Bri

Are the dividends shared between the participants or are they individualized? My thought being, if you can get those dividends to automatically post to the IRA instead of the original plan account, then you could already be down to zero for the final time without having to wait any longer. It would be less easy to do with money due to a different 401(k) plan, though.

Let's see how clearly I can detail the situation: Two owners are the only participants in a DB plan. They're each about 70. The DB plan NRA is 65+5 yop. Formula is 10% per year, and they each earn about 120,000 per year on their W-2s. The two owners and two staff people are in a DC plan (meant to provide the staff their test-passing requirements, mostly). That plan has an NRA of straight age 65. The two participants are 75 and 57. So this isn't easy to pass to begin with. 2020 was year six for the plan, effective 1-1-2015. So the owners are only now past their NRA. A. The owners' accrual has increased from 50% (five years times 10%) now to 60% of high-3. This new benefit is larger than the actuarial increase of the 50% benefit as of NRA last year. B. The regulations say you can ignore actuarial increases in the 401(a)(4) testing only if the employees have a uniform normal retirement age. Am I stuck not having a uniform NRA between the plans? Could it retroactively be amended lower from 65+5 to 65? Does the fact that the DB plan's participants are past the need to even mention the 5 yop in the NRA definition carry any impact? The staff people are excluded from the DB plan by job category, although I suspect that doesn't help the argument that the NRA basically is just 65 in the DB plan at this point. Obviously it's a lot easier to pass the testing if their DB accrual rate isn't the full 10% but perhaps just (60 minus the adjusted value of the 50 from the year before). Thanks.... -bri

I've often listed "same for all" on Page 5 if they corrected everything at once. And yes, you list the sponsor there, specifically in the role as the disqualified person. Item 1 is NOT discrete, because it's a loan between the plan and the plan sponsor. The date of the transaction is the date it became a prohibited transaction, so either the payroll date or some day almost immediately thereafter such as when they SHOULD have made the payroll deposit but didn't. So you might have various dates for each of the prohibited transactions but the same correction date (scenario 2)

I vote SF - the plan itself covered someone not an owner during the year.

That only applies to NHCEs who specifically are benefiting. And with no TH minimum forced upon the person, they could indeed be set to zero (coverage/nondiscrimination testing notwithstanding)

Sounds like it's a document language question - Read the definition of entry date. If it says it's the date "coinciding with or next following" completion of the eligibility requirements, then completing the subsequent year of service on 12/31 means 12/31 becomes the employee's entry date. If it only says entry occurs on the date following completion then it'd be the 1/1 afterwards. The old "tie goes to the runner" argument, as I like to call it.

Plus contract rules are collectively bargained with the MLBPA, so I suppose there might be something to that as well?

The instructions for the PBGC premium payments say that alternate payees are not included in the participant count. From what I read in the code and ERISA, an alternate payee is defined as someone subject to a domestic relations order. Not specifically a QDRO. Therefore, I suspect that for my 2021 filing, where the only benefit left to go as of 12/31/20 was for an alternate payee whose QDRO was signed by the judge in January, there's no participant count at all. (Actual participant took his 50% earlier in 2020.) I wasn't sure if the January date "qualifying" the order might mean the sponsor has to pay 1/12 of a head-count charge. But since the domestic relations order really came about first in 2006 (it was signed by a judge then but incorrectly designed/worded - not sure who reviewed it - and never corrected until the past year with the payment pending upon plan termination), I think the sponsor has no premium due at all. (Obviously no VRP since all benefits have been completely paid now.) Sound correct? I'm also thinking my participant count was 0 at year end 2020 and then as the BOY count on what will be their final 2021 Form 5500-SF filing as soon as the residual $40 in trust assets is liquidated and applied to administrative fees. Thanks. -bri

Got a follow-up here. PBGC premium for 2021. The participant took his 50% benefit as a lump sum in spring 2020. I reached out to the ex-wife to indicate she needed a legitimate QDRO. She found her old attorney, who was able to put one together. But the courts were closed for several months. It was finally signed in January 2021, and she took her "half" in late May, essentially finishing the plan off, as hers was the only benefit remaining to be paid. The question is, since alternate payees don't count as participants, unless the participant was deceased, the PBGC instructions indicate she doesn't get counted. Is it the date the QDRO is signed which makes her officially the alternate payee? Or is it enough for an Order to be pending? In other words, does the plan sponsor owe 1 month of head-count premium ($7.17) for 2021, or none? Or does "pending" as of 12/31/2020 hold any status in this sense? (Seems odd that her benefit wouldn't have to be protected via premiums through May, but the instructions seem to indicate they're not. There's still $40 in plan assets which could be used.)

Thanks, guys - I think we're going to go with the 1-1 date and acknowledge the amendment to eliminate the NC, just to avoid a mid-year valuation date that ties to the termination date but not the end of the short plan year. A valuation reflecting zero benefits and assets did seem a little *too* easy!

Small non-PBGC cash balance plan used a 12/31 valuation date. Froze 3/31/20, terminated 5/31/20, assets all out on 8/12/20. So I'm prepping final report and SB for actuary to sign ahead of 6/15 extended deadline. Is 8/12 an okay valuation date to use? Assets and liabilities both zero at that point since everyone was paid (final assets were just a residual dividend liquidated to pay fees). Don't want to switch to 1/1/20 because we'd have to assume folks would be hitting 1000 hours and getting a new contribution. 5/31 valuation date would obviously require more review of the numbers the software spits out. Thanks. -Bri

If you're in active conversation with the participant, they might even be fine with just having the 20% apply to the whole larger-than-RMD amount, in which case the notice makes sense and you're not tasked with separate forms where they end up with a weighted 18.7% withheld or something like that.

ASC did the same thing, too. So yeah, I bet they advised their approved software vendors to check for it.

Seems reasonable. In my head I can imagine a nightmare where the SEP document won't allow the 58,000 because the 6,500 isn't catchup "yet" until the 415 limit is hit. But a quick review of the plan document should spell out whether that's even possibly an issue or not. And although you could instill a plan limit of 0% to the 401(k) so that the 6,500 is automatically catchup immediately, that then risks the case of wanting to do more than 6,500 because the deduction limit to the SEP won't let you do the full 58,000.

Well, instead of the usual 5% cap for bottom-up QNEC purposes, Davis-Bacon amounts can be used up to 10% before the "representative rate" rule kicks in. You can use the prevailing wage amounts as safe harbor, if indicated in the document. Just obviously, if they're not 3% of pay for someone, then the employer would need to top them off. I presume that second question was theoretical, since you're running an ADP test.

You could if the document said so, but you'd probably owe a top heavy minimum to them anyway. But could escape gateway extra.

And on a final bright side, the plan could disaggregate its 410(b) and 401(a)(4) testing for 2020/2021. The statutory group is only HCEs. The otherwise excludable group is only the NHCE.

Interesting. I never thought about whether there's a required "order" to these kinds of elections. Would a comparison to someone wishing 100% deferral despite FICA concerns be of any use in the analysis?

Are they 50? If they did 19,500 + 19,500 exactly it at least hints that they're not.

In a perfect world the CPA wouldn't suggest just deducting it against his spouse's income, though, either! 🤐

I suppose that since this is outside the SCP window, the IRS would scrutinize it under a VCP application. They might suggest an alternative in light of it only being 2 current employees benefiting. (Heck, what if ALL the NHCEs had turned over?)

I'd think so, since it's not so much a "targeted QNEC" like the typical bottom-up rule. It seems like a straightforward interpretation of the rev. proc., but I'd suggest an "actual attorney" give you a formal blessing. (Since THAT, most certainly, I am not.)

That's on page 91 of 125 in the 2019-19 Revenue Procedure, that you can exclude former employees.

I shook my head at how easy it was when I figured it out that way. (I had the uglier formulas written down somewhere for years, too.) And it can do a QACA, too: match = min(A1 * .005, B1 * .5) + min(A1 * .03, B1 * .5)

no ifs needs: let A1 = pay, let B1 = deferrals match = min(A1*.025, B1*.5) + min(A1*.015, B1*.5) use a round function on it, but that's messier to type out here. You essentially have 2 matches layered on top of each other. 50 percent on the first 5, plus 50 percent on the first 3.