Calavera

Nobody said it is a good option. However sometimes it is the only option.

I agree with Kristina. We had this situation several times over last 3 years. It was exactly as she described.

I am not aware of any official guidance. Hope this will help: https://www.actuary.org/files/publications/PC_PPAIssues_FINAL.pdf

Yes-ish. See Q25 of https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/efast2-form-5500-processing.pdf

I agree that this is a plan document question. Generally, termination due to death, disability, or retirement means termination when eligible for death benefit, disability benefit, or retirement benefit.

... the term required beginning date means April 1 of the calendar year following the later of the calendar year in which the employee attains age 70½ or the calendar year in which the employee retires from employment ... This question keeps popping up, and I think most of us (if not all) agreed that an employee "retires" on 12/31/2017.

Yes I am not aware of anything regarding the testing on a contribution basis. The testing on a benefit basis described in many materials. So from that perspective, the approach for testing on a contribution basis makes sense.

What Effen described would be the testing of a Cash Balance plan on a benefit basis. It seems that original question is about the testing of a DB plan on a contribution basis. Therefore: {CB account / immediate QJSA factor (plan AE) * immediate QJSA (standard factor 8.5/up84) / testing compensation} > (normal rate) should give you the most valuable rate

Client definitely get deduction for 2016. And yes it is a PT. However, there are different opinions on this board regarding whether this particular PT needs to be corrected, and regarding the excise taxes. See prior discussions regarding this matter. http://benefitslink.com/boards/index.php?showtopic=38796 http://benefitslink.com/boards/index.php?showtopic=36434 http://benefitslink.com/boards/index.php?showtopic=28518 http://benefitslink.com/boards/index.php?showtopic=26763 http://benefitslink.com/boards/index.php?showtopic=19745 http://benefitslink.com/boards/index.php?showtopic=11880

Yes. The method is well known. See also Gray Book 2011-7.

I would side with Belgarath on this one, and will go back to Plan Sponsor for clarification. If they would want to make a case, they can change the date of termination in their systems to 12/31.

"The mistakes made by Congress wouldn't be so bad if the next Congress didn't keep trying to correct them." - - Cullen Hightower. "When buying and selling are controlled by legislation, the first things to be bought and sold are legislators" .- -P. J. O'Rourke "The only difference between death and taxes is that death doesn't get worse every time Congress meets.” - - Will Rogers

I thought you cannot go over 100% of comp. Would it make answer $12,400?

I am not aware of any new guidance except the ones already mentioned, IRS examination guide and the discussion: https://www.asppa.org/News/Article/ArticleID/5037 https://www.irs.gov/pub/irs-tege/2013cpe_db-floor-offset-arrangements.pdf

As I recall from one of the EA meetings, the IRS' opinion was that this design violate 133% rule. The suggestion was to grant only portion of the prior year. I do not have any more details. Also note that this design essentially switches 1st year and 2nd year contribution requirements, (i.e. you gain extra 50% of target liability deduction in 1st year and lose it in the 2nd year), so you will get the same deduction over 2 years period.

I like this point. I personally prefer not to count APs on Schedule SB. The 5500 instruction is silent regarding the Schedule SB, so I was trying to see what others would do. Well, the 5500 instruction says that “alternate payees” are not to be counted as participants. There are no reference on alive or deceased participant. This is different from a PBGC instruction where it says: "However, a deceased participant will continue to be counted as a participant if there are one or more beneficiaries or alternate payees who are receiving or have a right to receive benefits earned by the participant."

I agree with everything above. We just have some different opinions in our office regarding the count on Schedule SB. So here are 2 scenarios: 1. Participant and AP are both alive and receiving benefits. 5500 count is 1, PBGC count is 1. Do you show 1 or 2 on Schedule SB? 2. Participant is deceased but AP is still alive and receiving benefits. 5500 count is 0, PBGC count is 1. Do you show 0 or 1 on Schedule SB?

Line 7 instruction to 5500 clearly says: "For pension benefit plans, “alternate payees” entitled to benefits under a qualified domestic relations order are not to be counted as participants for this line." (emphasis mine). What about Schedule SB Line 3 Column (1): Funding Target/Participant Count Breakdown—Enter the number of participants, including beneficiaries of deceased participants, who are or who will be entitled to benefits under the plan? There are no mentioning of "alternate payees" here. Do you include them in the count?

...but plan is covered by PBGC then all is well

From 5500-SF instruction: For defined benefit pension plans that are required pursuant to section 101(f) of ERISA to furnish an Annual Funding Notice (AFN), the administrator must instead either provide the information to participants and beneficiaries with the AFN or as a stand-alone notification at the time an SAR would have been due and in accordance with the rules for furnishing an SAR, although such plans do not have to furnish an SAR;

1.430(h)(3)-1(f)(2) (2) Option to apply prior regulations in certain circumstances. For a plan for which substitute mortality tables are not used pursuant to § 1.430(h)(3)-2 for a plan year beginning during 2018, mortality tables determined in accordance with § 1.430(h)(3)-1 as in effect on December 31, 2017 (as contained in 26 CFR part 1 revised April 1, 2017) may be used for purposes of applying the rules of section 430 for a valuation date occurring during 2018 if the plan sponsor— (i) Concludes that the use of mortality tables determined in accordance with this section for the plan year would be administratively impracticable or would result in an adverse business impact that is greater than de minimis; and (ii) Informs the actuary of the intent to apply the option under this paragraph (f)(2).

Ask CPA/ERISA counsel if this will work: He made elective deferral and catchup of $24,000 during the year He has to make $200,000 of MRC His available DB deduction only $96,000 as ($120,000-$24,000) He elects not to deduct $104,000 of DB contribution this year, and carryover it to future years.

Just in case, some IRS guidance is in Rev. Rul. 2007-43. In particular: "If a partial termination occurs on account of turnover during an applicable period, all participating employees who had a severance from employment during the period must be fully vested in their accrued benefits, to the extent funded on that date, or in the amounts credited to their accounts."

It appears based on these facts that you have a partial plan termination over 2016-2017 years and ALL employees terminated for whatever reason during 2016-2017 years should be 100% vested.

Be sure QPSA should have been started at participant's age 65 and not at participant's ERA that could be earlier than 65 such as 55 for example. See how the amount and the time of payment of QPSA are described in your plan document. Surviving spouse may be entitled to the value of the early retirement subsidy. In that case she will get actuarial increases from ERA.