ScottR

I think an RMD of $60k in March 2014 would satisfy the 2014 requirements. Alternatively, you could use the account balance method and divide his actual lump sum distribution by his life expectancy factor, which will probably yield a lower result. Regardless of which method you use, the total payouts during the 2014 limitation year may not exceed the lump sum value of a $5k monthly benefit, based on 417e mortality and 5.5% interest (or plan rates if less favorable). Thus, the RMD will be carved out of the 415 lump sum limit for the remainder of this limitation year. ... Scott

When is the corporate tax filing deadline for 2012? 10/15/13? If so, Code Section 404(o)(5) will probably allow the deduction of all employer contributions made thru that date. You might also take a look at Code Section 404(g) to see if that helps. Under that section, contributions are deductible in the year made, but only to the extent that they don't push assets higher than PBGC guaranteed benefits. ... Scott

I thought the 10% penalty no longer applies to nondeductible DB contributions... 4972©(7)Defined benefit plan exception.— In determining the amount of nondeductible contributions for any taxable year, an employer may elect for such year not to take into account any contributions to a defined benefit plan except, in the case of a multiemployer plan, to the extent that such contributions exceed the full-funding limitation (as defined in section 431©(6)). For purposes of this paragraph, the deductible limits under section 404(a)(7) shall first be applied to amounts contributed to defined contribution plans and then to amounts described in this paragraph. If an employer makes an election under this paragraph for a taxable year, paragraph (6) shall not apply to such employer for such taxable year. .. Scott

I doubt this would be permissible if the value of the annuity exceeded the 415 lump sum limit. Otherwise, there would be widespread distribution of 100% J&S annuity contracts with max monthly benefits, no? It seems to me that the distribution of an annuity contract would be akin to an "in kind" distribution of investment securities. We would test their value at the time of transfer against 415 limits. Can't point to anything specific, but it doesn't pass the smell test for me. .. Scott

The PBGC is fairly flexible on this. I don't think they would have a problem with an accelerated payout to a participant in the event of an emergency. Otherwise, we generally wait the 60 days for all participants. ... Scott

(A)gree

The combined-plan limit would be 31% of $250k PLUS the $17k deferral. It's not great, but there's still room for a significant DB contribution for 2012. More importantly, setting up a DBP this year will give him 2 YOP at the end of 2013. If you amend the DBP to take his AB up to 415 limits in 2013, it should open up room for a very large DB contribution next year. Just make sure he limits his PS contribution to 6% of pay (plus deferral). ... Scott

Hi all, I'm not clear as to what the following Code Sections mean.... 436(f)(3)© 436(i)(2) Would anyone care to shed some light on them? Also, am I correct that Section 436(j)(3)(A) means no mandatory burn of COB/PFB if assets/FT is >= 100%? For example, assume assets of $1 million, FT of $990k, COB of $100k, and PFB of $200k. No need to burn any of the COB/PFB? TIA .. Scott

If you've got surplus assets stuck in the 1-man plan, you might consider purchasing a guaranteed J&S annuity for the 415 max monthly benefit. That should take care of any surplus. ... Scott

For B.O.Y. valuations, the AFTAP generally isn't affected by current year contributions (or by current year accruals). It's based on B.O.Y. assets (with interest adjustment for prior year deposits made after the end of the prior year) and B.O.Y. Funding Target. Thus, I'm not understanding your question. ... Scott

I generally restated terminating plans if our EGTRRA prototype had been approved prior to the plan termination date. Otherwise, I just went with good faith amendments, because that was the best we could do. Not saying you're wrong, but I would have restated the plan prior to 12/31/11 as part of the plan termination process. ... Scott

I've had success in emailing the PBGC about coverage questions such as this. They are very responsive, and promptly follow up with questions, and later, a letter stating their position. FWIW, I think your plan ceased to be covered when the last non-owner was paid out. But you'll probably have to pay a full PBGC premium for 2012, and for deduction limit purposes, you should treat the DBP as covered for 2012. Don't think it matters which spouse owns the company. They're both substantial owners by attribution. Best! Scott

Some plan documents (e.g. the Relius DB prototype) give the option of applying 415 limits BEFORE the AB fraction. Check your plan document to see if it contains such a provision. If so, then I think the AB = $16250 x 5/15. Otherwise, it would be $20,000 x 5/15 (assuming that the plan's benefit formula is 100% of AMC reduced for < 15 (or less) YOP). Best! Scott

I've worked on a similar situation. I believe the guild plan is viewed as a multiemployer plan, and must be aggregated with the 1-man DBP for 415 purposes. Fortunately, you can count YOP in the Guild plan in computing the aggregate 415 dollar limit. In the case that I'm working on, this means no immediate 415 problems because he has 10+ YOP in the Guild plan and a relatively small accrued benefit therein. If he keeps his 1-man DBP long enough, we'll eventually bump into the combined-plan limits. Do I gather that you're terminating his 1-man DBP? If so, you'll want to get details about his YOP and accrued benefit in the Guild plan to see if there are any immediate 415 problems. If no problems, go ahead and close out the plan, and let the Guild plan know how much he receives, as it will affect his 415 limits under the Guild plan. ... Scott

I think this is an area where the IRS would accept any reasonable method for allocating contributions. The cost for employees should clearly be split 50/50. But I think you have some wiggle room WRT the contributions for the partners. Most likely, a 50/50 split wouldn't be questioned (IMO). ... Scott

Yes, it would be. When you bring the FPB forward with interest, you would normally credit the existing PFB (minus whatever PFB that was applied last year) with last year's actual rate of return, and last year's excess contribution with the effective int rate for last year. To the extent that last year's excess contribution was created by the (needless) application of the existing PFB, that portion (reported on 38b) gets credited with the EIR, and not the actual rate of return. (Does that make any sense? I just don't know anymore...) This way, you get the same result whether or not you chose to (needlessly) apply PFB to create an excess contribution last year. Personally, I limit my use of PFB to exactly what's needed to avoid a funding deficiency. ... Scott

I agree that the employee doesn't need to get an accrual. Only if they wish to keep the plan tax-qualified. The employee was a non-excludable employee for coverage testing for the year in question. If he doesn't get an accrual somewhere, and the owners do, how is that going to pass testing? ... Scott

Datair has released a 2011 interim amendment for CB plans, and we've been advised that adoption by employers is "highly recommended". No interim amendment for traditional DBPs, as as far as I know. .. Scott

Do I glean from the above that you weren't a "former HCE" in year of termination (2011), for some arcane reason?

I have no problem with #1. IMO, #2 works only if the plan provides that surplus assets revert to the employer. If the DB document says surplus goes to participants, then the employees would get all the surplus. (Ugh!) And any amendment of that provision may not take effect for 5 years. This is precisely why I draft all DB plans to revert surplus to employer. It can be amended just prior to plan termination to give surplus to participants, if desired. ... Scott

How do you go about setting up an "escrow IRA"? Can you do it anywhere, or is it a specialty item? Any tax remifications if/when $$$ go back to the plan? ... Scott

Hi all, We're being told by Datair that 2011 Interim Amendments are "highly recommended" for cash balance plans written on their document, and that they need to be adopted by 12/31/11. Does this ring true? For those using Datair or other types of CB docs: Are you rolling out interim amendments to be signed by 12/31/11? TIA. Scott

Yes, 5500-EZ may be filed without Schedule SB attached. ... Scott

I would include the C/R in the asset value. ... Scott

Personally, I draw the line at the employer giving notice to himself. I don't do it. ... Scott