SoCalActuary

mb - the subtle point in the OP was that 4041 liabilities are irrelevant because the plan is not PBGC covered. So your reference is not sufficient.

You can certainly consider the deduction for payments made after year end to meet minimum funding requirements. Some practitioners say that deduction stops when 430 no longer applies, but others say deduction continues until the plan has been liquidated (my preferred interpretation). But the IRS has avoided publishing new 404 regs since PPA, so I am guessing.

As mentioned before, it means that you track terminated participants until the plan is terminated, then you try to find and pay them. Also, you pay PBGC premiums each year for them, and you have per-participant administrative fees from the TPA each year. Do you really want the testing to drive the administration?

The plan administrator must continue to protect the rights of the participants. So, you buy annuities or you offer lump sums if your plan allows it. You give disclosures. The plan sponsor remains liable for the cost, even if the annuities are based on 2.5% interest rates. Or, you throw the whole problem onto the PBGC.

I don't know what question you are asking. Remember that the issue is also about the pre-retirement death benefit, which must show the conversion of the J&S benefit at plan rates vs the benefit at testing rates. Here's another perspective: If you have a small plan that pays no benefits until retirement, then you also have an administrative burden to track that 25 year old terminee until the business closes.

That same advice applies to CPA audits, where you are training the green young auditor how ERISA works.

You have issues with the guidance in the 415 regs, since you are suggesting taking 3 years of retroactive payments. You also may have issues with the suspension of benefits rules and participant notification. That said, I think you are out of luck unless you get a PLR. But the alternative is to put the excess assets into a replacement plan and see if that helps.

I actually do not agree that they should reflect long term expectations. They should reflect the actuary's best estimate (or at least a reasonable estimate). But we are discussing the nuances of actuarial education going back 30 to 40 years, so we can agree to disagree about what the intent was.

You make an actuarial assumption about future compensation as of the beginning of the year. It is acceptable to use prior year compensation, potentially with a salary increase assumption. However, you may also use an assumption based on the expected pay of the participants that is provided by the plan sponsor. If they told you that they expected to have a very good year, then you would be permitted to consider this information.

This would work if you used HCE vs NHCE, since those are based on prior year compensation. But you have the potential for someone to grow out of one group into the other during the year.

If you are not discussing the 415 limits, then it is at the option of the plan sponsor. Assume I have a lifetime payment of $10,000 annually, and I receive that payment each year. Then assume that I have earned a new annual benefit of $2,000 by working longer. Now I get to add that $2,000 on top of the old benefit, because I worked to earn a new benefit. This works fine for the 415 limit on compensation as well, so long as those annuity payments do not exceed the 10% pay x yrs of svc. The 415 dollar limit is however adjusted for prior payments. However, the plan document can and often does limit the current benefit by reducing for past payments received. This is a choice of the plan sponsor, who wants to limit their benefit liability. This subject has also been discussed in other forums, like the ACOPA listserve, and the Q&A sessions with the IRS.

The numbers you show in your illustration are well below the 415 dollar limit. So I would say the new AB is allowed to be $12,000.

No matter when the plan is terminated, plan assets must be liquid. Normally I agree, but there are exceptions in the microplan market, where the sole participant agrees to take distributions in kind. This is especially true when the plan is terminating with assets rolled to a replacement or other DC account.

Is it good tax planning? Are you borrowing money to convert into benefits that will be paid as ordinary income? Will the deduction help? Is this a good use of capital?

http://www.irs.gov/pub/irs-pdf/p15a.pdf See page 5. It explains that insurance agents are employees because of a statute, so they are statutory employees. They must meet specific conditions for this to apply. So the original post should follow up with those rules to see if they are relevant for their client.

In most fields, you would be right. But company-linked insurance agents sued to get health coverage as employees several years ago. It cost them the ability to claim that income as "their own business". So you need to understand the exceptions when making generalizations.

For those outraged over the unequal treatment of this income, remember this: the insurance agents lobbied to be treated as employees so they could get employer-sponsored health insurance. They can't claim independent status and also health care eligibility.

I believe you are out of luck on this fact pattern. He needs to contact his home office legal department / benefits department. But the fact that all income goes thru the carrier leaves him in a position that he can't claim independent income.

I doubt that you are using the best testing techniques. If you can get the gateway to pass, applying the PS contribution to all others, that is the first step. But for the 401(a)(4) rate groups, you can test the other HCE's with a portion of the NHCEs on a contribution basis. Study the rules for component plan testing.

Why bother? It only lowers the minimum. Don't want to report it?

The deferrals of non-owner employees are shown on the Schedule C as payroll. Employee deferrals come out of their wages, and you don't deduct them twice. Owner deferrals do not come out of Schedule C as deductions. They appear on the front of 1040.

On top of the other comments, you don't use 1/2 the tax. You use the EMPLOYER portion, which does not have the 2% welfare-level stimulus that only lowers taxes on workers. The spreadsheet is seriously out of date. Look at the IRS Pub 560, which shows how to treat the deferrals when computing a DC plan.

BenefitsLink published the link to the new BB projection table. Interesting reading, and the potential for a generational type of mortality improvement table with 2-dimensional methodology. Also interesting to note the recent experience for the 40-50 age group with flat or declining mortality improvements. This corresponds with children born in the 60's. However, it reinforces the original problem: we must wait for the IRS to determine the 2014 and later tables.

You can make a reasonable projection of mortality improvements as was used in constructing the 2009-2013 tables. But it is an academic exercise, bacause the IRS has not published the official table yet. I don't know what mortality trends have changed with sufficient detail to predict their intent. If you are serious about the question, contact ASPPA, SOA and AAA to get the IRS to discuss it.

Do you hire people and conduct business activity that does not meet the definition of professional services? PBGC coverage has an external standard, one based on actual business activity.