shERPA

An individual's DOB is 7/16/55, he turns age 66 this year. I think SS full retirement age for those born in 1955 is 66 and 2 months. So September 2021 would be full retirement age and assuming he wants to start his benefits at this time the first payment would be in October. Is this correct? How does this mid-year benefit start coordinate (or does it) with the earnings cap in this first year? This person earns about $6,750 per month, so as of Sept 1 earnings will be $54K YTD. He plans to continue working. I know after full retirement age there is no earnings cap but I don't know how they track/measure/compute this for a mid year benefit start. I've tried to figure this our reading info from SSA but nothing really seems to be on-point and it is confusing to say the least. It's hard to research (at least so far) because so much is written about the earnings cap and early benefit start. I'm not a SS expert at all. Thanks for any help.

Code Section 404(a)(7)(C)(iii).

TBH I missed that "unrelated" part. Problem with old eyes reading a forum message on a mobile device early in the morning. So if they are truly unrelated, then yes one person could participate in a one company's SEP and the other unrelated company's qualified plan(s). I will edit my other reply to note this. Thanks.

Your belief is incorrect. EDIT - when I wrote the above I had missed the "unrelated" part. CBZ is correct if truly unrelated for CG, ASG and 415(h) purposes then yes the participant could do this.

Yeah, I'd like to know how Bill remembers other peoples' questions. I want some of that. I can't remember my own questions either!

He's the new "Lance".

I don't think so. General rule of 404, contributions are deductible in the year made.

Is the TPA offering a comprehensive 3(16) service as part of this? Outside of this I don't think it's common at all. Within 3(16), probably typical. Speaking as a veteran of the TPA business, it does sort of sound like something a TPA would do - take on more work, responsibility and risk for lower fees! Our industry is sort of addicted to abuse. 😖

There is no way to answer that here. He has to work thru the SBA worksheets with his other eligible payroll (and other) expenditures during the applicable period to figure out how much is eligible for forgiveness. Pension contributions paid during the applicable period are includible as payroll costs eligible for forgiveness, subject to the overall compensation limits applicable to owners.

We're talking in circles....

There are always concerns when 412(e) is involved. Assuming the policy fully provides for the plan's benefit, from a qualification aspect the plan might be OK, but refer back to my first sentence above. The excess premium payments (aka contributions) might not be deductible. Furthermore, if the plan already provides for a benefit at the 415 limit, then there's no place for the money to go (refer back to my first sentence above). In 2004 IRS came out with all sorts of bad news for abuses in fully insured plans, up to and including "listed transactions" for buying insurance in excess of the plan benefits. I am not an expert in listed transactions and have no idea if this would apply here, refer to ERISA counsel and of course, refer back to my first sentence above.

So is the optional until 2022 applicable to the rates or just the shortfall amortization? As I read the act posted on Congress.gov it seems to be optional for both, see below, emphasis added. - - - - - - - - - - -- - - - - EC. 9705. EXTENDED AMORTIZATION FOR SINGLE EMPLOYER PLANS. (a) 15-Year Amortization Under The Internal Revenue Code Of 1986.—Section 430(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: “(8) 15-YEAR AMORTIZATION.—With respect to plan years beginning after December 31, 2021 (or, at the election of the plan sponsor, plan years beginning after December 31, 2018, December 31, 2019, or December 31, 2020)— “(A) the shortfall amortization bases for all plan years preceding the first plan year beginning after December 31, 2021 (or after whichever earlier date is elected pursuant to this paragraph), and all shortfall amortization installments determined with respect to such bases, shall be reduced to zero, and “(B) subparagraphs (A) and (B) of paragraph (2) shall each be applied by substituting ‘15-plan-year period’ for ‘7-plan-year period’.”. (b) 15-Year Amortization Under The Employee Retirement Income Security Act Of 1974.—Section 303(c) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1083(c)) is amended by adding at the end the following new paragraph: “(8) 15-YEAR AMORTIZATION.—With respect to plan years beginning after December 31, 2021 (or, at the election of the plan sponsor, plan years beginning after December 31, 2018, December 31, 2019, or December 31, 2020)— “(A) the shortfall amortization bases for all plan years preceding the first plan year beginning after December 31, 2021 (or after whichever earlier date is elected pursuant to this paragraph), and all shortfall amortization installments determined with respect to such bases, shall be reduced to zero, and “(B) subparagraphs (A) and (B) of paragraph (2) shall each be applied by substituting ‘15-plan-year period’ for ‘7-plan-year period’.”. (c) Effective Date.—The amendments made by this section shall apply to plan years beginning after December 31, 2018. SEC. 9706. EXTENSION OF PENSION FUNDING STABILIZATION PERCENTAGES FOR SINGLE EMPLOYER PLANS. (a) Amendment To Internal Revenue Code Of 1986.— (1) IN GENERAL.—The table contained in subclause (II) of section 430(h)(2)(C)(iv) of the Internal Revenue Code of 1986 is amended to read as follows: “If the calendar year is: The applicable minimum percentage is: The applicable maximum percentage is: Any year in the period starting in 2012 and ending in 2019 90% 110% Any year in the period starting in 2020 and ending in 2025 95% 105% 2026 90% 110% 2027 85% 115% 2028 80% 120% 2029 75% 125% After 2029 70% 130%.”. (2) FLOOR ON 25-YEAR AVERAGES.—Subclause (I) of section 430(h)(2)(C)(iv) of such Code is amended by adding at the end the following: “Notwithstanding anything in this subclause, if the average of the first, second, or third segment rate for any 25-year period is less than 5 percent, such average shall be deemed to be 5 percent.”. (b) Amendments To Employee Retirement Income Security Act Of 1974.— (1) IN GENERAL.—The table contained in subclause (II) of section 303(h)(2)(C)(iv) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1083(h)(2)(C)(iv)(II)) is amended to read as follows: “If the calendar year is: The applicable minimum percentage is: The applicable maximum percentage is: Any year in the period starting in 2012 and ending in 2019 90% 110% Any year in the period starting in 2020 and ending in 2025 95% 105% 2026 90% 110% 2027 85% 115% 2028 80% 120% 2029 75% 125% After 2029 70% 130%.”. (2) FLOOR ON 25-YEAR AVERAGES.—Subclause (I) of section 303(h)(2)(C)(iv) of such Act (29 U.S.C. 1083(h)(2)(C)(iv)(I)) is amended by adding at the end the following: “Notwithstanding anything in this subclause, if the average of the first, second, or third segment rate for any 25-year period is less than 5 percent, such average shall be deemed to be 5 percent.”. (3) CONFORMING AMENDMENTS.— (A) IN GENERAL.—Section 101(f)(2)(D) of such Act (29 U.S.C. 1021(f)(2)(D)) is amended— (i) in clause (i) by striking “and the Bipartisan Budget Act of 2015” both places it appears and inserting “, the Bipartisan Budget Act of 2015, and the American Rescue Plan Act of 2021”, and (ii) in clause (ii) by striking “2023” and inserting “2029”. (B) STATEMENTS.—The Secretary of Labor shall modify the statements required under subclauses (I) and (II) of section 101(f)(2)(D)(i) of such Act to conform to the amendments made by this section. (c) Effective Date.— (1) IN GENERAL.—The amendments made by this section shall apply with respect to plan years beginning after December 31, 2019. (2) ELECTION NOT TO APPLY.—A plan sponsor may elect not to have the amendments made by this section apply to any plan year beginning before January 1, 2022, either (as specified in the election)— (A) for all purposes for which such amendments apply, or (B) solely for purposes of determining the adjusted funding target attainment percentage under sections 436 of the Internal Revenue Code of 1986 and 206(g) of the Employee Retirement Income Security Act of 1974 for such plan year. A plan shall not be treated as failing to meet the requirements of sections 204(g) of such Act and 411(d)(6) of such Code solely by reason of an election under this paragraph.

Retirement plan contributions are includible in "payroll costs" under PPP forgiveness, need to follow all the PPP guidance from SBA and Treasury. The "reimburse" comment makes no sense. The PPP proceeds should have been paid to the PC, so the PC already has them.

I don't suppose the DB had 401(h) accounts, did it?

This is a pretty common situation, and Lou's advice is usually the simplest approach for a small add-on entity like this. Yeah, technically it's a MEP, but it's not much of a MEP and not a big deal to administer. The biggest challenge I've run into with 4k plan recordkeepers is handling two different payroll sources, they don't like to do that. Using a common paymaster is one way to address it, and depending how your owner/client is being paid from each entity, potential payroll tax savings is possible. They should discuss the common paymaster with their CPA if they want to look into it, there are ownership requirements (I think 50% but been years since I dealt with this).

Thanks Luke!

Thanks Mike, A is my opinion too.

Three partners get together and form a business. They start meeting and discussing the business in April 2020, they start working on organizing the business, writing a business plan, researching customers and suppliers, etc in June 2020. In September 2020 they engage an attorney to create an operating agreement and form an LLC, which is registered with the state in November 2020. In November and December 2020 they interview and hire employees to start working in January. They "officially" begin operations in January 2021. For purposes of plan eligibility, what is the partners' date of hire? Under DOL regs it is typically the date an employee first performs an hour of service for the employer for which the employee is entitle to payment. The partners clearly started working on this in April of 2020, they clearly expect to earn a profit, but they didn't have a formal employer entity until November. A. April 2020 B. June 2020 C. November 2020 D. January 2021 E. Other________________________ Thanks.

Sorry about your dad's death. There are lots of ways to avoid probate in most states. There is the small estate exemption (amount varies by state). Or if all the property is in a living trust (or enough that the remainder is under the small estate exemption for the relevant state), or if most accounts have transfer on death designations or are held as JTWROS. A trust is typically needed to avoid probate on real property that it not held JTWROS. So the IRA could very well bollix things up and force a probate. I'd ask the custodian for a copy of the IRA document to verify the provision dealing with death and no designated beneficiary. If the estate is the default, then yeah, probate may be the only option. Bummer.

Corporate accounting must be lax to non-existent for this to occur for several years. The paying agent approach might be the best way to resolve it, or treating as contributions to the plan. Each has its pros and cons and implications for the corporate tax returns as well as correcting the plan. At a minimum, any correction that involves plan money going to the corp should involve ERISA counsel.

Who is this "we" you speak of? It's up to the plan trustee to value the plan assets. When I've had clients tell me something is worthless I ask them if they will give it to me. This usually demonstrates that there is some value. Client needs to assign a value, he or she may consult with the FA for help. Warrants that have expired are worthless and just a loss, but not expired presumably could have value depending on the price of the underlying stock.

A younger family member making a high percentage 401(k) deferral often blows up the average benefit percentage test.

That's how I read it.

What does the plan document say? Typically it will say the normal form of benefit for an unmarried participant is a life annuity. For married participants there will be QJSA options with the spouse (subsidized or not), maybe a lump sum, maybe installments, and RMD provisions. The participant cannot elect what the plan does not offer.

I agree also. No allocation required, but includible in testing even if < 500.