Dinosaur

Thanks Lou S. and C.B. Zeller The information was helpful.

I have a question regarding the calculation of the cushion amount under 404 for a cash balance plan since the plan was amended to freeze and then to increase benefits (for HCE’s). The facts are as follows: - only 2 participants in plan are HCE’s - cash balance credits; 85% of salary for both participants; salaries for both participants have been in the 240K range. - plan was amended in early May 2020 to freeze benefit accruals (contribution credits); There is a 1,000 hour requirement and neither participant received an accrual in 2020. - plan was amended effective 1/1/2021 to unfreeze benefit accruals (adopted at the end of 2021); new contribution credits are a flat 250K for both participants. Since the plan was amended to increase benefits in 2021 for HCE’s, the cushion amount in the maximum contribution calculation cannot reflect the increase in benefit formula for 2 plan years. This would affect the maximum contribution calculation for the 2022 and 2023 plan years (the funding target for the 2021 valuation used the frozen accrued benefit). Please correct me if I’m wrong. With respect to the cushion amount for the 12/31/2022 valuation, my inclination is to use the 85% of salary formula through 12/31/2021 for the funding target (for the cushion calculation) with $0 cash balance contribution credit for 2020. My confusion comes from the fact that the plan was frozen before the increase in benefits to the HCE's. Any thoughts?

Thank you Calavera!

Thanks for your help in advance. A DB plan terminates on December 31, 2021. The distribution for the owner (only participant) will take place in early 2022 (will be age 63 or so). Highest 3 year average = 285K so benefit will be based on 415 dollar limit. Is the calculation of the maximum lump sum benefit to be paid in 2022 based on $230,000 (in effect on plan termination date) or $245,000 (the new limit for 2022 since will be paid in 2022)? Thanks

W have a client, dentist, who is selling his practice as an asset sale. He intends to start a new practice in a different part of his state (not actually his state but the state where he practices). He maintains a cash balance plan which he intends to continue to maintain in his new practice after he pays out the four participants who will terminate from his corporation at the time of the sale and go to work for the acquiring corporation. In the year of the sale, he would like to contribute $500,000 which will put his plan assets $500,000 over the value of all cash balance accounts which consist, likely, of just his account. Are there any issues I should be worried about? 415 is not an issue. What lurks in my mind is that if the plan is terminated with excess assets reallocated within some time limit of the sale of the old practice, that the old practice employees should be included in the allocation of excess assets.

Thanks everyone.

That's a good point. I wonder if other people agree.

Thanks, I did review the instructions for the codes but it didn't specifically mention a Roth conversion rollover in them so that is why I posted my question.

A terminated participant in a 401(k) plan elected to receive her distribution from the plan (all non-Roth 401(k) pre-tax salary deferrals) as a Roth Conversion Rollover (to her Roth IRA). I understand that this money will be taxable income for the year so I assume that box 1 and 2 will both be the amount of the distribution. What would the distribution code be? I'm thinking a code 1 since it's taxable income but it's a Roth conversion rollover so it's confusing me. Don't see how it can be code G for a rollover since it's taxable income. Any thoughts?

New DB plan effective 1/1/2015, only employee (owner) turned 70 1/2 in 2014. Assume 100% vested. Required beginning date is 4/1/2015 not plan not adopted until after that date. When must the participant receive their first RMD? I can't imagine it would start in 2015 since the benefit won't be calculated until after the end of the plan year when we get the final salary (I assume it could be estimated). Would the accrued benefit start 1/1/2016?

David The plan paid the cost of the annuity to the insurance company for 100% of the participants' benefit in the plan. So, I guess it makes sense that the insurance company will provide the 1099R as the participant receives his benefit.

A DB plan terminated and all participants were paid out in 2015. One participant chose the joint and 100% survivor annuity option and an annuity contract was purchased (from an insurance company). My questions are as follows: 1) Is the purchase amount of the annuity included in #7d (benefits paid) of the SF? I assume yes since where else would you put it. 2) Is a Form 1099-R prepared for this participant? I assume no since the insurance company received the benefit and not the participant.

I thought I read somewhere that if you have another qualified plan you couldn't exclude years of service for vesting prior to the effective date of the plan. Or maybe it was something with a terminated or predecessor plan.

We have a client that established a new DB plan effective 1/1/2015. The plan will be adopted this month. The only employee is the owner and she turned 70 1/2 in 2014. Vesting is 100% since she has another qualified plan. Her required beginning date is April 1, 2015 but she has no accrued benefit on that date. When must she receive her first RMD as an annuity? I couldn't find anything in the RMD regs. I can't imagine it would start in 2015 since her benefit won't be calculated until the end of the plan year when we get her final salary (although since she is the owner we probably already can calculate her exact accrued benefit on 12/31/2015). Would her benefit start 1/1/2016?

DB plan not covered by PBGC. No DB contribution for year since close to being fully funded. For the 401(k) PS plan, client can deduct 25% of compensation or 31%?

If you have a plan with an 80% owner and a 20% owner (not married) or 60/40, 70/30, what form is filed? Form 5500 or Form 5500-EZ? The instructions to the EZ say 2. Covers only one or more partners (or partners and their spouses) in a business partnership These instructions do not define "partners". Any ideas?

Thanks for the information My 2 cents

Thanks Andy 1)The prior valuation report just said "Benefit Funded to Annuity". 2)Yes, there was an amendment allowing lump sum benefts for all participants. 3) it makes sense that going from probablity of 100% annuities to 100% lump sums should be an assumption change. Thanks for the SB item since this change obviously increases the funding shortfall.

I couple of years ago we took over a plan that had the plan funding to an annuity. The plan now pays lump sums so we want to change it to fund to a lump sum. I'm assuming this change would be a change in the actuarial cost method and not a change in actuarial assumptions, correct? Also, does this change require IRS approval? If so, could someone point me in the right direction. I can't get me hands on where this was discussed. Thanks

We are filing for a determination letter for a plan termination on a pre-approved VS document. The plan has never applied for a determination letter before but has always adopted the document restatements and amendments on a timely basis. The prior instructions for the Form 5310 clearly stated that if you didn't have a determination letter (DL) then you had to attach all plan documents, amendments since the effective date of the plan. The new instructions, revised 12/2013, say this under the What to File (#4) "a copy of the opinion or advisory letter for the pre-approved plan, and/or adoption agreement and all required attachments and statements" and (#5): "A copy of all amendments made since the last cumulative list listed on the last DL or plan document, if applicable" Do we have to send in all documents since inception or only the current document with any amendments adopted after the document restatement.

The actuary is the same actuary that signed the original SB. So, the original signed SB can be used, correct?

If you are amending a Form 5500 filing for a change in the participant count at end of year, does the actuary sign the SB again if there were no changes to the SB (beginning of year valuation) or just include a copy of the previously signed SB?

For a Sole Proprietor DB Plan, the client deposits $40,000 into the plan during 2012. His Schedule C less 1/2 self employment tax is $35,000. The minimum required contribution for 2012 was $0. The calculated maximum contribution is in excess of $100,000. He has no other qualified plans. I believe there is an exception under section 4972© for the 10% excise tax if the client deposits a contribution in excess of the Schedule C to satisfy the minimum required contribution. But the minimum is $0 in this case. Is this client subject to the 10% excise tax? There is mention about the full funding limitation in section 4972. Is this applicable?

We have a DB plan that has actuarial equivalence factors based on 1971 GAMT @ 6%. There are a number of participants beyond NRD. Benefits, which are frozen, may be paid as lump sums. We would like to change the actuarial equivalence (AE) interest rate to a lower level. We are considering the following: A participant’s late retirement benefit will be equal to the greater of: Late retirement benefit determined according to the AE factors in effect as of April 1, 2013 (date of amendment), or Late retirement benefit determined according to the application of the new AE factors as of the actual date of late retirement (after April 1, 2013) applied to the participant’s NRB. Benefit 2 will not be greater than Benefit 1 for several years which would require a notice to be distributed. What is the lowest interest rate basis that would pass muster? First segment rates? Other? Could you increase a flat .25% per month for late retirement? .1%?

The plan will be amended before any employee accrues sufficient hours to be entitled to a profit sharing accrual and, likely will cover HCE's as well as NHCE's.