Bri

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.

If the balance is over 5,000 then the non-responsive would indeed need an annuity as well.

Got a client, sole prop filing a K-1 as a 100% partner. (Had a partner through 2019, that guy's gone/paid etc.) Sponsors CB and 401k. K-1 shows about 74,000. Cash balance credit is a flat 150,000, but he's done enough cushioning in prior years that his MRC is only around 46,000. Max is hundreds of thousands higher, and he's not near his 415 limit (this is first year I've seen in five where he's been below 401a17 in Earned Income). Sponsor says he'd like to deduct 100,000. Obviously that exceeds his Earned Income so I'd think this is a nondeductible contribution. But he could make a 4972(c)(7) election to not owe any sort of excise tax. I guess the thing I need clarification on is, what stops him from looking at his overall income for the year (taxable investments, perhaps) and use that as something to deduct the remaining 26k of the 100k against.... I suppose it might have to do with the fact that the other income is passive and therefore any claim for a deduction against THAT income isn't an ordinary 162 expense of the business. Am I close, crazy, or somewhere in between? Thanks! -bri

And I suppose the contract with the recordkeeper will spell out exactly where their fault would lie in relying on the participant without trustee authorization, too.

If the mistaken deposit wasn't really deferrals, then forfeiting it out from the wrong account shouldn't suddenly make it deferral money you couldn't later use, just because it had a bad label on it.

Why not just contribute the missed earnings for themselves and pay the naturally dinky 5330 tax? (This might not even be a Title I plan, right?)

I think it's going to be in your basic plan document, in terms of what contributions are permitted - and in this case I'm referring to different types of QNEC. Our document vendor had it at one point that a boring X% to everyone QNEC was always permitted to fix a test. But if you wanted to target the QNEC, the adoption agreement had to have the box checked off providing for QNECs in general

How about an -11g amendment to allocate the additional 10% to HCE 1 and the NHCE on top of a nominal stated contribution of 15% to everyone? Plan doesn't have to fail to do an -11g. The new benefits would be nondiscriminatory.

And of course, make sure your plan document doesn't contain language requiring it to cover EVERY member of the controlled group. (There's nothing STANDARD about a standardized plan document!) 😁

The topic at hand intrigued me, if only because I've got some local towns who were set up with both their deferrals and town contributions under the same contract with a recordkeeper. The employee amounts are on a 457(b) document and the employer amounts are on a 401(a) document but it's all combined on the platform. I consider the deferrals part of one trust and the rest the other.

How about making it part of his 2020 allocation then?