA had no authority to withhold them, but the AP would only potentially get 6 months of retro, and maybe none. But you asked about qualifying the DRO. Does this plan have established QDRO procedures? I agree the timing is no a big problem and the DRO c/b qualified, but if it requires 11 years of retro payments, I would look very hard at those provisions. Short answer - you should consult with the ERISA attorney.

Agree with what David said. "No formal QDRO was entered by a court until 11 years after the participant's annuity starting... Nevertheless, the participant commenced receiving reduced pension payments based upon the parties' agreed division as of his annuity starting date, in the form of a ten-year certain and life annuity. " Are you saying the PA withheld the AP's share for 11 years without a DRO?