david rigby

What do the plans say? Many plans contain language requiring a contribution to be deductible. But absent that issue, in your case, some portion of the total contribution will not be deductible. A couple of other points: - Be careful about how you determined the 25% of comp. Perhaps it is greater than you think. Another related discussion: http://benefitslink.com/boards/index.php?showtopic=23128 - Talk to the actuary.

IRC 404(a)(7). When you have both a DB and a DC plan, the maximum combined deduction is the greater of (a) the DB plan minimum required contribution (under IRC 412), or (b) 25% of comp.

Sorry if my comment was unclear. Interpretation from FundeK is what I was trying to emphasize.

What the plan does when an EE reaches the comp limit is based on plan provisions. Most plans will not require the an HCE to cease contributions when they reach $205K. Some plans will establish a maximum percent for all HCE's, but that provision is to help in passing the ADP test. If the HCE is 50+, don't forget about the make-up contributions. Plan provisions have to permit this. Several prior discussion threads on this topic. For example, http://benefitslink.com/boards/index.php?showtopic=16395 You can use the Search feature to look for more.

Maybe, but there are probably missing facts. GBurns is correct that this seems like apples and oranges. In general, look to documents (plan and collective bargaining) for guidance. However, the reference to "controlled group A" might imply something else. Was plan A sponsored by company A, or was company A merely one member of a controlled group participating in plan A? Is there a surviving plan sponsor (controlled group A or a member of that controlled group)?

Not sure what you mean by "retirement packet". Can you clarify please?

Yeah, what he said. I wonder if the question has been raised because the sold company has only one employee? That should not change the answer, but might be the source of confusion.

Strong words. Much depends on what was communicated to the employee about compensation.

Upon reflection, I believe AndyH has given an accurate summary. If there is a "scam", it is that your employer used money that you "earned" (your term) and told you it was to fund your retirement. Thus, it became a way to divert some of the total compensation otherwise allocated to you.

Have you tried here? http://www.naic.org/

I agree with Jay21, it smells like a non-qualified plan. Or is it a target plan? But if it is qualified, let's talk about elective deferrals. Just how was this $50K NC determined? Just how was it taxed?

Maybe it's just me, but I don't see "partial termination" here.

You can find Revenue Rulings here: http://www.taxlinks.com/rulings/findinglist/revrulmaster.htm

I think it is possible, but there may be other materials (such as SPD) that imply otherwise. It is also possible (likely) that some facts are incorrect or are omitted.

Hmmm. What to conclude about previous "reliability"?

Agree.

Please clarify: is the plan funded only by EE contributions? The plan will define each employee's accrued benefit. It will probably include language that states the total accrued benefit is no less than what would be provided by the EE contributions. If so, the accrued benefit might be greater than otherwise determined.

Maybe a little. The driving issue is the CL funded ratio. The purpose of the DRC/AFR is to increase this. Period. The presence of a waiver amortization is merely one of the mechanics of determining charges and credits in the funding standard account. A more important issue might be whether the plan sponsor will qualify for a waiver, since it should be based on temporary business hardship. If they expect to apply for a waiver every year, how is that temporary? Freeze the plan to keep it from getting worse?

when, not if

Whether it is "complicated" is not the issue. Whether it is "legal" may not be the issue. The key, as suggested by HarryO, is the relationship between the benefit of NHCEs and the benefit of HCEs. It may be possible to simulate the non-discrimination testing of your intended result, to determine in advance if it will pass the testing. Simulate, because that includes estimating a future compensation, where the actual compensation will be used in the final testing. But there may be other issues as well, such as the timing of the amendment(s), and notice to participants. Discuss with your actuary and ERISA counsel.

Blinky and WDIK are correct. The receivable does not disappear. Instead, it becomes part of the next year's funding requirement. When the contribution is not made (in this case by 9/15/22001), two things happen: (a) the funding deficiency is created, thereby giving rise to the excise tax (which by the way is paid by the plan sponsor, not by the plan), and (b) the 2000 plan year is closed. No more contributions can be credited to the 2000 plan year no matter when they are contributed. Now, for 2001 plan year, it starts with a deficiency of the 110K, which is added to any other charges for the year, and becomes part of the amount due on 9/15/2002. Other possible problems: 1. Quarterly contributions may be due, and could be late or missing. This creates an interest penalty and serves to increase the minimum contribution. If this has been ignored, then the Funding Standard Account will be incorrect (that is, the 2001 and/or the 2002 contribution requirement may be more than you think). The dollar amounts are usually not enormous, but it is part of the funding rules, so do not ignore it. Your actuary will not ignore it. 2. The creation of a funding deficiency as of 12/31/2000 means the 1/1/2001 asset value is not as much as originally expected. This might mean the “deficit reduction contribution” will kick in, or be increased. Details not necessarily important here, but it illustrates that the omission of the 9/15/01 contribution can have more than one impact on the 2001 plan year requirements. (Also, may not be applicable if less than 100 participants.) 3. The existence of a funding deficiency invites an IRS audit. 4. Even if the 10% excise tax was paid timely, the omission of the 9/15/2002 contribution may create a new deficiency, with its 10% excise tax, and the potential for a 100% excise tax on the portion that represents the prior year’s deficiency. As WDIK mentioned, the original deficiency is subject to a second excise tax of 100% if not corrected within a year. However, the timing of that deadline might have some flexibility. 5. Notification to participants. A possible help: were there any other contributions? Suppose a $20K contribution was made on 04/15/2001, intended for the 2001 plan year. Using it for the 2000 plan year will likely provide some savings by reducing the amount of the funding deficiency. Discuss with your actuary. Some prior discussion threads on related topics: http://benefitslink.com/boards/index.php?showtopic=25115 http://benefitslink.com/boards/index.php?showtopic=8576 http://benefitslink.com/boards/index.php?showtopic=10304

Clarification please. Are you referring to 412(i) plans?

Does the governmental entity file a tax return?

What does this contract/agreement say with respect to non-performance or non-payment?

I don't think you ever have to use the word "frozen". Your goal probably can be accomplished in 2 amendments, the first by 12/31/04, and the second by 12/31/05 (others may point out that those dates are not absolute, but are used to illustrate the sequence). However, you may also have other problems, with respect to 1.401(a)(4)-5. Difficult to answer that question here. Other commenters may have different solutions.