frizzyguy

I generally have the conversation with the client that J4FKBC mentions (he's right), explain what ERISAtoolkit.com mentioned (he's right too) and then tell them the price for the restatement and let the client choose. I do the same approach to whether or not they are going to apply for a d letter upon termination. Guess what they always choose...

I agree with SoCal. The same reason you need to subtract it in the current year is the same reason you have to subtract it in years before the plan begins. I am confused as to why the plan being in place matter. Also, I believe you need to take into account contributions made to other plans as well. SoCal, do you agree with that too?

Not to mention, the ones with the real interest to manipulate the data have the passwords and login already any way.

All a DB(k) plan is, and I would like others to chirp in because this is all opinion, a separate DB and 401k plan wrapped into one. The only reason that they might become popular is because you can maybe save on some administration fees. That being said, they are done so little (I've never heard of one in practice) that no one has an expertise, so for now they are actually going to cost the same, if not more than two seperate plans. With DB plans, I like to stay ahead of the curve. I uncharacteriscally am going to let others break the ice with DB(k) plans. I'm curious, do you have a client who wants one?

I'd really hate for someone to break into my client's PBGC account and pay their premiums on time for them.

Don't work with 412(e) plans. Oh you meant for software...no suggestions.

I realized I worded my first point very poorly. I was trying to discuss the 31% of pay limit. If the DB plan contribution is 6% or less of pay then the you can go up to 25% in the profit sharing plan.

A couple items. First, if the minimum for the DB plan is zero or can be satisfied by balances then you can still make the profit sharing limit 25%if you don't contribute to a DB plan. This sometimes comes into play when a plan has been around for awhile and the owners always put in the max. If that's not the case, the 6% of total pay limit is for the plan, not individual. Generally the owners make significantly more so you can give quite a bit to the staff member to pass testing before that is passed. For example, both owners make 250,000 and staffer makes 50,000. Total pay equals 550,000. 6% of this is 33,000 which is 66% of the staffers comp. Assuming that you, for whatever reason, gave safe harbor to everyone and not just NHCEs, then each owner needs to get 7,500. That means that 33,000 from before is now 18,000 available to the staffer. This is 36% and still pretty good for passing testing if you're doing it right.

I worked for a DB administration firm that had a major client move over that insisted for the same thing. We ended up showing the lump sum using the plan rates, even if the 417(e) lump sum was larger because that way we were always conservative. We only updated it annually and had to send it to the recordkeeper every January. I think it made retirement planning misleading for participants and wasn't a huge fan of it myself but the client was very pleased with the result. As far as why the lump sum changes from year-to-year making it nearly impossible to predict is because the IRS mandates that plans maintain a minimum lump sum actuarial equivalence factor to protect participants from getting swindled by a pretty lump sum amount when an annuity might be worth significantly more. This actuarial equivalence definition isn't based on a static number and changes at least every year depending on the plan provisions. It's based on the economy. I hope this helps.

I definitely do not agree with this statement. It depends on many, many factors and I would say is very likely not the case. Maybe I'm missing something though. It's happened before and will definitely happen again.

The Corbell DB VS document allows for installments. What a nightmare but it's there. On the DB VS document, they recieved and opinion letter which I would assume means it's allowed.

Shouldn't that have been part of the hiring process? I would think the employer has it.

The system is set up to give employers incentives to give money to their employees. We follow the letter of the law/regs to provide employers a larger benefit. If this system was setup so employees needed to get more money, many small employers wouldn't set up a plan. Then what happens to the tax payers. Also, there are limits (IRC 415) about the benefits and also rules that prevent abuse (IRC 410b, 401(a)(26) and 401(a)(4).

I apologize, it will never happen again.

If he's a statutory employee, he can use all of his income for a DB plan as long as he's not a full time insurance saleman. Statutory employees can't recieve benefits from the employer, therefore they are allowed to open their own plan. Check out the EOB, there is some really great stuff in there about it. Sal cites everything wonderfully, as always. Let me know if you can't find it. Because he gets benefits from the U, he is not a statutory employee. That being said, Dave Rigby is running towards this post screaming something...what's that Dave? "Consult an ERISA Attorney." Louder Dave, Louder! "CONSULT AN ATTORNEY." What's that? Still can't hear you... "CONSULT AN ERISA ATTORNEY." That's a really good point. This is a unique enough situation where I think you'll want to consult an attorney. I could see this, especially because of the break point on comp, as a clever way to circumvent 401(a)(17) limits. Is that what's happening? Probably not. I'd still like to know that if the IRS throws a tissy and it has a chance of falling through there is an attorney there to a) cover my @#& and b) represent my client. I think the client would probably understand the additional fee if you explained the situation.

"If I take the annuity, I could have a stable stream of income for the rest of my life...bbbbbuuuuttttttt if I take the lump sum, I could buy a boat!!!" (Can you tell that I get excited when I get when client's ask me this question. Also, welcome to benefitslink New Guy. You aren't by chance Lance Wallbach, are you?)

You might want to do some research about ASPPA. It may be beneficial for you. It won't get you the depth that you are going to need but it will give an accelarated base of knowledge. They also do a great job of keeping you current with law changes.

http://www.irs.gov/retirement/participant/...=211439,00.html Under a “safe harbor” in IRS regulations, an employee is automatically considered to have an immediate and heavy financial need if the distribution is for: *Medical care expenses for the employee, the employee’s spouse, dependents or beneficiary; *Costs directly related to the purchase of an employee’s principal residence (excluding mortgage payments); *Tuition, related educational fees and room and board expenses for the next 12 months of postsecondary education for the employee or the employee’s spouse, children, dependents or beneficiary; *Payments necessary to prevent the eviction of the employee from the employee’s principal residence or foreclosure on the mortgage on that residence; *Funeral expenses for the employee, the employee’s spouse, children, dependents, or beneficiary; or *Certain expenses to repair damage to the employee’s principal residence. I think that the last point deals with this situation. I think the amount of documentation necessary is up to the sponsor. Express to them what the rules and ask them what they want to require. If you start to dictate what is necessary, you start to put yourself at risk. Remember, you're not the sponsor, they are.

§1.416-1. T-25 Q. How is the present value of an accrued benefit determined in a defined benefit plan? A. The present value of an accrued benefit as of a determination date must be determined as of the most recent valuation date which is within a 12-month period ending on the determination date. In the first plan year of a plan, the accrued benefit for a current employee must be determined either (i) as if the individual terminated service as of the determination date or (ii) as if the individual terminated service as of the valuation date, but taking into account the estimated accrued benefit as of the determination date. For the second plan year of a plan, the accrued benefit taken into account for a current participant must not be less than the accrued benefit taken into account for the first plan year unless the difference is attributable to using an estimate of the accrued benefit as of the determination date for the first plan year and using the actual accrued benefit as of the determination date for the second plan year. For any other plan year, the accrued benefit for a current employee must be determined as if the individual terminated service as of such valuation date. For this purpose, the valuation date must be the same valuation date for computing plan costs for minimum funding, regardless of whether a valuation is performed that year. Hidden in plain sight.

Is he deemed a statutory employee? Sounds like it.

Then I wouldn't worry too much about it. Amendments can't be discriminatory but because they're all HCE's, in my opinion go nuts. If you want to include them, include them.

Before wheel spinning commences, were their past employees? Depending on that, I have more questions.

This is way to general a question. I believe fee disclosure is required at the sponsor level but I do not believe it is at the participant level unless their benefit is effected. Maybe (and this is a big ole' fat maybe) PS58 costs on insurance or if the plan is charging them for the QPSA benefit but in the majority of cases, I don't think participant fee disclosure is required. In both instances that you mentioned, I think that the disclosure is very easy though.

I'd start with a pink slip.

Also, I'm not disagreeing with SoCal. I'm just expanding. If anyone knows it, he does.