Hojo

Took this from an old ACOPA presentation 2011 Greybook Q&A 7 •A company has a calendar taxable year and sponsors a pension plan with a calendar plan year. Which of the following combinations are acceptable for a contribution made during the 2010 §404 contribution grace period (January 1, 2011 to September 15, 2011)? –a) Deduct in 2010, reflect on 2010 SchedSB? –b) Deduct in 2010, reflect on 2011 SchedSB? –c) Deduct in 2011, reflect on 2010 SchedSB? –d) Deduct in 2011, reflect on 2011 SchedSB? 2011 Greybook Q&A 7 (cont) •RESPONSE •a), c), and d) are acceptable. IRC §404(a)(6) deems a contribution made after the last day of a taxable year to be made on the last day of a taxable year if the payment is made on account of such taxable year. A contribution is considered to be on account of the 2011 plan year when reported on the 2011 Schedule SB and thus cannot be deducted on the sponsor’s 2010 tax return Commentary We respectfully disagree that (b) is not acceptable •IRC 404(a)(6) and 76-28 do notrequire contribution to be on account of preceding planyear •They require it to be on account of preceding taxyear •As detailed above, there is plenty of authority (e.g. RR 77-82) providing that they can be different –e.g. as in (c) where on 2010 SB but 2011 tax return •If a contribution is within deductible limit for preceding year, and is made by due date of preceding year tax return, it should be deductible in preceding year irrespective of treatment for funding purposes

The plan says that they can be forced out, but not what I can do if they don't cash the check.

It's not quite that. Their balances are super small and we have a large number that have not cashed their checks. The Trust company wants to just open an IRA for each one. I guess since they are a force out that it's doable, but I didn't believe that it was. Maybe I'm mistaken.

I believe I know the answer to this, but a trust provider is telling me differently. In a PBGC plan termination we have a number of participants whose LS value is less than $500. Is it possible to open and IRA for those participants since they are considered force-outs? I thought the answer was no and you had to submit them through the missing participants program....am I wrong?

I've hit the runaway train scenario with traditional DB Sole-Props too often when income was huge and later fallen off the cliff.

If you are not yet the TPA then I don't think that Precept 10 would apply in this case. I'm not going to just provide information to another actuary because they ask for it unless either 1) they have a signed service with the other actuary, or 2) the client asks me to share the information directly (in which case I would simply send it to the client and they can share as they see fit).

Thank you Lou!

I know this has been asked before, but my search capabilities have failed me. Is there a definition of when a contribution can be credited? Must it be the date that the contribution has cleared the account or can it be the date that the contribution has left the control of the sponsor? In this case, the sponsor sent a check on 9/14, was received by the trustee on 9/15, but it did not clear until 9/18.

Yeah, i looked through 401(a)(4) and it troubles me, but at the same time, would this prevent him from ever having a plan? No prior comp will be considered, only W2 comp after the establishment of the plan. No prior service either. The facts and circumstances can show that it was not economically feasible to have a plan prior to the sale, whereas now it is. It doesn't feel great, but I'm having a hard time saying no.

I have a company that just went through an asset sale that included the former employees. As of 9/1 there is only the owner left as an employee and he has income coming into the employer for the next few years. Would there be an issue starting a new CB plan effective 10/1/2023 with a short plan year and only covering the owner? I feel like I'm missing something, but I'm not sure.

Peter, I think the main difference is in large plans vs small plans. Large CB plans, like BOA will act like more traditional Db plans and will have the same rules upon death that, unless there is a surviving spouse, there is no benefit after death. Almost every small CB plan is there as a tax deferral vehicle for the owner and will pay 100% of the benefit upon death. In my opinion, it's just a matter of what world you're working in.

Also remember that match doesn't count towards gateway.

Not to speak for Jakyasar, but that was exceedingly helpful Paul.

I would like to hear more about this. 1) How did the PBGC determine the existence of the plan? 2) How did the PBGC determine coverage?] I'm sure I have other questions, but it is fascinating to me that they would even bother.

I think the real question is do you want the right answer of how this is supposed to be handled.....or.......other?