SoCalActuary

While the 1987 ruling was clear, I suspect that it has been made obsolete in actual practice. I can't cite the source yet, but I believe the IRS now allows the exception for someone who previously terminated before 55 and is taking their distribution at or after 55. You should also consult the IRS publication on distributions.

If the plan has any significant discrimination issues, you should hold back on distributions to HCE's until you get a ruling, or you should get a bond or lien on their distribution account if you pay them. If you fear some errors have occurred either in contributions received, investment earnings or forfeiture allocations, then you should not distribute until you are certain of the distribution amount. Once the payment is gone, you have much more difficulty (and possible liability exposure) recovering a bad distribution amount.

Look to Sec 104, in which the disability payment is charged to the employee as an after-tax contribution while working. Several gov't plans have this feature. Their tax disclosures explain their intent to treat these payments as accident and health payments.

Your plan is being harmed by the behavior of 'X' since your plan is paying more than it should. If the numbers are large enough, your attorney should send a formal notice to 'X' and their employer, indicating that they must honor their contract (the QDRO).

Sure, it's been done for a long time.

Relius has its Report Writer, and you can modify an existing report to save as a new report. You need to learn a little about Crystal Report Writer, if you don't already know.

I recommend you conduct a search in the Distributions discussion forum. Click the search icon, enter your key words, and the forum you want searched. Good luck.

Your guild plan gives you a pension benefit at retirement, and may give you an option for a supplemental plan. The payments to that plan are paid out of your receipts for your work, and may be made by the production company directly, by the studio, or by your own company. The payments by other parties are not business expenses of your company, just reductions in your revenue. The payments from your company, if any, are your pension deduction. I will now describe the most favorable scenario to you getting a pension plan for yourself. If you have a defined benefit pension plan sponsored by your company, it can provide a supplemental pension to your guild plan, with a company contribution that could potentially exceed the $42,000 available in a SEP or a 401(k)/profit sharing plan. With this plan, you would be accumulating additional benefits to those in the Guild plan. For example, you could aim for a pension payable at age 62 of $170,000 annually for your and your spouse's lifetime, worth about $2 million at that time. However, your Guild plan and a private plan for your company may have to be coordinated if both come from the same source, that is your company contributions. To coordinate the two, you must have an actuary review your Guild benefits and your company plan. In addition, you should have a clear guide to the rules on when the two plans must be coordinated. For this, you need a good entertainment attorney or tax consultant.

You can contribute to your employees who are eligible for the Keogh plan. Look at the rules in your adoption agreement, and talk with your pension provider to get more info on the eligibility rules. If you contribute, the cost for employees will be deducted on 1040 schedule C. Your contribution would not be deductible even if required, since the owner's pension contribution cannot cause a sole proprietor's busines to go into a tax loss.

You should work with a competent local accountant or pension consultant to sort this out. Among the items to address: What is the proper salary to take in the S Corp? What type of union or guild are you in? Do you have a spouse who can also be an employee of your S Corp? From your age, it looks like a defined benefit plan would give you a contribution in excess of $60,000 per year. A spouse could have a similar benefit if paid enough.

We faced a plan audit for a non-Title 1 plan on this issue. We argued successfully that the instructions to the broker were mis-understood, and that the plan sponsor instructed the broker to sell the security, transfer the funds to the plan, and buy the security within the plan. We also went back to the tax return and showed the effect of the stock sale on the income tax of the sponsor. Take it for what it's worth.

You have described a plan benefit structure that does not have a "safe-harbor" to pass non-discrimination between HCEs & others. Thus you must do a general test. However, this does not address age discrimination. Group B participants of the same age as Group A participants do not have the same benefit. Is this discriminatory for age? It might be. Maybe race, gender, religious heritage, height, weight, recreational preferences (including sex)? The recent Sp Ct case asks if the practice of having different benefit formulas has another basis. Can you explain why groups A & B have different rules?

To Bob DB You might get a better answer if you can tell us your perspective. Actuary in training? Regulator? Accountant? TPA? The Treasury has suggested their new proposed funding methods, including use of a zero-coupon bond yield curve. This method is not used by small plans, but may be used by some larger plans, as well as the PBGC for certain plans they take over. Small plan actuaries (and possibly large plan actuaries as well) have commented that the proposed approach is inflexible, and unrelated to the expected investment performance of the trust assets. Generally an interest rate is selected for the period of accumulation of contributions (pre-retirement) and a separate rate for post-retirement interest while benefits are in pay status. Some actuaries tie these two assumptions to the current market yields of long term investments available to the general public. Others tie the rates to the expected yield on the investments in place, as for example a rate of 3% for fully insured plans.

Here's my thinking: The rate needs to be acceptable to the IRS, so generally within a two point range around the current long term interest rates available. The rate needs to anticipate the investment methods of the trustees, some of whom are risk takers and others are worried about loss. The risk takers will have a wider range, and generally a higher interest rate for the long term. The risk averse will probably go with short term cash type investments, so their interest rate should reflect the rates on the investments in their portfolio, such as 1 point below the 30 year treasury rates. If the portfolio has had a dramatic unrealized gain or loss, the assets may be mis-valued, especially if I know the market has changed dramatically since the valuation date. Examples were in October 1987 (when I raised rates) and in March 2001 (when I lowered my assumptions). Thus my interest assumption may be changed to consider the long term value of the investments. Now for an editorial: With the proposed new funding rules, the flexibility I have had will now be gone, and it will make things worse for my clients. The yield curve is a valid measure of a stable population with predictable demographics. Most of my clients are small businesses with retirement savings needs that are not stable and predictable, because employee turnover or life-changing events for the business owner are not always planned ahead. If you ask me whether a 55 year old owner will retire at age 65 and take a lifetime annuity, I doubt there is a 25% chance it will happen as planned. If you ask that same business owner about their projected sales, salaries, staffing and profits for the next ten years, the probability of meeting that target as planned is also very low. Statisticians would say the beta coefficient is very high between expected and actual employee longevity.

Attached is a benefit calculation spreadsheet for a fully insured plan. In this plan, the accrual is the cash value of the policy. My example shows that benefit accrual rates decrease by age. I guess some not-too-caring attorney will now have grounds to sue on behalf of these participants too. insured_accrual.xls

Cash balance plans still provide employer-paid benefits with controllable costs, that provide employees with protected benefits. They just don't look like the DB plans that were in existence when that old (and in my opinion, bad) regulation was written. Instead, they provide a level cost benefit, much like fully insured pension plans with accrued benefits based on the reserves from the level cost policies. Have you every tracked the accrued benefit provided by those plans? They decrease by age also. Treasury wants to write the rules that provide these plans, but politicians won't let them.

We've had this discussion before. One district court does not make a precedent when other courts have disagreed. That's why it is still in litigation. Sadly, IBM won't be offering anyone DB benefits in the future, because of that one case.

The age discrimination alleged against cash balance plans is that pensions payable monthly must not decrease by age. The counter argument is that cash balance plans provide exactly the same current market value of pension by age. Will the court decide this issue on pension value or on the monthly benefit? We'll see.

The obvious answer is that you must follow the terms of your document. That is the position IRS takes on audits of these plans.

This is not necessarily a safe-harbor, but you do get the idea. If you look at the eligible employees for the added 6% benefit, what percentage are HCE's? If you pass the coverage rules for this group, then a one year benefit of 6% of pay is a unit benefit safe-harbor design. If you currently have fractional accrual, you need to measure the additional accrual resulting from the early retirement window. That benefit needs to be tested.

In most small plans, the official plan administrator is the employer. The third party administrator will not talk to you directly unless your boss authorizes it. You are entitled to a summary plan description, and an annual benefit statement. Sometimes these are not completed until 9 months after year end, when the final contributions have been made. In addition, you may request a copy of the plan document. If you don't get these items, you can complain to the Dept of Labor, but you are not a team player anymore. If you fear you are being abused, then you might have to do this. If not, just make a formal written request for your SPD and the annual statement.

Look at the early retirement window as a second benefit formula under 1.401(a)(4)-3(b)(6)(ix).

Are the affected participants able to pass the 70% 410b test? If so, disaggregate the group and show non-discrimination for this segment only, using only the added benefits resulting from the Early Retirement Window.

Employer has a SEP requiring 3 years in last 5, wants to contribute max allowed. Employer is considering a 401k with one year eligibility as a safe-harbor plan. Key is only person getting SEP for current year because other employees don't have 3 calendar years employed. Three questions: 1. If 401k is a safe-harbor match, do we avoid aggregating plans for 401a4 discrimination testing, 401k or 401m testing? 2. If 401k is a 3% SHNEC, do we avoid aggregating plans? 3. What is effect of top-heavy?

Over 40 but extremely talented, fit, well-paid, and strong.