rodin011

Right: The Sole Proprietor Created a Corporation and is 100% owner. Exactly same business, different structure.

Sole proprietor sponsor a qualified plan. Starting 1/1/22 it became a corporation. New name, new EIN. Besides restating the plan to reflect change in business structure, name, EIN, etc. is there any other paperwork required for the new entity to continue the existing plan? The 2022 5500 will also show the changes. Thanks for your help

Thank you.

Sorry for the font. I'll be more careful next time Back to my question: Is there any quantitative guidance regarding the "meaningful Benefits"? And are these meaningful benefits related - in the case of aggregated plans- pertinent only to the benefits provided by the DB? Do they take int account the equivalent benefits provided by the PSP in years when the DB was not frozen? Still unsure if I feel lucky or not:) Thanks for your help, Mike.

Corporation sponsors a DB and PSP that are aggregated for testing purposes. Plan was effective 01/01/12 . The DB accrual formula was 5% per year of service for owners and 0.5% per year of service for all other eligible participants ​Plan is to be terminated in 2016 and was frozen effective 1/1/15 with no further accruals For 2015 the owners made a substantial contribution in order to bring plan assets as close as possible to the 417 termination liability. Is there any problem with the above? Can the IRS challenge if the average annual accrual rate in the DB is not at least 0.5% per year of service: in our case it is a little bit lower if no accrual are allowed for 2015. Thank you for your help

Thank you all.

So, it seems that for all practical purposes- if the plan is not underfunded- new would be entrants are treated and included in ND tests as any other nonstatutory excluded class, right? I was fairly sure... it sounded too good for the plan sponsor.

Thanks. The plan is not underfunded

Plan sponsor wants to close the plans to new participants while continuing to accrue benefits for existing participants. A couple of questions: Must the 40% participation test, the 410(b) and and the plan's average benefit tests include the employees that - in the absence of this freezing- would qualify to participate? I vaguely remember that it may be an exception for frozen plans, but I am not sure. Any citations? Usually when freezing a plan, the amendment simply replace the plan accrual formula with 0.0%. Any special language for an amendment that continue accruals for existing participants but close the plan to new participants? Any potential pitfalls - excepting the employees happiness- I should be aware of? Thanks for your help

The owners plan to retire in 5 to 7 years. Until then they plan to contribute each year substantial amount of money (in the range of 300k+). Therefore the percentage of plan assets invested in that property will - under normal conditions- substantially decrease. If death or other circumstances would require payment of benefits to owners, and if the sale price of the property is substantially lower than purchase price then, indeed there may not be sufficient assets to pay the owners full benefits. But is this scenario much more different than what happened to the equity markets in 87, 92, 2001 and more recently, during the current recession? Even the most diversified portfolio had moments of 30% to 40% losses when the benefits of the owners could have been be in jeopardy. An index fund portfolio for any plan is probably considered an acceptable investment , while its risk/return ratio is probably no lower than an RE investment that in a few years will become a small % of the portfolio. And , I quote, " A fiduciary is required to examine the level of diversification, degree of liquidity, and the potential risk/return ", I doubt that- especially in the small business market- any Plan Sponsor, usually the fiduciary has the expertise to evaluate this factors. And even for a professional adviser, are there any "yardsticks" to define them? Any regulations that define them? We do not give investment advice, but we should be able to answer such question or at least to be able to direct the client to competent adviser. But I have no idea who can perform , analyse, judge and approve or not the "level of diversification, degree of liquidity, and the potential risk/return " or to have a "written record demonstrating that a contemporaneous economic analysis showed that the investment alternatives were of equal value" So, I am still in the dark, even though it seems to me that buying a piece a property that is clearly not a prohibited transaction and not financed, is no different and no riskier than any equity investments for this particular situation. But I may be wrong and it would not be the first time....

DB Plan with over 1MM in assets wants to purchase an investment property. The plan will pay the entire cost with no financing. The 2 owners' PVAB, combined, exceeds 90% of the total PVAB of the plan. Assuming the purchase is a bona fide investment , that every year an accurate appraisal is provided , etc., and that the plan will always have enough cash to provide termination benefits for the other participants: is there anything that would forbid the plan to invest about 75% of assets in such property? I know that we have to report on the annual 5500 if more than 25% of plan assets is invested in a single asset. However I wonder if there is any "legal" limitation as long as the non owner employee benefits are not in Jeopardy. Thanks for help.i

We have the following situation: Company A and B members of a controlled group. Company A adopts a retirement plan and company B joins as adopting employer via a joinder agreement. Company B is no more part of the controlled group and decides to terminate participation as adopting Employer of Company's A retirement plan. Since they do not want to sponsor a retirement plan going forward the participant's benefits must be paid out. Question.: If there are any "standard" resolutions to execute the above, I could not find them. I think there must be a company's B resolution to terminate the participation in the company's A retirement plan and distribute the benefits . Also a resolution of company A to approve the cessation of company B as an adopting Employer. Since B will not adopt any other plan, is this enough to justify the distribution of benefits? Or do we need some other corporate resolution(s)? And in any case, I assume that benefits must be 100% vested. Thank you for your help

Plan docs do not exclude bonuses from definition of compensation. Deferrals and SH were based on compensation that excluded bonuses, some of them quite substantial. Can this be "fixed" according to the "missed deferral opportunity" rules? And if so, how must the lost earnings be calculated? Any citations? And can Employer simply contribute the lost deferrals and match without submission through one of the compliance programs? Thanks for help.

Employer SH matches every payroll using the correct formula. However, many employees have huge swings in compensation from payroll to payroll, as they are also paid commissions. Therefore, the deferrals of participants that defer a constant dollar amount are sometimes under 3%, between 3 and 5% or over 5%. Consequently, at the end of the plan year the total SH match (that is correct on a payroll basis) will many times be out of range on an annual deferral percentage basis. Does the employer have to make the additional match contributions or withdrawals after the plan year end in order to satisfy SH formula on an annual basis? Thx