Calavera

Start with reading the IRS publication 560 here http://www.irs.gov/pub/irs-pdf/p560.pdf. This will give you basic information about types of retirement plans. Based on your age and low wages from your business, take a closer look to 401k and SEP-IRA retirement plans. For kids education I suggest receaching a 529 plan. You make contributions with post-tax money and they grow tax free. You can withdraw money for certain education expense and tuitions when time will come without penalty or taxes. I am not sure if there are self directed 529 plans. Also some State plans will have contribution deduction on State taxes. I believe currently it is $2000 deduction against income per year, so if you make $10,000 contribution you can deduct it over 5 years. Good luck.

Other option for calculating interest on missing payments is using the DOL calculator http://www.dol.gov/ebsa/calculator/

Should be: Annuity Conversion = 1,763,000 / Min (149.07, 156.04, 176.30 * 1.05) = 11,826.66 176.30 * 1.05 part is eliminated for small plans.

I agree with a. through f. In addition you can use the account method under c. and d. to reduce the RMD amount.

I red about it couple days ago in http://benefitsbryancave.com/what-a-difference-a-day-makes/ where it was emphasized that this answer was unofficial, and does not constitute a formal position of the IRS. Would you say that 1-year requirement was met on 00:01 of 1/2/14, therefore entering the plan 2/1/14?

It is too late to use Self Correction for the 2010 missing RMD if it is considered to be a significant operational failure. You can correct this through Self Correction if it is considered to be an insignificant operational failure (facts and circumstances). Review RevProc 2013-12 for more details. Otherwise you need to go through VCP - $750 + cost of preparing the filing. As part of VCP filing you can ask for excise tax forgiveness without any specific letter. Without VCP filing, use form 5329 as Tom outlined in his post.

As Andy said, the benefit at NRD is not relevant for a PPA valuation For the 2013 Plan Year, looks like in your case the $415 limit somewhere around $230,000 at 66.5-ish reduced by years of participation less than 10. I would calculate 1 year of accrued benefit by the formula and than limit it by min($415, Sal 415). $415 limit will be 230,000 x Participation (1 year) / 10 = 23,000 Sal 415 limit would be (100,000 +100,000 +255,000)/3 x Service (at least 3 years based on your post) / 10 = 45,500

Indeed. It took me just 6+ years to upload my photo. Were kind of busy I guess.

Depends on how agressive you want to be in your thinking. The section 415 must be satisfied as of each of the annuity starting dates, but the regulations for multiple annuity starting dates is not available. So any "reasonable" method that you can defend should work. See this article for more details. http://www.soa.org/library/newsletters/pension-section-news/2006/january/psn-2006-iss60-maclennan.aspx

I vote for $0 of Outsatnding Balance, and $10,612 of Installment. The instruction for Line 32(a) says: "...enter the sum (but not less than zero) of the outstanding balances of all shortfall amortization bases..."

From 5500 Instruction - Do not list the PBGC or the IRS on Schedule C as service providers.

Just a thought - I recall old 404 regulations would mention the adjustment to the asset for contributions deducted but not made. I always thought this was exactly for situation described in the original question. Here is also 14:18 from DB Answer Book Contributions to a defined benefit plan can be deducted for a taxable year if the contribution is deposited to the plan's assets no later than the due date for filing the tax return for that taxable year (including extensions). [ I.R.C. § 404(a)(6)] Although the deposit may be timely for deduction purposes, it may not be timely for purposes of satisfying the minimum funding standard. Conversely, a deposit may be timely for purposes of satisfying the minimum funding standard and may not be timely for deduction purposes. Example. Fred Flintrock is a sole proprietor and sponsors a defined benefit plan. If his tax return for 2000 is not on extension, he must make contributions by April 15, 2001, in order to deduct them on his 2000 tax return. If Fred makes the contributions after April 15, 2001, but before September 15, 2001, the contributions will be timely for purposes of satisfying the minimum funding standard for 2000 but must be deducted in 2001. Conversely, if Fred's tax return is on extension until October 15, 2001, and the contributions are made on this date, they will be timely for deduction purposes but not for purposes of satisfying the minimum funding standard for 2000. If the employer files for an extension of time to file its tax return and then files its return before the original filing date, the due date for deductible contributions is the extended due date. [ Rev. Rul. 66-144, 1966-1 C.B. 91] If, however the employer first files its tax return and then applies for an extension of time, the IRS has ruled that the extension is not valid for purposes of increasing the time for making deductible contributions to the plan. [ Ltr. Rul. 8336006] I think ERISA Outline has some example like this as well. So nothing against Gray Book 2011-7, but I like Effen's reply - it should be the clients/accountants call.

The timing of the amendment to avoid giving benefits to one NHCE may be considered discriminatory under 1.401(a)(4)-5.

I guess you can show $200 as payable on the 2012 Form 5500 with final assets of $0 and mark it as final filing.

I guess it was a poor choice of using word "maximum". I didn't mean the maximum deductible contribution. I meant enough to cover the value of his frozen accrued benefits. The question really was what is the maximum lump sum he is allowed to receive under the 415 rules. It was either the present value of $160,000 or the present value of $205,000.

Good point Effen, but my situation is different. There is no excess asset and the owner just want to contribute what he can take out. So consensus for now that the actuarially equivalent straight life annuity benefit of his lump sum is compared to the current $415 limit and not to the $415 limit at the time of plan freeze. FYI - I also discovered that if plan was terminated in 2013 and distribution occur in 2014 you have to use the 2013 $415 limit and not the 2014 $415 limit.

I believe it is correct and in accordance with the Sch SB instruction. Note that for the AFTAP the Asset in nominator should be increased by contributions for the current plan year. See the following for more details: http://www.ccactuaries.org/opportunities/ea2013/onsite/302.pdf

Thanks guys. David, It is not a one-person plan. Owner just want to contribute up to the maximum he would be allowed to take as a lump sum after everybody else is cashed out. Andy, I am glad that you are thinking what I was thinking. Hopefully nobody else thinks otherwise.

New spin on the old question. NRA is 62. Small plan was frozen when participant was 52 years old in 2003 with 10+ years of service and participation. Given the IRS position that 415 applies to the accrued benefit and there was no special language in the freeze amendment, the final annual accrued benefits are $160,000 (2003 $415 limit). Plan is terminating now in 2013, and participant is 62 years old. What is his allowable lumpsum? Step 1: Calculate lump sum under the plan's assumtions (417 October rates for prior year) 160,000 x 14.7734 = 2,363,744 Step 2: Under 1.415(b)-1©(3) the actuarially equivalent straight life annuity benefit is the greatest of: a) 2,363,444/14.7734 = 160,000 (plan's rate) b) 2,363,444/12.4228 = 190,251 (5.5% rate) a) > b) = 190,251 Step 3: Verify whether 190,251 is above or below $415 limit to confirm if I can pay 2,363,744 lump sum. Question is if I am still stuck with 160,000 limit, and therefore lump sum is limited. Or I can use $205,000 for this purposes since it has nothing to do with the accrued benefit, and therefore lump sum is NOT limited.

Also need to check if 4062(e) reporting is applicable.

I agree with Effen. Moreover, when you are over NRD and an actuarial equivalent of your benefit is higher than the 415 limit, you either need to implement a suspension of benefit or you need to implement in-service distribution.

Does your plan document specify to use GAR94 @ 5% for lump sum calculations?

Grandfather rule for preexisting benefits is described under 1.415(a)-1(g)(4)

QDRO states that AP may commence her benefits on or after the participant's earliest retirement date but not later than the participant's normal retirement date. Participant is still active past NRD. We have prepared the benefit package for the alternate payee but she refused to return it. Plan document is silent regarding this issue. What are our options? 1. Start paying her on a life annuity basis (but she may refuse to cash the checks). 2. Wait until participant retires and start paying her with missing payments to participant's NRD (with interest or without interest?). 3. Wait until participant retires and start paying her actuarially increased benefits from participant's NRD to her commencement date. 4. Suggest to plan sponsor to contact participant and AP and request a new QDRO. 5. Other?

I am not sure if there is a rule for that. I have seen distinction was made by EIN on each individual Schedule C. So if all of them have the SSN of the employer, it would be treated as one employer. But if all of them have different EINs you will have one employer and 4 participating employers.