AndyH

OK thanks for the clarification. Been a long time since I've seen these types of things.

Create a plan loan because of plan cash value life insurance? Uggghh.

Was a 204(h) notice issued? .

I googled the subject of the 100% excise tax and found an article by Jim Holland from 3/15/2018 that discusses this. Basically there may be a couple of possible ways of seeking a waiver of the 100% tax, but nothing is certain and one approach is very expensive. But nothing happens automatically so this would remain a lingering issue without a reasonable amount of effort and/or expense.

He's not statutorily excludable so I don't know why he wouldn't be counted and in the test. Isn't whether or not he benefits addressed by how 415 was handled in accordance with 1.410(b)-3(iii) and (iv)? Which of course reverts back to how 415 was handled for a)(4) testing if that was necessary. If (a)(4) testing wasn't necessary it seems that you have two choices, one taking 415 into consideration and the other ignoring 415.

Also, were valuations and SBs done each year? if not, there are lots of issues. And were benefits frozen separately from the termination action?

I (and many if not almost all from the ACOPA board) think that lack of a ps contribution to the owner blows the uniformity rule. Not sure about the limited offset part without further thought. I can't help with your document question.

No replies so I'll bite. The fact pattern or objective does not seem clear to me. What is the legal basis for aggregating them under 401(a)(26)? When "can they be" aggregated other than when/if they are merged?

Not a lawyer, but this does not sound exactly right to me. The plan can provide that any future benefit accrual is offset by the present value of distributions, but this is not a direct quid pro quo (couldn't resist). There could still be a small increase depending on the accrual level, the level of current distributions, and the actuarial equivalence factors, but often this results in a full offset. The plan can also provide that benefits are suspended upon re-employment under certain situations. But I've never seen or heard of a plan that provides for an employee election in this situation. There's a first time for everything I suppose.

Agree

It is not universally accepted that the deposit on 10/12/18 is deductible for 2017 (lots of discussion on the ACOPA board), so as I said I would defer to the accountant on that. Otherwise I think we all now agree.

The $60,000 can't be on the 2017 SB because it was after 9/15/18, so it would be on the 2018 SB. Was the $60k claimed as a 2017 tax deduction, and if so is that proper? I don't think so, but not sure about this - throw at an accountant. An advisor raised this question with me recently because he heard or read it recently. If yes I would think the comp is $190k. Just one opinion.

Tom, congratulations and best wishes! I will miss your knowledge, sense of humor, constant willingness to help, and always positive attitude. And your amazing patience. Those are things we will always remember. Best wishes! Make sure to come back and visit when you have a new album of Pension songs!

On the planet where they produce such documents, they also might produce other language that restricts what you do when the test fails, so better to take a look.

Well, to some of us, volunteering for this would be like volunteering to get some bad virus.

Well, just to supplement this, and I know Mr. Zeller knows this, but the excluded participant must be in the non-discrimination tests whether they are benefitting or not, unless they could be excluded for age or service.

Well if Ned has successfully sold the client on the need for insurance, and all participants don't have comparable DB benefits, having insurance in both plans may be the only way to pass BRF testing it seems to me. But I guess that would also require that the employer fund additional DC contributions sufficient to pay the premiums in the DC plan. Having recently taken over a couple of combo plans with insurance only in the DB I wondered if this was being done in other cases to pass BRF.

Well, I meant if the owner obtained a plan loan, loaned the money to the business, and used that amount as the contribution, but I guess that is not necessarily what was proposed.

On audit could this end-around be considered an extension of credit and deemed a PT?

If I may chime in, Tom's suggested procedure interests me because I don't recall seeing that done before, but yet again I haven't often tested plans with the two-prong NRA definition discussed here. According to 1.401(a)(4)-3(f)(3), an actuarial increase may be disregarded for testing purposes if (A) the same uniform retirement age applies to all employees and (B) the percentage increase factor is no greater than the largest percentage increase factor that would be produced using any standard mortality table and interest rate. So it appears to me that if the AdKu's plan did not have the non-uniform NRA definition then using the DB factors is optional but not required and you could use the testing factors to age 65. For example, if the DB plan had a NRA of 62 and the DC plan 65. Anyone disagree?

I agree. There should be some other language describing who and under what conditions a Beneficiary may be named. I also agree with jpod, but the Beneficiary definition was not what I would have expected.

I don't disagree with the last two view points, but I just think there is a possible argument the other way so I would defer to plan counsel if that is an informed judgement.

Obviously the actual plan language is critical, but I can see an argument in favor of the attorney's position from IRS LRM language which arguably defines "benefits" as benefits being paid in a lump sum form.

The 436 and top 25 rules are independent. If one is satisfied that does not mean the other may be ignored.

Tom, you do also need to find time to publish a pension song book. Best wishes to you!