emmetttrudy

Let's say a participant's high 5 of last 10 for his Average Monthly Comp is currently $50,000. The participant continues to work for another 10 years at a much lower comp rate so upon termination high 5 of last 10 is $25,000. His/her final accrued benefit is calculated using the $25,000, correct? The plan defines AMC as high 5 of 10 Years of Service where Year of Service is defined as 1,000 hours worked.

thats what i thought. the plan was effective 1/1/2008 but they granbted 1 year of past service so assets = 0 and FT >0 for 2008 valuation. thanks!!!

thanks i dont have access right now but will check it out.

To clarify, I say 0% funded ration for 2008 because at 1/1/2008 assets were $0 so AFTAP = 0%.

Client contributed approx. $50,000 above minimum in 2008 (1st year of plan, BOY val date). But since the funded ratio for 2008 is technically 0% can this prefunding balance not be used to offset the minimum required for 2009?

So if he had to cover the handful of employees, even if it was a small benefit, then there would definitely be a partial plan termination issue and they would all most likely need to be 100% vested, correct?

What if the plan year was defined as 5/1/2010 to 4/30/2011? Then you have an entire plan year where there is only one employee? The fiscal year remains 9/30 but there's no issue with having a plan year end different than a fiscal year end.

The owner of a company would liek to set up a one-man DB plan for the plan year ended 9/30/2010. The company had other employees up until 4/30/2010, but now he is the only employee. If he implements a one person DB plan, would the initial plan year need to be a short one from 5/1/2010? And would he only be able to use his compensation from 5/1/2010-9/30/2010, or would he be able to use his full year compensation?

Just wanted to confirm my understanding of deductibility of contributions. Plan Sponsor failed to make contributions for 2007 and 2008. Amount to satisfy unpaid minimum required contributions for 2007 and 2008, and min. req. for 2009 (as of 9/15/2010, inlcuding adjustments for interest) is $175,000. My understanding is that none of this would be able to be deducted in 2007 or 2008 with a revised tax return because it was made after the deadline for both of those years. Is this correct?

Plan sponsor failed to make 2007 minimum required contribution which is $100,000. Excise tax due for 2007 = 10% * 100,000. Client froze the plan in 2008 to "stop the bleeding". Minimum required contribution for 2008 is $120,000, which is the $100,000 from 2007 plus an additional $20,000 shortfall installment. Plan sponsor made no contributions for 2008. Is the excise tax due for 2008 = 10% * 120,000, or 10% * 20,000? My understanding is that it is 10% of the entire minimum required contribution (10% * $120,000) even though a portion of the 2008 MRC is due to unpaid MRC from prior year. Is this correct? [For simplicity sake I am not taking into account any discounting that would apply to the $100,000 contribution from 2007].

HAs a model 204(h) notice been released by the IRS? If so, where can I find it? If not, does anyone have a good reference for a list of the requirements for the notice? Thanks!

HAs a model 204(h) notice been released by the IRS? If so, where can I find it? If not, does anyone have a good reference for a list of the requirements for the notice? Thanks!

OUr VS says the same thing. It just seems unsual to have to count 501 hours of service when that vacation, sick, etc. time was accrued over a lifetime of employment, not specifically this plan year. But it looks like it all needs to be counted if she was paid for it in this time period.

Cannot change to safe harbor 3% mid-year for an existing plan. this needs to occur as of 1/1/2011.

An employee worked only 2.5 months out of the year and then terminated. She got paid for about 500 hours of actual services rendered, so normally would not be eligible for a profit sharing contribution. However, she also got paid out for approximately 510 hours of accumulated sick, leave, vacation, etc. time leaving her with slightly over 1,000 hours in the plan year. For purposes of the 1,000 hour allocation requirement should all of these 510 hours count in the year of termination? Do you count the hours for the time period in which you are paid for them? Or could you argue that most, if not all, of them were accrued in past years?

Employer failed to make a SH and PS contribution for plan year 2008 by 9/15/2009. The contributions were made in March 2010. Must the employer restore lost earnings to the plan for these late contributions? We do now know yet if they took a deduction for the contributions in 2008. If so, they would need to amend. Also, the PS contributions were not "discretionary" per se, since they also have a DB plan and the PS contributions were required for the plans to meet the combined Gateway contribution.

We thought of that but since they are so overfunded it would not make that much of a difference. Any portion allocated to 2008 would go right to the prefunding balance and wouldnt change the maximum for 2009 all that much. Have not completed the 2010 valuation yet but hoping 2010 will be able to eat up the excess and they'll be able to take a deduction for it in 2010.

And are the taxes due by 7/31? Or as long a the form and check are postmarked by 7/31 it is considered filed timely?

Maximum Deductible Contribution per 2009 valuation is $200,000. Employer Contributes $250,000 during the calendar year 2009. So now they must file a Form 5330 to report the excess nondeductible contributions. Are the excess contributions simply $50,000? Or can you use the value of the contributions during made during 2009 discounted back to the valuation date (1/1/2009)? If this is the case the excise tax would be slightly lower...

Has this approach drawn questions or an audit in the past?

I know the PBGC has rules allowing majority owners to forego benefits, but does the IRS? We certainly could get a letter from the owner saying he forgoes benefits, but the concern is that this is not allowed.

One person plan terminated but is underfunded by about $300,000. Should the Form 6088 show the total calculated PVAB? Or should it show the PVAB to the extent funded (i.e. $300,000 less than the actual PVAB). Is there any guidance on this issue someone could point me to or has anyone experienced this before?

OK, thanks. Some "hope" was what I was looking for. Ultimately I am going to refer them to their "expert" CPA on the deductibility issue but I wasn't sure there was even a possibility they could deduct the amount in a future year.

Cash Balance Plan - Maximum deductible contribution for 2009 plan year was $150,000. An amount of $200,000 was contributed during the calendar year 2009, leaving $50,000 in non-deductible contributions. It is my understanding that a deduction for this $50,000 can never be taken? Obviously not for 2009, but not for 2010 either, correct? So the plan sponsor just loses out on any deduciton for this $50,000?

A plan sponsor has a DB and 401(k) PSP. The key employees are benefitting in the DB plan. The key employees are specifically excluded from receiving any profit sharing contribution in the 401(k) PSP. They are eligible to defer but have never deferred antyhing. Are these two plans required to be combined for TH determination? Are the key employees considered participating in the 401(k) PSP even though they arent contributing anything, because they are eligible to defer?