SoCalActuary

Does each plan pass a safe-harbor on its own? If so, you are not required to aggregate the two plans. Does either plan depend on the other for qualification? If not, the new safe-harbor should pass on its own. I don't think you need a gateway unless you are playing with eligibility, benefit levels by group, etc. Your document must also determine which plan meets top-heavy. I would think the safe-harbor plan would be ok, unless there are non-key HCE's who don't get the safe-harbor 3%.

One plan or two? If each is separate, you have dual expenses for 5500 audit bond etc. If together, you have two benefit structures in the same plan. General test should still pass on benefits basis, unless HCEs are young. Then you should test on contributions. Is the gateway a problem?

It may be worthwhile to look at the capital required to run an assisted living facility, since you are primarily providing housing, with attendent services. This is less intense than full hospitalization, which is clearly health related. What portion of the AL facility expense is return of capital or interest on capital? Of course, that does not help your goal here to keep one document in place for both.

By achieving a contribution in excess of 25% for the owner, you still have not given the major reason for the DB. You can exceed $41,000 of benefit value in a DB, but not a DC. For testing purposes, the gateway test thinks you have less than 25% cost, since the benefit is converted to cost using a high interest rate. The DB/DC combo still gives a better result than a single cross-tested DC. Don't forget that you can allocate more than 25% to an individual in a DC, so long as the combined contribution of all participants is not above the 25% deduction limit. However, again, you cannot exceed the 415 limit. Meanwhile, in a DB plan, the maximum benefit lump sum value is about $190,000 at age 65. However, in the fact pattern you described, you can cut your fees down (a valuable priority to the client) by just having the DC plan. With total pay of: 1 150,000 2 15,000 3 60,000 4 50,000 total 275,000 x 25% = 68,750 deductible amount Does the client want to spend that much? If not, then go DC only.

Looks like you need someone to check your test. Got a good local actuary?

How many people have earned income from this partnership? How many partners combined produce a controlled group situation? Investment partners who receive passive income only don't count. Who's left?

If I were judging this, the facts you gave would lead to forfeiture of the 8 years. He left non-vested, had a break beyond 8 yrs parity, and therefore forfeited. The only way it could change is if the union negotiated to grant the service credits. Does your participant have enough political clout with the union? If not, no go.

Sorry, that won't work in DB plan, since you have 2 or more who are not statutory exclusions, and 401a26 requires at least 2 participants.

vesting is a big issue here. Partially vested people should continue to get credit for both plans. If he left plan A with no vesting, probably no luck after 15 years break. If he was fully vested, your argument is moot. Was partial vesting involved? However, in multi-employer plans, other issues also matter, such as credits for early retirement, disability eligibility, etc. Break in service issues make also get in the way. Which service are you trying to protect?

3% contribution is modest if the company is profitable. Of course, CFO's push for highest profits, so they may want to go cheap on retirement benefits.

I'm a fan. Good people, fast to market on technical updates. Thumbs up!

The plan contract may seem sneaky to you, but it is just fiscal prudence to plan sponsor. No one guarantees post retirement health benefits, unless the employer buys insurance policies. I don't even think insurers offer a lifetime health benefit policy. And... no one guarantees that the plan sponsor will always be able to afford the benefits, nor future profits, nor that the plan sponsor will even exist. Sorry if I don't seem too helpful here. Maybe you could explain why your case has merits ignored by the judge.

The obvious response - ask the other guy doing the 412i. Did they include an offset provision in their 412i design? Otherwise, your plan does not have an offset provision, does it? Normally 412i is not using an offset formula, as this just makes it much too complex to coordinate benefit amounts.

After an equally long day, I believe the IRS has addressed this by suggesting that there are two valuations: one on the plan as it normally existed for 8 months cost, and a second on the plan after the amendment. That second valuation might not produce a zero cost if the plan is underfunded, so I would not assume zero without doing the work. However, it's just an opinion on a theoretical approach. As a practical matter, I have seen valuations done at year end after the termination amendment, just using the benefits then in effect. If you are doing beginning of year valuations, as in most large plans and many FAS reports, then you should look at the dual valuations, with FAS 88 curtailment calculations as well.

I would have to research, but I think it still works. The amount is deductible but not yet deducted. The contribution will be timely for FSA minimum.

What does the document say? A merged plan has to address the issues, and lawyers are paid to address the interpretation.

Potentially, a business audit could assert that this is a change in accounting practice. However, the IRS specifically allows the deduction to move back one year in the event contributions were made timely for funding standards, but later than the tax return for the business. Personally, I would not look to file for a change in accounting method.

The first question is whether each individual plan can pass all discrimination tests by itself. If so, and considering the total employees of the group in the ratio tests, then you can have each plan on its own. However, you must include all plans for the average benefits percentage test if you are not using the 70% ratio test to pass coverage. If any one plan fails on its own merits, then you voluntarily or "permissively aggregate" plans. You might combine the plans any of 4 ways to get a passing result. A & B B & C A & C A & B & C Good luck with your testing.

Look for the regulations on "statutory employees", typically sales reps who set their own working conditions but sell only for one company. W-2 income does not count for SIMPLE or SEP of the sole proprietor. It can only count for 401(k), 403(b) 457 or other employee deferral in an employer sponsored plan, or as an IRA contribution. Schedule C income alone is used for the SIMPLE or SEP. Does the person have both W-2 and 1099 income shown as separate items in 1040? If so, the W-2 shows as wages, and the W-2 indicates whether the person is covered by an employer sponsored plan. The 1099 would show as income in Sched. C, subject to SE tax, and possibly eligible to sponsor a separate plan.

Good question. The 11g issue allows you to correct the discrimination problem. IMHO, you can amend in any reasonable way to pass the test, and you are not required to give the additional amt to the age-confused participant.

The business did exist. Revenues occurred. The expense of the employee (who happened to be a relative) was real, assuming it was paid & payroll taxes administered. Negative net revenue is only a problem if you risk running into the "hobby" rules for a sole-proprietor return. If there were profits in the last few years, the business is considered real.

To Andy H: When I worked on large plans, 1000+ records, we would routinely get 80 to 90 pct accurate data. There were always data corrections in the next plan year. In small plans, you have plan years already closed with completed admin, benefit reports, tax forms, and maybe even distributions made with incorrect data. In the large plans, you just forget about last year's errors. In the small plans, you sometimes make the participant live with their incorrect date if they caused the problem, or you just correct the admin going forward. If distributions were made that underpaid a participant, I recommend the plan sponsor make additional payments. If overpayment was made, we would look to see if HCEs benefited unfairly and make a request to return funds. In this case and the facts presented, the plan sponsor appears to be at fault for the error. Since the error would cause disqualification, I would push to have it corrected immediately, using the appropriate self-correction method. However, in other fact patterns, I might counsel that the error be corrected in the next year plan administration. Of course, since I work in db plans, that is often easier than with dc plans.

Assuming that the spouse has wages and payroll tax withheld, then the cost of that employee belongs on the Sch C deduction. If this produces a loss, then the employer (the primary person conducting the business) pays no SE tax, and takes no deduction for pension on 1040 page one.

Do you feel lucky? Clint Eastwood had some great lines. If you don't correct, then you face audit roulette. Not my recommendation, but also not my call. If the employer tax return is already complete, then deduct it for 2004. Otherwise, you should amend 5500 and admin.

You are headed for an argument with IRS over substantiation quality data. Is this a small plan, where the employer was expected to have accurate info on each person? If so, why was the birth date record revised? If it occurred in 2004 after an employee was found to lie on their employment information, you may have an argument to ignore it for 2003, but you may have to use the new date in 2004 administration. There is some legal history that the employer can rely on the original birth date for employee benefit amounts. This might involve consulting a good ERISA attorney. If it is a large plan, then you can probably ignore it. On the other hand, if the birth error was due to careless data collection, then you should probably fix 2003, since either the employer or you are at risk.