david rigby

Carol, thanks for all your contributions, on your webpage and on these Message Boards, as well as your standards of excellence. You will enjoy retirement!

The PA has no interest in the method of division, but (as @QDROphile correctly states) the PA can "refuse to do the math". Preferably, this condition is already stipulated in the plan's written QDRO procedures. You did review those procedures, didn't you?

The original poster could probably benefit from reading/re-reading the top-heavy statute, section 416 of the Internal Revenue Code: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section416&num=0&edition=prelim and the regulations: https://www.ecfr.gov/current/title-26/section-1.416-1. (Regs in Q&A format.)

Wow! Sounds like a scheme to skim off a fee. Why would the PA want to assist that? Never look for trouble.

A few thoughts (there are probably other relevant questions): Are the facts presented accurate? Are the facts presented complete? Did the buy-sell agreement contain any provisions relevant to the future of the plan? Did the buy-sell agreement alter (or attempt to alter) any plan provision of the A plan? Does A still exist or is it a wholly owned subsidiary of B? What does the A plan say about a distributable event? Does anyone in authority at B know what's going on? Has legal counsel for B made any statements about this?

I would think twice (thrice) before taking this assignment. The facts presented do not bode well for a good consultant/client relationship.

As I read the implications here: (1) the owner can afford to pay more into the plan, and (2) the 100% pay limit has not been reached. If my interpretation is accurate, the simplest way for the owner to accomplish his/her goal might be to amend the plan to unfreeze. Have I missed something?

Consider buying into an existing TPA? That is, look for a TPA that has an owner who might be retiring 5 years from now. Get legal advice from attorney with relevant experience.

"...take a lump sum..." implies there is a distributable event. Is there? By the way, the RMD at 4/1/26 is not based on the accrued benefit at 12/31/25, but on the AB at 12/31/24. (Of course, the participant can take more than the RMD.)

CFR? Really? You are stating/suggesting that the (missing) guidance is a regulation? Just a guess, I would expect it to be an administrative procedure. In writing.

I'm not so sure about that. For a one-participant plan, it should be very easy to increase the benefit (it's not already in pay-status, is it?). The increase does not have to absorb the entire amount of the excess funding; just do an amendment that increases the benefit by 5%, or 8% or whatever percent gets about 90% (for example) of the excess. Since 415 limit appears to be irrelevant, choose whatever increase you want. Assuming a lump sum payment that is rolled into participant's IRA, that "protects" more of the total dollars. Alternatively, if you put all the excess in QRP, the same protection does not apply, because it's not yet allocated, and might not be fully allocated for a few years. What happens if the participant dies six months after the transfer to QRP? Have I overlooked something?

We have seen mistakes in this area before, so I raise this question just as a caution. The lack of a named beneficiary does not, by itself, default to the estate. Virtually every plan will include a "line of succession" to determine a beneficiary, the last of which is the estate. So ... has the plan definition of Beneficiary been reviewed?

There have been several similar discussion threads, including when the interest/dividend payment was MUCH later than a few days. As I recall, at least one such discussion involved payment from a litigation settlement, months after the supposed close-out date. Before taking any action, a prudent PA/fiduciary might make sure there is no possibility of another payment.

Maybe I'm just being picky. If the vendor uses the term "solo-K", is it time to find another vendor?

Additionally, practitioners should note that the 80/120 rule is administrative and regulatory in nature. It is NOT a statute; thus, not appropriate to assume its application extends to anything else.

Although not recently, we used to see mistakes where Plan A contribution was mistakenly deposited into Plan B. The solution was simple: just transfer it to the correct location/trust. If you need an adjustment for earnings, make a reasonable estimate and do it. But do it immediately, and document it completely.

Duplicate post. Replies here: https://benefitslink.com/boards/topic/80743-a-real-problem/

As usual, @Effen states the issue better than I. For participants in their early 40s, I suggest there is a potential future surplus but NO current surplus, since many things could happen in the next 2 decades to affect the plan's funded status. If you want a discussion of these many things, I'll be glad to recommend an experienced consulting actuary, since the list of such items is very long, Overspending on life insurance now will benefit only the person receiving the commission. It would be more prudent to evaluate any surplus closer to actual retirement rather than assuming it must be "absorbed" now.

Exactly! Whenever I see the phrases "husband and wife" and "cash balance" and "overfunded", I wonder if the last one is true. Has there been a real 415 test? A consulting actuary would ask lots of questions, which might include: Why is a husband/wife plan structured as cash balance rather than traditional DB? Do the participant(s) have health status that impairs insurability? What is the magnitude of any "overfunding"? What are the ages of the participants? How soon do the participants plan to retire/cease working? Are there others (e.g., children) that might join the business? Do the participants plan to choose a lump sum distribution (at some later date) or choose a J&S payment form? Does the business also have a DC plan? A really good consulting actuary will explain to the plan sponsor how these questions are inter-related.

Interesting Q. After reviewing the definition of BIS in IRC 411(a)(6)(A), and then reading how that definition is applied in subsequent subparagraphs, my suggested answer is NO. I wonder if the questioner has inquired about this unusual provision, specifically asking whoever wrote the document originally if that person/law firm can defend or explain.

Another Q that may have already been addressed by the parties: Why terminate? If the buyer will accept it, the seller can avoid the aggravation and expense of a plan termination.

Before providing a direct answer to the question, your consulting actuary will ask some important questions. Likely, the first one is (or should be), "why do you want to do this?" The answer should be deliberately and completely identified, because there may be more than one way to accomplish your goal. If you are unsure of the answer, your consulting actuary will have some follow-up Qs to help you with your deliberation. (BTW, if your actuary does not ask this/these question(s), send me a private message and I can suggest some other names for you.)

Sure, explore that process. But get review by the plan's ERISA attorney. Also, consider whether you need review by your own attorney also.

1. Review the document to determine if it helps with your question. 2. Hire a pension actuary to assist you, especially one that has done several plan terminations. That actuary has probably seen similar situations and might recommend some solutions. One solution might include "creative" communication to encourage the participant and/or spouse to sign. For example, many years ago, I had an unresponsive participant with a LS of around $4000 (the LS limit at the time was $3500). We advised the participant that, if there was no response by X date, the plan would be required to purchase an immediate J&S annuity (because we already knew that no insurer was willing to sell a deferred J&S), and the approximate benefit would be about $20 per month. BTW, it worked and the participant completed the form for LS payout.

Can it be created on 12/31 such that no accrual occurs until the next year?