tymesup

The feds don't like "outside agreements". Their contention is the combined arrangement constitutes a giant cash or deferred arrangement, in violation of the 401k deferral limit.

At least PBGC will know that our small plans missed their quarterly contributions.

Would you post a copy of the notice, blanking out the personal and company info? Prospect Avenue, by any chance?

Third, if your sole proprietor has no earned income, he can't take a deduction. If he can't take a deduction, why would he want to make a contribution?

And then use that mandatory insurance program as justification to pervert the funding rules and impose additional compliance burdens.

Hope it's deductible when they want to deduct it. Hope the deduction pattern doesn't show up on audit radar. Hope the accountant and client haven't forgotten anything else.

The pharmacist gets paid first.

High 25 is not mentioned in our typical 23 page SPD, nor in our 3 page "Common Questions".

Is disclosure of this risk required? Probably not. Was the 401a4 High25 risk disclosed in the past? Probably not. Will this be the first participant who does not elect an immediate lump sum? Probably not.

This is the way I had it set up from looking at example 5 of the regs. $50k of the 300k goes towards satisfying each of the quarterly contributions. Each 50k is discounted from the date paid to the due date of the quarterly using EIR + 5%. It is then discounted from the due date to the valuation date using the EIR. The remaining $100k is discounted to the valuation date using the EIR. Yarg, if only I had seen Carrot Add the sum of the interest adjusted quarterly contributions to the interest adjusted $100k to compare to your MRC. I don't think this way ends up at the same place as what you show above. Am I doing it wrong or am I missing that the two methods end up with the same interest adjusted contributions on the valuation date? I tried both ways and ended up with two numbers (although within $1k). We're doing it the same way as RBlaine and Example 5. To put numbers on it: 50,000/(1.06^(3.5/12)*1.11^(11/12)) = 44,673 50,000/(1.06^(6.5/12)*1.11^(8/12)) = 45,191 50,000/(1.06^(9.5/12)*1.11^(5/12)) = 45,714 50,000/(1.06^(12.5/12)*1.11^(2/12)) = 46,244 100,000/(1.06^(14.5/12)) = 93,201 Total = 275,023 Yarg, wish I'd have noticed carrots' post

Let's not forget the value of giving the Plan Administrator something else to do. Let's also not forget the value of reminding participants of what the plan is not giving them. Perhaps plans that are not subject to restrictions could issue a notice that says we are well-funded, none of these restrictions apply to our plan.

If the AFTAP is deemed below 60%, accruals are frozen, affecting participants. If the plan is well-funded, there may not be any deductible contributions available. If the plan sponsor is OK with the above, this could work. Is a plan sponsor going to think of this on their own? Not likely. The EA might want to check with their E&O carrier before suggesting this idea to the plan sponsor.

An alternate payee can't get something the participant can't get.

Note this awkward situation could be avoided if the employer were allowed to access funds in this well-funded plan. 401(k) participants are allowed to take loans and hardship withdrawals from their accounts; the poor sponsor does not have these options. One could argue that it is not good for employers to be able to withdraw funds from a trust because this could adversely affect participants. Note, however, that this prohibition provides a powerful disincentive to fund a plan, which also adversely affects participants. Clearly, we need a complicated set of rules and regulations to determine when a sponsor can withdraw funds. Throw in an excise tax and maybe some additional funding requirements and I think we have a winner.

We had a similar set of questions recently and the same set of answers. If we worked on large plans, we wouldn't have these problems.

Note that allowing owners to waive benefits enables them to manipulate their tax deductions. The feds view this manipulation as a giant cash-or-deferred-arrangement (CODA), circumventing the 401(k)/402(g) limit. They can stomach a one-time irrevocable election before participation, but that's about it until the plan terminates.

If you use BOY, you can use the 2007 earned income to estimate the 2008 earned income. This will in turn lead to minimum required and maximum deductible contributions for 2008. Accountant comes up with Schedule C, client makes 2008 contribution, you calculate 2008 self-employment tax and voila, you have 2008 earned income. Repeat for 2009. Several flies in this ointment. End of year assets, including contribution, may not match up well with end of year lump sum since 2008 Schedule C not reflected. You can adjust the contribution to reflect this, if you want to do the extra step. If there are employees and/or another plan and/or non-discrimination testing, you get an extra round of work. If 2007 earned income is large, you may get a large 2008 minimum. If 2008 Schedule C is small, cash may not be available and/or contribution may not be deductible. BOY works better if owner already has comp over the a17 limit.

We recently had a restricted employee ask for her lump sum. We didn't see how she could make an informed election if the notice said, you'll get this monthly amount for a while. At some point which we can't even estimate, you'll get a large distribution which will be the balance of the money owed to you. We didn't think we could pay her monthly amounts for a while and then let her make an election once the restriction was lifted. We told her she couldn't get a lump sum now, she seems to have gone away.

Perhaps this thread will help: http://benefitslink.com/boards/index.php?s...mp;hl=quarterly

Looks like this design could work. Please keep us posted what our fiend from the Infernal Revenue Service says on the subject. It would be double plus ungood if this design doesn't work.

Off the top of my head, I believe we are not supposed to recognize the upcoming freeze. I would expect we recognize the actual accrued benefit for the subsequent valuation.

Not exactly on point, but why did they have a DB plan with a 23K contribution? Seems like a lot of trouble and actuarial fees for a relatively small contribution. 70K with the potential to grow seems like a more feasible arrangement.

436(h)(3)(A) and (B) apply on 4/1, so the AFTAP shall be presumed to be 10 points lower. 436(h)(2) applies on 10/1 shall be conclusively presumed to be less than 60%. Beats the heck out of me.

My literal reading of that section is that you have to have this year's AFTAP in order to substitute the prior year's. Since the plan and then the actuary are hooked for a bad AFTAP, I think you have to do the darned thing. Overregulation strikes again!

But it was all right, everything was all right, the struggle was finished. He had won the victory over himself. He loved Big Brother.