Effen

Our policy is to create and sign the SB before the due date, then send it to the sponsor and tell them to keep it in their file. We also keep a copy in our files.

Due to the COVID extension, I think if they wait until 1/4/2021 to make the deposit, it could be counted for 2019, 2020, or 2021. You would need to amend the 2019 SB, but I think it would work. If they deposit it during 2020, I don't think it can be considered as a 2021 contribution.

Yes, as long as you do it for everyone else. In essence, you are just increasing the accrued benefit. As long as the increase can satisfy the applicable non-discrimination rules, you can do it. IOW, yes, but you can't do it if only HCEs would be eligible.

There is more to it, but generally a plan that doesn't benefit any HCEs is exempt from (a)(26). Also, .5% is not found in any Code or Regulation. There is nothing "official" saying it is required. The word "benefiting" is never defined in the Code. Paul Schultz released a memo to IRS field agents many many years ago stating they should challenge any "benefit" of < .5%. The theory is that anything less than a .5% DB accrual is not a material "benefit". The IRS took this position because they knew it would cost sponsor less than the cost of litigation and therefore no one would ever challenge them. Since no one has, it has become the standard definition of "benefiting". (b)Exceptions to section 401(a)(26) (1)Plans that do not benefit any highly compensated employees.— A plan, other than a frozen defined benefit plan as defined in § 1.401(a)(26)-2(b), satisfies section 401(a)(26) for a plan year if the plan is not a top-heavy plan under section 416 and the plan meets the following requirements:

can you be more specific Mr. Johnson.

I think we need more information. Was the merger a stock sale, or asset sale? Did NewCo purchase Company A's stock, or just the assets? I assume stock sale since if you are doing a short year tax filing, Company A ceased to exist on 2/1? If that is true, than Company A's cash balance plan now belongs to NewCo. for YE 12/31/20, so the deduction is theirs?

Allocation from the suspense account is not constrained by the 25% deduction limit. It is only constrained by the 415 limit, which is min ($57,000,100% of comp). The client may need to forgo cash contributions until the XS is allocated, but in your situation you could allocate at least $114,000/year and easily absorb it within 7 years. If they are over 50, they would be able to make catch up contributions.

I don't think I have an issue with the form of payment, assuming it is permitted by the plan document, but how does this solve his excess assets problem or allow him to terminate the plan?

PBGC issues guidance related to delayed contributions. https://www.pbgc.gov/prac/single-employer-plan-sponsors-and-administrators-questions-and-answers

Do you mean can you hire someone to be the Trustee? Most large banks and financial institutions will provide this service, but it generally isn't cost effective, or desired, with smaller pension plans.

Search button is your friend.

I don't think the rule is as black/white as you think. Personal experience is that most view this as a change in actuarial firms. The instructions state "Complete Part III if there was a termination in the appointment of an accountant or enrolled actuary". An "accountant" has never been interpreted as an individual as accounting firms often change the entire audit team each year and I think the same argument can be made for the actuary. I have seen some firms report internal changes, but I don't think it is very common. 1) No issue because the filing is not incorrect 2) No liability on your part. The service agreement is with the firm, not the individual actuary. Once you left the firm, you are no longer responsible. 3) If you retained the work at a different firm, I would show that as a change. However, this brings up an interesting question for small plan land. TPAs that outsource actuarial work and hire independent people to review their work. I guess I feel a little differently if the TPA changes from basement actuary A to spare bedroom actuary B. That feels more like a change of actuary even though both might have signed using TPA's address and firm name. I was assuming you left one actuarial firm for another, but if you are an independent signing stuff for a TPA, I might have a different opinion. Probably matters what your engagement letters say.

July 15 deadline won’t be postponed. The IRS has announced that the July 15 filing and payment deadline won’t be postponed. Individuals unable to meet the July 15 filing deadline can request an automatic extension of time to file. However, tax payments are due on July 15. Automatic extensions of time to file a return. Taxpayers who need more time to file their federal income tax return can get an extension until October 15 by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, before the July 15 deadline. Taxpayers should estimate their tax liability on Form 4868 and pay any amount due when filing the form.

yes, but dancing partners are very difficult to find.

I suggest that you respond that you will provide the requested information, but will only provide the final SB after all outstanding fees have been paid. (Unless you already gave it to him.) Keep in mind, once he has what he needs from you, he has no incentive to pay the remaining 50%. You may want to increase that upfront piece to something closer to 100%. He has already demonstrated he doesn't want to pay you for the work you already did.

I don't think anyone "loves" time tracking software, but we used Time Slips for years and found it acceptable. You are able to have different billing rates and time codes that would make it easy to track billable and non-billable separately. We had a small office and only needed one local license. We all used Excel to actually track our activity, then we had one person dump our excel output into Time Slips once a week. You can also have multiple licenses and a cloud based setup where everyone enters their own, but we never needed it. Also, if you use PensionPro, they have a time tracking tool that can be added in. We played around with it for a few months but decided to stick with Time Slips, mostly because change is hard.

Are you saying the plan terminated in 2018 but still hasn't distributed assets? Yes, you are permitted to fund the plan in connection with a plan termination. However, due to the delay, the IRS might take the position the plan never actually terminated. Did you submit for a determination letter? I would need to research it, but for some reason I was thinking there was a time limit between termination and distribution. I think one year, but someone else will likely confirm.

I agree. That seems to be the building consensus of practitioners on other boards as well. That would also mean it should not be considered part of the assets as of 1/1/20. Therefore deferring past the original due date would increase the amount of the 2020 MRC and potentially increase the 2020 PBGC premium. Hopefully, we will have more guidance before the actual payments are due.

I assume your question is about a traditional DB and not a cash balance plan? Assuming so, it would be a very poor/impossible design to use a one month stability period. I hope this is a hypothetical question and you really don't have such a creature. Your election package should state the relative value of the optional forms, and explain how interest rates impact the value of the lump sum. We always quote a lump sum amount, and a date of payment, with a comment that if the lump sum is paid after that date it is subject to change. If a participant delays returning the paperwork, or if there is a delay for some other reason beyond that stated date, we ask then to sign a new election form, especially if the lump sum goes down. Others maybe more lax, but that is our procedure. If the PA caused the delay and the lump sum declined, I am more sympathetic to the participant and recommend they receive the higher amount.

I was reading it differently. this statement implies he did not receive the payment by the date illustrated on the election form. Maybe he returned the paperwork late, maybe the PA issued the check late, but either way, it was issued after the date illustrated.

I think some of the "long story short" might be relevant. Did the PA tell him he needed to respond by a certain date? Did he submit the paperwork timely? Did the election package contain information about the impact of delaying the election? Whose "fault" was it that the distribution wasn't paid the first time? Once the timing became impossible on the first payment, I don't think the PA can just issue a check for a lower amount. They had no participant election to pay the smaller amount and therefore no authority to pay it.. They should have sent a new election package with updated amounts. Then the participant could have decided if they wanted the lower payment, or continued to defer the election. You might be able to argue that not cashing the check was the only avenue available to the participant. Now that rates are lower, he should re-submit his application and request an updated election package.

Not sure how the IRS could make that argument. What authority would they use to support it?

Always a good idea to review the COPC: The highlights were added by me. Precept 10: An Actuary shall perform Actuarial Services with courtesy and professional respect and shall cooperate with others in the Principal’s interest. ANNOTATION 10-4. An Actuary may be requested to advise a Principal for whom the Actuary knows or has reasonable grounds to believe that another actuary has provided, or is providing, Actuarial Services with respect to the same matter. In such event, the Actuary may choose to consult with such other actuary both to prepare adequately for the assignment and to make an informed judgment as to whether there are circumstances involving a potential violation of the Code that might affect acceptance of the assignment. The Actuary should request the Principal’s consent prior to such consultation. ANNOTATION 10-5. When a Principal has given consent for a new or additional actuary to consult with an Actuary with respect to a matter for which the Actuary is providing or has provided Actuarial Services, the Actuary shall cooperate in furnishing relevant information, subject to receiving reasonable compensation for the work required to assemble and transmit pertinent data and documents. The Actuary shall not refuse to consult or cooperate with the prospective new or additional actuary based upon unresolved compensation issues with the Principal unless such refusal is in accordance with a pre-existing agreement with the Principal. The Actuary need not provide any items of a proprietary nature, such as internal communications or computer programs. Maybe I need to edit my response. A strict reading of this would say if you don't have a service agreement, you cannot hold back your cooperation, but you are entitled to payment for work related to assembling and transmitting.

What does your service agreement say? Yes, the COPC states you need to provide the information, but you are also entitled to reasonable payment. You don't need to provide support for work he never paid for.

I agree with Jeff, but in those instances there is no reason for the sponsor to start a new corporation with a new EIN doing similar work.