Bird

So Company B's plan will have a short year 6/1-6/30. First, I see no problem with B making a contribution for the 5/31/13 year end. It is accrued and becomes an asset (receivable) as of 5/31. The funding date makes no difference, other than doing it in a timely manner. What is the basis for including all company B deferrals for the calendar year? You have a fiscal year ending 5/31 which will have its own testing/limits, then a short year for June with its own testing and limits, then the B participants will have comp and contributions from 7/1 - 12/31 including in the A testing and limits. The only calendar year concern for B participants is individual 402(g) limitations.

They definitely don't like them - I think there was some public forum where Phyllis Borzi said that after the hoo-haw with the FAB and the revised Q&A - but the revised Q30 essentially still allows them.

That's a function of the Plan Administrator (typically the Employer) but usually it is the TPA (or at least in my world) that initiates it.

I share everyone's concerns...but at the end of the day, my practical side says that's going to have to be good enough.

If it's not coming from the plan I don't think it's reportable.

I read it that we were talking about "can" and since you "could" take a distribution immediately if you had $1000-$5000, and after the amendment you "could not" - that's a cutback.

I see it as a cutback in a protected benefit.

I can't imagine what difference the term date for a PS-only plan makes anyway. Just tell them that they need to take formal action, with a future effective date, and do it.

Ditto to what masteff said. In a way, none of this is our/your problem; they need to just figure out what they want and then just do it.

Well, I think the actual definition is "It is an optional feature that increases commissions..." The ones I am familiar with, and I get the vague sense that is what is being described here, are for variable annuities, and guarantee an income based on a guaranteed interest rate, no matter what happens to the underlying value in the contract. So it would seem that if they are buying an annuity, they are using it as any other asset in a trust. Anyway, I wouldn't think it could be included in a DB funding vehicle. You'd effectively be using plan assets (it's an internal expense) to provide some benefit that is other than that called for in the document.

I'd say no. If a word is not defined in the document, and I doubt "Owners" is, then I'd use the common definition of that term, which wouldn't assume attribution. If it said "More Than 5% Owner", which is defined in the document, then yes. Again, no. As discussed, better to have everyone in their own group (or name names).

fwiw, I don't think it was fully answered - you don't want a separate after-tax account. It's part of the "regular" money but it simply has basis and you show that as non-taxable (and non-rollable) at the time of eventual payout (unless you just ignore the basis entirely...I'd show it though, based on the PLR cited).

I think if you buy into the notion that you can do it all (and I'm skeptical), then you can do it in a DC plan.

I would name (would have named?) the remaining entity, the S corp, as the plan sponsor, and the LLC as an adopting employer. Or I guess the LLC could be the sponsor and then do an amendment to change the sponsor as of 11/1. (Actually I like that better.) Seems like a Q that should have been resolved at the time of adoption...?

Thanks all. (FWIW...it's one thing for us to brainstorm here and say "I think..." but I find it rather irritating that someone from a home office just spits out bad info without giving it a second thought. Not all that surprised though.)

New client has a DB plan that is in the process of being terminated. It has a large ($100K interpolated terminal reserve) insurance policy on the owner that he wants to keep, but wants to get out of the plan. I suggested the plan borrow, say, $90K out of the policy, and then he personally buy the remaining $10K value. Someone from the home office says... "I have heard of taking a loan then buying for a reduced cost from the plan...only in a PS plan and has to be paid back within a certain amount of time or its deemed income." I could be wrong; having less and less to do with DBs all the time. But I kinda figured upon plan termination, just about anything would be fair game. And the second sentence makes me think the guy doesn't really know anything. Any thoughts/comments? We are setting up a 401(k) plan and could roll over the policy along with other assets, but really don't want to do that and delay the inevitable and make it worse. (I suppose if there is some restriction on doing this within a DB we could do the rollover and then borrow once it is in the 401(k)).

The approach of having multiple plans which effectively allow self-direction as you describe has been suggested by some well-know pension experts for a long time. Personally I'm uncomfortable with it and haven't ever done it. (You don't say how many of the 100 employees will be participants but it's interesting that such a plan could become top heavy.)

Just to clarify, it's not that you have to distribute within one year, it's that if you don't, the plan isn't effectively terminated and you have to keep the document up-to-date and otherwise operate it like an ongoing plan. I'm not sure that's the biggest thing they have to worry about.

I respectfully disagree... She can only defer the first year's MRD to 4/1 of the following year IF she doesn't take any distribution during the current year. Since she took a distribution, then per Reg 1.402(c )-2 Q&A-7, it counts towards her MRD requirement to the extent it "has not been satisfied" (also, the cite I provided above says the distributing plan doesn't care that the distribution was rolled over). So, it's appropriate to issue 2 1099's AND strongly advisable to currently send the participant (not the IRA custodian) a letter explaining the ineligible portion and inform her that she needs to take a corrective distribution from the IRA. I think you're right - I was just thinking out loud.

Yes, except it's not your job to communicate with the IRA custodian. But...if one 1099 shows the RMD as taxable, then the participant doesn't have the option to defer it into 2014. That doesn't seem right. Maybe (I think yes) you just do one 1099 showing the rollover and communicate w/the participant that she has to take out "x" by 4/1/14.

My 2 cents...everyone seems to be coming down hard on this employer. But I've taken over plans that were handled by large firms, and had all kinds of problems because of poor communications, and they're running just fine now. There's a big difference between spitting out computer-generated e-mails and taking the time and effort to print something and mail it and put a "Sign here" sticker on it. Clients like this are why most of us are in business and able to compete against bigger firms.

I think it's ok. If I remember correctly, they said that mid-year amendments might take a plan out of safe harbor status, and listed a couple that were ok. My take is that the profit sharing formula (probably) isn't in the SH notice, and my sense is that you're not supposed to change something that was in the notice.

I don't think you have to impute PD on both component plans. But I don't think I can prove it, sorry.

We do a resolution that says the sponsor elects to administer the plan as a SH plan using the 3% nonelective. It's on a template from our documents provider (Fort William). I think some action like that, akin to an amendment, is required, yes, in addition to the SH notice.

Yes. Sounds like fun/good luck.