Calavera

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.

Check what your plan document says about a year of participation/accrual. You mentioned that the plan was frozen 1/1/2016 and not 12/31/2015. If your year of accrual is based on 1 hour of work, you may have 4 years and not 3 years of participation. Otherwise you should be good, and the benefit will stay at $5,250 level.

As part of his full distribution he would elect a full lump sum IRA rollover. A portion of his lump sum would not be eligible for rollover due to RMD and has to be taken as cash payment. This portion may be calculated using the account balance method. See 1.401(a)(9)-6 Q-1 (d)(1) for more details.

By taking the full lump sum in service distribution you may use the account balance method to determine the amount not eligible for rollover due to RMD. Therefore you will get the same result as if you would take it from the IRA.

Yes. However can wait until 70.5 and take full lump sum in service distribution as well.

Years of participation for 415 purposes are tied to years of benefit accrual service (see Years of Participation definition under 1.415(b)-1). So I am not sure that you can even recognize additional years of participation for 415 purposes when a plan is frozen. But what you can recognize is increase in the 415 $ limit. However this amendment will be discriminatory if you have any non-HCEs in your DB plan.

Those who eligible to retire should receive their immediate annuity benefit based on the early retirement provisions of the plan. The lump sum amount may exclude the early retirement subsidy and be only based on the present value of the deferred annuity. The amendment to offer the lump sum should properly reflect that. Alternatively, the early retirement subsidy could be included for everybody, using a plan's early retirement reduction from NRA to ERA and an actuarial equivalent thereafter. The amendment will need to reflect it as well.

Non-professional sole proprietor hiring his spouse will be filing 5500-EZ and will be covered by PBGC.

Yes. I assume person in question would be a top-25 paid participant. Therefore, be sure plan is at least 110% funded on a post-distribution basis if this participant takes a lump sum.

You will need to split his income into contribution and post-contribution net-earned income that has to support the contribution. Generally he may need to make only minimum required contribution during first 3 years to establish higher net-earned income. Very careful planning is required for the first 3 years where contributions should be made after the year end when the net income is known. This why in certain cases it is not beneficial to have a defined benefit plan for a new company for at least first 2 years, especially if income is not projected to be high enough.

I disagree with this statement. See https://www.pbgc.gov/docs/QDRO-model_separate.pdf, https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/qdro-drafting. for more information. QDRO says: "ORDERED , that the Plan Administrator issue separate checks to the PARTICIPANT and the ALTERNATE PAYEE for their respective interests in the plan at the time its benefits become payable" You cannot take it away from AP in the separate interest QDRO. However this seems a shared interest QDRO and not a separate interest QDRO. It is not clear from the extract of the language provided. And in this case she can be really out of luck. The relevant sections in this case to review would be the timing of payments section and death of relevant parties section.

I feel that under the separate interest QDRO she cannot possibly be "out of luck" and she is still entitled to 50% of the portion of the pension earned during the marriage. Can you attach a QDRO so we can see actual language (just strip out all personal info).

If no survivor benefits were included, and QDRO was written properly, death of the participant should not have any effect on the award benefit. Ex-wife should still be entitled to 50% of the portion of the pension earned during their marriage. New wife should be entitled to survivor benefit of the remaining pre-divorce and all post-divorce benefits. See if QDRO has any sections describing "If participant dies before commencement then..."

The normal due date means the last day of the 7th month after the end of plan year whether it is short or not. So for the short plan year, the extended due date will be 9 1/2 months after the end of the short plan year.

Possible mismatches may come from accounting for payables/receivables benefit payments and/or expenses on 5500. Also some statements sometimes show the accrued income, and some do not.

1.411(a)-7: “For purposes of subdivision (ii)(B) of this subparagraph, participation commences on the first day of the first year in which the participant commenced his participation in the plan”