SoCalActuary

what is the resulting earned income, if not zero? how can zero income produce 401k?

All the variable effects of income are easily managed if you make the commitment to be 110% funded. Cash balance has the advantage that benefit accrual is low when income is low. But with the wide range of contribution requirements and deduction limits, you can still get good deductions without high earned income, at least for a limited period. I will take any of your variable income clients that you don't feel comfortable handling. (joke)

I find it better to give the departing partner an opportunity to specify additional funding against their equity interest in the firm and its receivables. If they are willing to complete their pension funding with pre-tax dollars, everyone benefits.

brad, the benefit payments of the big public pension plans are statutory, and reflect a stream of annuity payments extending 100 years into the future. They represent the probable payments that will come due when employees become eligible to retire, and the expected payments to current retirees. The theory of present value is that you need to establish a monetary value today for those future payments. If you discount those future payments based on the expected return of your portfolio of investments, you now have to make another assumption that your investments will grow and earn returns at a long-term sustainable rate. The debate today is that these plans have assumed that they can beat the growth of the economy and the prevailing interest rates by some percentage. If you assume the investments grow at current long term bond rates for quality investments, you would choose something in the 4 to 6% growth rate. Can you imagine that borrowers would agree to a long term 10% cost of money? If not, then you should consider the 10% assumption a fool's choice.

If B, C, or D pay their employees or owners compensation, that pay does not count for the XYZ plan unless they are also adopting employers to the plan. So, basically, yes, they probably need to adopt.

to dan.jock: while your plan can provide an offset for prior distributions, and should do so for 415 purposes, it is optional, based on the plan provisions. The least you should do is continue to pay the prior elected benefit (J&S if none elected). If additional service and higher comp are involved, then compute the new benefit and follow the terms of the plan.

to maven, the RMD rules for DB plans are relatively stable regulations, but widely misunderstood. Unlike DC plans, the DB rules require 417 compliance, expressed as a default to the plan's J&S equivalent of the accrued benefit. If a plan offers a lump sum eligible for rollover, then there is an exception to make the rollover look like a DC plan. But if the plan is not terminating, you should review the available elections in the plan for annuity benefits, present a relative value disclosure to the 5% owner, and follow their election. Not quite as simple as the accrued benefit x 12, but similar in concept.

Consider a plan year ending 6/30/17, with a short year filing, and test on that basis. Any thoughts on this variation?

Why chance it? Pay minimum wage for 1,000 hours.

If you reduce the net income down to 24k, then you must compute the DB benefit using only that amount. You still pay FICA on the full amount. Also, be prepared for IRS audit if your pension deduction in line 28 of 1040 is near the net business income of line 12. But it looks defensible.

If they accrued the required hours, I believe you have to include that service in the benefit unless you amend prior to the 1000 hours. But how do you plan to pass the non-discrimination testing?

Calavera, did you limit benefit to 100% of 2017 avg pay?

Well, it looks like $2.688 million for lump sum at 62 at full dollar limit after loading the new tables and using the $215,000 limit, $2.513 million at 65, and $2.888 million at age 68. I did not check the monthly values between whole ages.

Has anyone matched the apr rates for 2016 vs 2017 at age 62 assuming a lump sum at 5.5% or at 5%? Not being lazy, but I have not loaded the new tables yet.

You might get some benefit from this as a short-term fluctuation, but you get better mileage with amending the plan assumption. Good luck and remember to give the greater of the old and new values for a year.

On further review, I too am uncertain, because of this language: Taxpayers are permitted to apply the provisions of these proposed regulations · except for those described in section III of the Explanation of Provisions portion of the preamble for plan years beginning before this proposed applicability date, So you have to interpret section III as well.

Here is a parsed version, and I read it to imply that you can use the guidance: The proposed regulations have a section that talks about allowing a DB/DC combo plan to utilize the average NHCE match (but not over 3%) as being counted toward the minimum gateway. When can that portion of these proposed regulations be relied upon? The Proposed Applicability Date section says: Except as described below, these regulations are proposed to be applicable to plan years beginning on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register. Taxpayers are permitted to apply the provisions of these proposed regulations · except for those described in section III of the Explanation of Provisions portion of the preamble for plan years beginning before this proposed applicability date, · but not for plan years earlier than those beginning on or after January 1, 2014. Accordingly, the ability to rely on a provision of these proposed regulations for periods prior to the proposed applicability date for these regulations applies to: · the disregard of certain defined benefit replacement allocations in cross-testing; · the exception from the minimum aggregate allocation gateway with respect to certain closed plans; · the special testing rule for benefits, rights, and features with respect to certain closed plans; and · the rule applying the ratio percentage test to a rate group in the case of a benefit formula that does not apply to a reasonable business classification. Taxpayers may rely on these provisions · (that is, the provisions that the proposed regulations would permit a taxpayer to apply before the proposed applicability date for these regulations) in order to satisfy the nondiscrimination requirements of section 401(a)(4) for plan years beginning on or after January 1, 2014, and · until the corresponding final regulations become applicable.

It will be fun to parse down the complexity of the regulators' run-on sentences.

Does 417(e) apply to this plan? Mine are exempt. Futher 417(e) is a minimum value in my world for those plans covered, so the plan pvab would still apply.

Seems to me that you must include the valuation of the death benefit, and I don't find any cash balance plans in my world that pay a lower death benefit than the cash balance.

refer this to the plan sponsor's attorney, because they must defend the claim that they failed to follow the terms of the QDRO. If the plan sponsor says they paid 100% of the benefit, then they must confront the failure to follow the terms of the court. However, it would be better if they can prove that the non-participant spouse received their payment and a 1099 was issued.

loan out corporations are often established by entertainers, where the performers contract with the media (film, tv, music) to provide the service, payable to the corporation. There are issues of coordinating benefit limits with the union plans sponsored by the guilds where the performer is a member. There are extensive discussions about these issues here at benefitslink. Otherwise, they are simply corporate plans owned by the sole employee.

Under terms of the plan, payroll matching was required, but employer failed to make them timely for two years. So was this failure to follow plan terms, or was the employer holding plan funds (a PT)?

Generally, I work on DB plans, so forgive a naive question. A 401(k) plan with matching by pay period has turnover in their HR department and some match deposits get missed. Later the TPA notes the failed match, and wants to make corrections. The issue is not resolved until 20+ months after the due date, but finally paid, voluntarily without govt direction. How does this get reported for IRS, DOL and 5500 purposes? What happens to the excise tax (under $100), specifically as to paying it to IRS or to participants? Any help would be appreciated.

Your paper will discuss something that includes other economic issues, namely inflation and economic growth. In many pension environments, long term returns above the general growth of the economy are correlated with pressure to increase the benefits paid. Often, this is accompanied by actual and anticipated inflation in the general economy. I will send you a generic and simplified model if time permits.