My 2 cents

Presuming that the plan is a covered plan, the PBGC instructions are clear - if the plan is a new plan, you base the per participant premium on the participant count as of the first day of the premium payment year. Participant counts for the basic premium do not tie in to whether a benefit has accrued yet. Example - plan allows people to participant 60 days after employment (monthly entry dates) but one needs 1,000 hours of service in a plan year to accrue a benefit. Someone hired 10/1/09 would absolutely be counted in determining the basic premium for the calendar 2010 plan year notwithstanding the fact that there would not have been anything accrued by 12/31/09. New plan effective 1/1/2010, 50 people participate on the effective date with accruals commencing then. 50 X $35 = basic premium, obviously no variable rate premium required.

Absolutely not!!!!! The participants are entitled to the defined amount - no more, no less. The sponsor must bear all expenses.

If the defined benefit plan terminated effective 2008 and that termination ran to completion (never mind in 2009 - this would be true even if the distributions were completed in 2010), then the plan is not subject to minimum funding standards for the 2009 plan year and no Schedule SB would be required. While (as may be the case with any piece of knowledge) there is the possibility that what I know to be true isn't, let's just say that I know this to be true. A 2009 Schedule SB is only required for a plan that terminated effective in 2008 if the termination fails and/or is rescinded.

Just guessing here. Not a practitioner in the IRA arena. I agree with a previous poster - what possible justification could there be for the IRA being named as a defendant in a lawsuit? Is there an allegation of fraudulent conveyance (stashing the money there before the court could require the individual pay it)? The IRA, as I understand it, could not be reached otherwise in the event that the individual loses the suit and declares bankruptcy unless the funding of that IRA itself was ruled as an attempt to defraud creditors. Would it be necessary to name the IRA as a defendant in order to assert that the individual had bad motives in putting the money there in the first place and requiring that the money be removed from the IRA? Withdrawing funds from an IRA, to my mind, would never be a prohibited transaction. Taxable, yes, and perhaps subject to the pre-59 1/2 excise tax, but at all times, IRA holders can make withdrawals if they are willing to accept those consequences. I could be wrong. The motivation for the individual taking money out (presumably for purposes intended to benefit that participant in some way) could not matter. IRA's don't have hardship withdrawals, do they? Taxes and penalties yes, but other restrictions no.

Our understanding is that a plan with an AFTAP of 79.9+% would not be a plan whose AFTAP is at least 80%. 80% means at least 80.00000%. Our vote is for rounding down, especially when faced with a borderline result.

The PBGC actually said that people who are participants are not treated as covered just because they have no accrued benefits? Is this some sort of small professional corporation? I was under the impression that the basic premium (based on nothing more or less than the number of participants) would be due, whether it were the plan's first year or not, but my experience is pretty much limited to normal corporate plans subject to normal PBGC coverage. As a side question - how can you possibly justify a contribution in excess of 25% of pay to a defined benefit plan with only a nominal benefit (1/2% is so small as to not ever generate significant normal costs) and no past service benefits?

Can't imagine that any notice is required if the plan has been treated as a non-electing church plan all along.

Being below 60% means having to freeze accruals. Could also impact non-qualified deferred comp. How hard would it be to issue a notice in a 1-person plan? (if it is necessary)

I was told a couple of years ago that post-tax health insurance premiums cannot be reimbursed. Can only get a tax break on them if you get up over the 7% of taxable income (?) threshhold. Does anyone know? Sure would like to be able to set my 2011 health care reimbursement account contributions at the maximum and have my health insurance premiums reimbursed! So please answer in the near future, before I have to make my election!

If a plan goes into limitations under Section 436 because no AFTAP was certified until after October 1, those limitations cannot ever be lifted during the remainder of the plan year. The percentage remains sub-60% through the end of the plan year irrespective of any subsequent AFTAP certifications for the year. I have no reason to believe that it matters whether there is one participant or 10,000 participants. Section 436 does not take note of the number of participants. Whether a notice must be given under a 1-person plan I leave to others.

For purposes of discussion, let us assume that the question involves dropping them from the 5500 count (and PBGC count if a defined benefit plan) and excluding any liability for their benefits. No violence is presumed to be implied.

Is that 4010 filing? If so (assuming no larger controlled group plans are involved), the reporting is waived for a plan this size, right?

The other actuary is right only so long as the plan remains in existence. There is no bar to accelerating lump sum eligibility when the plan is terminating and distributing assets. The actuary is not right with respect to retirement age - a plan may permit the election of lump sum payments at any time upon termination of employment (with the option for an immediate annuity, which need not match the benefits payable under the early retirement provision, especially if that is subsidized). I believe that many of the plans we service are flexible enough to permit lump sums on plan termination without having to adopt a special amendment. For example, one plan, in a section entitled "distribution or transfer on plan termination", says "...shall be distributed to Participants and Beneficiaries by the purchase of immediate or deferred annuities, or payment of allocations in a lump sum, or transfer of such assets to another plan which is qualified under Section 401(a) of the code, or in such other manner as provided by law, in accordance with options established by the Employer at the time of Plan termination, and elections by the Participants and Beneficiaries." Even if the explicit reference to lump sums was not present, the phrase "or in such other manner as provided by law" would suffice to authorize the payment of lump sums, without having to amend the plan. The purchase of immediate annuities is already explicitly permitted, and there is nothing to prevent that from applying to people otherwise ineligible for immediate benefits under normal operation of the plan (again, in part because of the "or in such other manner" provision, which by itself is enough to modify the normal payment arrangements of the plan).

Three things: 1. Whether the AFTAP would permit it must be determined taking the extra benefit values into account. To be on the safe side, if the window would allow the non-HCE to take a lump sum, you should look at what the assets would be if the lump sum (the real lump sum, not the value based on the funding segment rates) were paid compared to the target liability with the person excluded. In the normal early retirement window situation (with a number of people eligible to choose to take the window), you probably should do this assuming 100% take the window. 2. I have never heard of an early retirement window that applied to anyone but active participants. The whole point behind an early retirement window is not to pay bigger benefits but to reduce payroll and related costs. So people already terminated are always going to be excluded. 3. With only one person eligible for the window, you REALLY have to scrutinize everything said and done to ensure that there is absolutely no hint of coercion. You have to make sure it is clearly understood that if the person does not want to take the window, then there is no reason whatsoever for that person to be concerned that they are near the front of the line anyway. The person having greater than average seniority, it should probably be expected that if they don't want to take the offer, then any reductions in force will tend to target younger, shorter service employees.

Protecting just the immediately payable benefit is OK with me if it is OK with the IRS. The IRS certainly would consider someone as being entitled to wear-away protection, even before earliest retirement age, if the accrued benefit would be adversely affected by recognition of an increase in Social Security covered compensation. Do they consider the operation of a limited period for compensation averaging the same way?

Is this how it would work? Accrued benefit as of date pay drops = (for example) 1% X 10 years of service X $50,000 average pay = $5,000 Accrued benefit 8 years later = 1% X 18 years X $50,000 (still) = $9,000, eligible to retire and receive $7,000/month Accrued benefit 8 years after that = 1% X 26 years X $25,000 = $6,500, but may need to base accrued benefit on $9,000 accrued at earlier date. $7,000 applies as minimum immediate benefit Accrued benefit 5 years after that, at NRA = 1% X 31 X $25,000 = $7,750. May have to protect higher accrued benefit of $9,000. You do NOT have to use $50,000 in conjunction with service earned after average pay begins to decline. Any protection to be offered would be in the form of a pure wearaway calculation.

Does ADA require the IRS or DOL to make reasonable accomodations for people with ADHD? If it weren't for concern over the potential reaction of the IRS or DOL, one can probably assume that the employer would not be averse to letting the person make the change. One thing is certain though - violating the law and/or IRS/DOL regulations goes way beyond making "reasonable accomodations". If the requested change would represent a violation of the law or the applicable regulations, the employer is fully entitled to reject the request out of hand. Demonstrating that the requested "accomodation" would be illegal should squelch any potential litigation under ADA.

Don't have any sources to back this up, but I would be really surprised if the IRS would accept, as justification for a tax deduction, a mere agreement to use a particular financial company's product to handle plan investments. I think the IRS would actually require the adoption of a detailed plan document, defining such things as eligiblity to become a participant, vesting rules, rollover rules, definition of the defined benefit or defined contribution etc. If the "retirement application" incorporates all of the mandatory plan provisions, then perhaps. If the retirement application merely describes contractual details (termination of the contract, liquidation of the funds, etc.), then I cannot imagine that that would suffice. Perhaps I do not fully understand your question. The phrase "retirement application" puts me off, since it would mean, to me, an application by a participant in an existing plan for payment of their benefits under that plan.

My understanding is as follows: For purposes of assessing the satisfaction of last year's minimum funding requirement, you would discount the contributions back to the beginning of last year (with interest penalties as necessary). For purposes of determining the assets as of the beginning of this year, you would discount any receivable amounts back to the beginning of this year using last year's effective interest rate. There would be no adjustment in that calculation to take into account the fact that some or all of the receivable contributions represented late quarterly contributions.

DB plans should not be allowed to permit participant loans at all. No loans, no hardship withdrawals. And those discriminatory DB/DC combinations where only the owners are covered by the DB plan shouldn't be allowed either, especially with the owners being the only ones who can take loans. The two plans should be ruled not comparable because the DC participants must bear investment risk and the DB participants don't (the fact that the owners bear the risk of investment losses on the DB plan by virtue of the impact on future contributions should not be passed to through to them in their capacity as participants. In their capacity as participants, they are entirely shielded from investment risk, so benefits rights and features cannot be comparable between a DB plan and a DC plan and the regulations and laws should operate in recognition of that fact.

Model owner-only defined benefit plan 204(h) notice: Memo to self: I held a meeting with myself and decided to freeze benefits under my plan. Therefore effective as of [date], I will not earn any additional benefit accruals under my plan. If I decide to resume accruals under my plan, I will let myself know.

It had been the case a few years ago that it depended on what the plan said. Most of the plans we serviced had had a separate definition of earnings for limitation purposes (with no reference to 401(a)(17)), and the 3-year average earnings for 415 purposes were not then subjected to the 401(a)(17) limitations. This would matter primarily in the case of people working substantially past normal retirement age (say, with actuarial increase factors of 300%), for whom the 3-year average limit actually came into play. You might have people who earned $300,000 per year, with accrued benefits of $90,000 per year as of normal retirement age (calculated with earnings limited by 401(a)(17)). The 415 dollar limit (then $160,000 say) would be increased due to deferral, possibly to $400,000 or more, but the accrued benefit, increased for deferral, could not exceed what had actually been earned over a 3-year period, even if the result was greater than the 401(a)(17) limit. Not sure if things have changed. Maybe regulations now prohibit the practice.

Agreed that in general all retirement elections, once they go into pay status, ought to be treated as irrevocable. Reemployment leading to suspension of benefits for a temporary period may create a new annuity starting date, but that is, pretty much, it.

My comments were not directed to the deadline for taking the deduction, but for when the contribution needs to be made at all. I agree that to get the deduction, the contribution has to be made by the filing deadline. I have since been informed that taking it to that limit is acceptable under governmental rules, and that presumably the DOL or IRS would not count a contribution close to the filing deadline as not timely.

I don't work with defined contribution plans, but my guess is that there are "as soon as administratively feasible" constraints for allocating contributions after they are made. Also, does an employer have so long a time to make a profit sharing contribution? Never mind deduction limits, but shouldn't the 2009 contribution have been made months ago? Again, forgive my ignorance on this point, but wouldn't something like 3 or so months be more reasonable? However and whenever allocated, that is a long time to be unable to earn anything on last year's employer contribution.