Calavera

Why would you even convert it to an annuity for a valuation purposes? It is a cash balance plan. So why wouldn't you calculate the target liability as: TL = BOY Account Balance projected to the expected retirement age with the interest credited rate and discounted back to the valuation date with the appropriate first, second, or third valuation segment rate.

I agree that B and D are in controlled group. Who owns other 10% of C?

Raise the average comp to 255000 and continue the plan until age 67-68.

Both are valid options. See what a plan document says. It may say the greater of 1 or 2.

Here is my understanding of 1.401(a)(9)-6. Q/A-1(d) for a person retiring at age 73 in 2012 with the Required Beginning Distribution Date of 4/1/2013. Under the annuity method the RMD portion of the lump sum that is not eligible for rollover is 24 x Monthly Annuity calculated as of 1/1/2012. Under the account method the RMD portion of the lump sum that is not eligible for rollover is the actual lump sum amount divided by 24.7 (2012 RMD) plus the actual lump sum amount divided by 23.8 (2013 RMD). Factors are taken from the Uniform Life Table in A-2 of 1.401(a)(9)-9 for age 73 and 74 respectively. I would love to hear if my understanding is not correct.

I am pretty sure you can find this table and many more here: http://www.soa.org/Professional-Interests/...le-manager.aspx

This is wrong. Even if the plan year will be calendar and the first year is 2013 that can still give rise to a deduction on the 7/1/2012-6/30/2013 tax return. In this case the plan documents need to be signed before the end of the fiscal year. That is, on or before 6/30/2013. I wouldn't say this is wrong. I think you need to sign the plan document by the earlier of the end of the first plan year, or the end of the tax year in which you are going to deduct your contribution. I purposely didn't mention 2013 calendar year as the first plan year, since the 404(o) regulations are not available, and the IRC Section 404(o)(1) refers only to "each plan year ending with or within the taxable year". I understand that the Pre-PPA regulations allowed 3 different choices. We just decided not to take any chances without new 404(o) regulations in place.

If a plan year will be a calendar year 2012, you will need to sign all plan documents before 12/31/2012. If a plan year wll be 7/1/2012-6/30/2013, the date 12/31 is irrelevant.

Is it a defined benefit plan or a defined contribution plan?

I suggest to use the participant’s age based on completed calendar months as of the annuity starting date, since this is what you should use to calculate the adjustment for retirement after age 65 for 415 purposes (1.415(b)-1(e)).

If you make the contribution within 60 days, you do not have to notify participants. If you didn't make a contribution within 60 days you have to notify participants. There is nothing about when you need to notify them. Old rule was that you can notify them with a SAR. I say using the AFN for the notification is perfectly acceptable. If you didn't make a contribution within 30 days, you have to notify PBGC. The notice must be filed within 30 days after a plan administrator or contributing sponsor knows or has reason to know that a reportable event has occurred.

I vote for must execute with the notarized spousal signature

I suggest you ask client how much he wants to contribute. It gives you exact NEI. Then you do your valuation to be sure that the contribution given you by your client is between min and max. And if clients wants the absolute max, then you do your iteration until you get the max under 404 supported by NEI with NEI calculated under the assumption that max will be made. Also based on the history of NEI the maximum contribution may not benefit your client in the long run (that requires additional consulting and education).

Who knew that "corporation" means "Pension Benefit Guaranty Corporation".

It is wishful thinking and I doubt it was intended. Nevertheless as it exists right now (reference in PBGC § 4006.5(g) to the target liability used to determine the plan's minimum contribution), it appears you can use it for the alternative method unless PBGC will come up with some clarification and/or technical correction.

I think 4006(a)(3)(E)(iv) talks about the standard method and not the alternative method. It appears that before MAP21 the meaning was to ignore 24 months average and after MAP21 it also ignores 25 years averaging. The alternative method is described under the PBGC § 4006.5(g) as: A plan's alternative premium funding target is the vested portion of the plan's funding target under ERISA section 303(d)(1) that is used to determine the plan's minimum contribution under ERISA section 303 for the premium payment year, that is, the amount that would be determined under ERISA section 303(d)(1) if only vested benefits were taken into account.

I was tracking down the references and something is not clear for me. It appears that the amendment of 4006(a)(3)(E) refers to the standard calculation of the variable premium and not the alternative calculation. The alternative calculation is mentioned under the PBGC regulations only and it seems that you can use the reduced funding target under MAP21 if you elect the alternative method of the variable premium calculations. What am I missing?

If I am not mistaken (see table below), and all partners are not related, there are no controlled groups between any companies. Therefore you cannot create one plan for all 5 partners. A B C P1 20.0% 33.3% 0.0% P2 20.0% 33.3% 0.0% P3 20.0% 33.3% 0.0% P4 20.0% 0.0% 50.0% P5 20.0% 0.0% 50.0% I am not familiar with an affiliated service group rules, so I am not sure if this may change anything.

Generally a sole-proprietorship or LLC that is owned by one spouse and pays W2-wages to other spouse is covered by PBGC. I am not sure if restructuring the business will help you since the plan, which is established and maintained exclusively for substantial owners is not covered by PBGC, and you look for the substantial ownership at any time during the 60-month period ending on the date the determination is being made. You also may explore with your ERISA counsel the idea of “once covered, always covered” until the coverage removed by PBGC. I don't think you can just mark your filing as the last year filing and remove the coverage. You need to apply to PBGC and request to remove the coverage. So, what if you will not apply and continue to pay PBGC premium.

It doesn't say 6-month extension from the date of the IRS determination letter. It says 180 days from the PBGC's 60-day comment period on the Form 500 filing or 120 days after determination letter is received (if later than the normal 180-day deadline) if the determination letter request was filed no later than the time the standard termination notice was filed with the PBGC. This language corresponds to the time line chart on the page 3 of the PBGC Form 500 instruction.

What section of Sal's EOB states that?

We used Kevin's approach couple times. Never had any issues with the IRS. You also need to pay attention to PBGC filing for DB plans, since there are questions about matching EIN/PN to prior year 5500 and prior year PBGC filings.

A, B, and C is a controlled group.

Thanks for quick replies. Participant is not an owner so commencement at 70 1/2 was not required. Participant is single so there is no J&S option. And of course plan doesn’t have a retroactive annuity language, and in-service distribution language. Andy, I see the point of accrued benefit is not benefit payable, so $5,000 it is. If plan sponsor is interested to know when the participant hit the 415 salary limit (last 3 year are the highest) for the purpose of the amending the plan for retro-in-service, would you agree that since the comparison of the actuarially increased last year benefit against total accrued benefit is done on 12/31 that date would be 12/31/2012 (12/31/11 benefits are below the 415 limit)? Or would you say I need to request last year salary payable through 11/30, 10/31, etc. and check every end of the month?

Facts: Hi-3 Year Average Comp - $60,000 Date of Termination 3/15/2012 Benefit Commencement Date – 4/1/2012 Age at commencement - 80 NRA – 62 There is no suspension of benefits Annual Benefit at age 80 as an actuarial equivalent of Normal Retirement Benefits – $72,000 ($6,000 per month) – over 415 salary limit. Is it appropriate to start paying $6,000 per month effective 4/1, since total 2012 payment will be $54,000 < 415 annual salary limit, and reduce monthly payment to $5,000 per month effective 1/1/2013? If not, are there any other options besides paying $5,000 per month effective 4/1/2012?