CharlesLeggette

An LLC shareholder taxed as a sole prop wants to contribute a deferral but he gets no paycheck. How is that accomplished?

A TPA has asserted the following. A CB/DC combo plan that requires a 7.5% Gateway covers 6 of 10 ees in their CB plan and 10 of 10 in the PS plan and the average NHCE EAR is 2.5% in the CB plan. The ER PS contribution is 5%. Question is do the employees who are not in the DB plan get to use the 2.5% avg EAR, or since they are not in the CB plan, they may only use the PS 5% and therefore must up the PS to a full 7.5%?

He says the recently issued modified rules on Safe Harbor permit mid year adoption of a Safe Harbor feature in an existing 401K Plan....is that correct????

Takeover plan. He actually worked 2012-2015 and didn’t formerly retire until 2015. There are a couple of other parts who are by aggregation, owners. The Plan is Non-PBGC and is about 125% AEQ overfunded. Its about 140% AFTAP/HATFA overfunded. The 2012-2014 distributions were RMDs. It seems legitimate that at his age in 2015 he would be given retirement paperwork[which included a lump sum option], execute same and go home. But something nags me about this….any thoughts???

I know a Safe Harbor Match of 100% of deferrals up to 6% of pay is permissible, but I've never had someone ask that a Non-Elective SH be 4%.... Realistically, you could just have a 3% NE SH and a fully vested 1% discretionary but then they'd go into different buckets in the R/K system... Thoughts would be appreciated.

No the 2016 contribution was for 2016.....so not yet deducted.

A CPA called me and said Solo has adopted a SEP in Jan, 2016 and immediately funded it. Now wants to do a CB Plan. I called my brainy Tax lawyer and he immediately responded that the code says that the adoption of the CB plan will disqualify the SEP and the $53,000 will be disgorged by the IRA….No implications…he said that the adoption of the CB plan disqualifies the SEP not the other way around. While I am thrilled by this, I am interested in hearing any comments….

Mike, I said Plan uses Elapsed Time...why do you keep saying 1,000 hour rule.

OK Mike, I absolutely respect your opinion. So a Plan has an elapsed time definition of Benefit Accrual.Service... Two employees each with annual pay of $100k start participation after meeting the eligibility scheme on Jan 1, 2016.One terms on Mar 1, the other terms on Dec 25.The Plan is a CB Plan with a pay credit of 10%....please explain to me what pay credit you would award each of them. Assume the plan has full vesting.Thanks in advance.

This plan doesn't have a last day rule provision, I just posted that as being from the FTW doc. it is an elapsed time plan that defines a Year of Benefit Accrual Service as an elapsed time Period of Service, that is 12 mos.....if you don't have a year of accrual service you don't get an accrual.

We were just provided an actuarial report prepared by a decent sized actuarial group in California on a small CB plan, where the prior actuary calculated AVA and included substantial receivables....does anyone know of any circumstance under which that would be permissible.

Does anyone know of a stock valuation person or firm that would perform a valuation for a 250 employee company for a reasonable fee....they are looking for a long term relationship.

Well, you'd be wrong -- here's what the FTW Plan doc says.... This is straight out of the Plan doc A Participant meets the service requirements for Principal Credits if he or she is employed by the Company on the last day of such Plan Year, or he or she completes at least 12 consecutive calendar months of service. In order to determine the number of whole years of service, nonsuccessive periods of service during a Plan Year and less than whole year periods of service during a Plan Year shall be aggregated on the basis that 12 months of service (30 days are deemed to be a month in the case of the aggregation of fractional months) or 365 days of service are equal to a whole year of service during such Plan Year. An Employee will also receive credit for any Period of Severance of less than 12 consecutive months, subject to the exemptions, terms and conditions of DOL Reg. section 2530.200b-9.

Consult your Plan doc provider [FTW,Sungard,Datair, ASC,etc]...I think you'll find all require point to point employment under elapsed time ....even for vesting.....consider the 1,000 hour rule...there isn't any fractional accrual for 999 hours.

I think you're mixing metaphors...I agree with what you say regarding vesting -- but benefit accrual is based on Plan years of Participation in a Cash Balance Plan, so no issue there in my opinion...

Sal is just another opinion -- and usually a good one --- but Rob Richter of Sungard is darn near always spot-on...I've asked his opinion on this --- film at 11.

I have asked for a similar response from Datair's Plan doc gurus.

So I went to FT William and posed the question to them --- bingo ---in the example I gave $0 - Pay Credit --- which is what I believed...so in a Partner centric Plan, if a Partner leaves on 12/28 -- NO ACCRUAL if an elapsed time accrual plan -- this is a huge help in clearing the 'terminating' partner issue and making a Cash Balance plan easier to navigate...here is the FT William response: Hi Charles, That would be correct. They need to be there for the entire eligibility computation period to accrue a benefit. Please let us know if you have any other questions. Best regards, Product Support Manager, ftwilliam.com Wolters Kluwer Law & Business Question: Under the Cash Balance doc using elapsed time for benefit accrual , if someone becomes a part on 1/1 and leaves on 12/28, do they get a piece of a year of accrual.My reading says they get zip.

You're not understanding --- the action of elapsed time appears to require 12 full months for accrual, their termination on 12/28 means they have not earned a year of accrual svc....its not last day.

A Cash Balance plan uses ET for benefit accrual....so a participant joins plan 1/1/2015....terminates 12/28/2015....looks to me like she gets no benefit accrual [Pay credit] for year. Any thoughts -- I haven't seen an ET plan in about 15 years.

Client missed their 3/15 deadline for MRC and contributed it last week…so now we’re square for 2015…but the client is having a terrific year and now wants to make the maximum 404(o) contribution for 2016…their plan is well funded, though not overfunded but by a little…calendar year plan…original effective date 2013….Cash Balance Plan…owner has 4 years under 415 but has an accrued Br of only about ½ that 415 max….I’ve attached Sal Tripodi’s piece on the issue… 1) Can they deduct the 404(o)max and 2015 MRC in 2016 as “includable contributions”. 2) Can he do 1 year pay credit to synch him up to 415 – he knows he’ll need to make larger contributions for staff, but is a very generous employer… 3) Any other ideas

He received some match but that's not non-elective and he received a CB accrual but that's not non-elective...does he get a Gateway??? I don't believe so, but just checking.

CPA called with a creative question....can the taxpayer contribute his 2015 MRC on 3/16/2016, 1 day after filing his 2015 return and still meet the MRC requirement for 2015 but push the deduction into 2016, if so what happens to his 2016 pension deduction which he expects to be large.

This is another mutual client of same lawyer we discussed on another earlier post who is paranoid re CODA. So here is the procedure for a Plan with 70 docs and 650 employees… FACTS: Thru 12/31/2015 they are a 401(k)/PSP SH 3% Non-elective – last day requirement for non-SH $$, allocation method was Integrated at TWB. No matching –just PS contributions. PS contribution for 2015 will be about 17% of pay for docs and 15% of pay for staff, limited by 415 and catchup, depending on their deferral. We know we could have fired up a new 2015 PS Plan and made new-comp contributions over there, but they elected to just move on and leave 2015 alone. For the last 25 years they have always contributed 15% of staff pay – IOW, a very generous employer. Effective 1/1/2016, docs no longer make deferrals except for $6k catchup…no longer have Safe Harbor, Safe Harbor discontinuance notice sent on 12/1. Every participant in their own rate group. We are Named Fiduciary of Plan under a 3(16) agreement crafted by our attys in concert with their atty. Procedure for Setting the amount of Individual Doc PS New-comp contribution for 1/1/2016-12/31/2016: We will calc the estimated 2016 equivalent PS amount that approximates the 2015 deferral+Integrated ps contribution - $6,000 catch-up, if applicable, IOW, the $xx amount per doc. We will craft a recommendation to the Board Benefit committee[there is no Plan Level Committee since we are the Named Fid.] with a list of docs and the $xx amounts per doc. We will send an email to the docs saying that $xx is the amount that will be credited to your account in 2016 and $yy is maximum permissible amount assuming your comp stays at $zz. The doc notice will say that if they want to petition the Benefit Committee for a different amount, they must do so in 30 days. They need give no reason or rationale for such a petition. Once the 30 days elapses, the Benefit committee will review all estimated contributions and petitions, if any, approve or deny them[we have no say in this matter]. The Benefit Committee will then send the gross amount of the expected employer contributions to the board for approval[no individual numbers].The benefit committee will then notify us of the amounts [which are an approximation]. We will communicate the doc amounts to the client’s accounting/payroll department. We are done until end-of-year. Does anyone believe this procedure will tag our client as being a CODA?

Yes, well I think that is obvious by inspection...I have had bank clients with trust departments that invested their own pension $$, Fidelity invests its own $$, I have had large corporate clients that had a Chief Investment Officer that invested their own plan's funds...I think if they were investing in their own company or they were receiving fees from the investments, I would be more nervous, but neither is true....the hangup seems to be the Partnerships and the fact that they are General Partner....I believe it is probably a securities/ERISA lawyer question....