Blinky the 3-eyed Fish

There is a chance that a blob-like creature will invade our world and make us his slaves, so why not this? In other words, there is a chance anything can happen. I am flapping my arms right now in hopes that I will fly away to a more peaceful existence.

I have a situation where a plan covered by the PBGC is terminating. All along the two 50% owners have deposited their "share" of the contribution each year into an account that they direct as trustees separately. Upon termination the assets of the plan will be less than the benefit liabilities, so the two majority owners will waive benefits. My question is would it be permissible to have them agree to waive benefits so that each owner ends up with the value in his respective account?

I have a situation where a client contributed more than the amount deductible last year and deducted that contribution on the tax return. My question is for 404 purposes is the excess considered a nondeductible contribution for the next year? When I think of a nondeductible contribution, I think of a contribution that is in the trust but not yet deducted. In this case the contribution is in the trust and is deducted, although it should not have been. I think the answer is that the tax return should be amended, or as the actuary I should assume it will be amended, to revise the deduction, and that I should indeed treat the excess as a nondeductble. Any thoughts?

Try here at the IRS website and scroll down to the determination letter program header. I didn't go through it personally though. http://www.irs.gov/retirementplans/display...%3D6934,00.html

Okaleydokaley A number 1 shazaam!

Timeout, 415 compensation is not influenced by the definition for deferral purposes. In other words 415 comp is 415 comp - gross compensation.

Mwyatt, two things: one, I have yet to see a volume submitter plan reference the 415 limits; two, the recognition of the 415 limit is a component of the funding method. While I have seen beginning of the year valuations recognize the end of the year 415 limit, I have seen more often, and agree with, the use of the 415 limit in effect on the valuation date. To me it coincides with the notion that the actuary has no knowledge past the valuation date (with minor exceptions).

Dan, although it is a component of the funding method, generally, for an end of the year valuation the actuary would recognize the dollar limit in effect on that date. In this case, where there is the change in the dollar limit due to EGTRRA, there is another wrinkle. While the EGTRRA increase in the dollar limit is in effect for plan years ending in 2002, the plan document either - references the 415 limit and automatically increases or it does not reference the 415 limit and would require an amendment to increase the 415 limit. The same principal applies to the 401(a)(17) limits. In your case you cannot recognize the EGTRRA increase unless your document says so already because you are already past the 2 1/2 months after the plan year end and too late to do an amendment. So, in summary, it's what MGB said.

A loan used to acquire a prinicpal residence may be repaid over any reasonable period.

You are correct that a SIMPLE IRA is not considered a successor plan and will not cause any problems with the allowance of the distributions.

J2D2, I believe you are correct. We had a similar situation where we had to go ahead and file the 5500 without the accountant's report, only to follow up later with an amended 5500 that included the missing report. I have yet to hear from the DOL with any problems.

What funding method are you using?

Jaemmons, for a money purchase plan the funding amount is the deductible amount (not considering any other plans that may factor into the deductions) (404(a)(1)(A)). For example, if the contribution formula is 10% of compensation, you cannot contribute and deduct 15% of compensation.

Pax, there are 4 total nonexcludables. The 2 in the DB satisfies 401(a)(26).

An employer has an existing calendar year profit sharing plan and wants to implement a defined benefit plan in 2002. The plans would be tested together for nondiscrimination and coverage. The only participants in the DB plan would be the 2 owners. The other 2 participants would benefit in the PS plan. My question is: because the two owners are currently participants in the profit sharing plan, would the 404(a)(7) limits have to come into play in 2002 or would an amendment to the PS plan at this time eliminating their participation be allowable to have the 404(a)(7) limits not be considered? I would think they were stuck except for the fact that the employer could always implement another PS plan and achieve the same results.

I was curious how some out there would handle this situation. Plan is 8 years old and terminating and assets are less than plan liabilities. Ownership of the corporation is: Owner A - 45% Owner B - 45% Owner C - 10% The owners desire to waive benefits in proportion to their present value of accrued benefits after the other participants are paid in full. The plan is not covered by the PBGC. The document specifies that in such a situation, each person's share of the assets in based on the PBGC guaranteed benefit calculation. Therefore, without even doing the calculation, I know that only owner A and owner B will get reduced benefits because owner c is not a substantial owner and will not be subject to the 30-year phase-in. Does anyone think a plan amendment changing the document language would be allowed if the result reduced owner c's distribution? Any other way to have what the client wants achieved? In other words how far can HCE's go to waive benefits?

What the accountant is referencing is the safe harbor plan under 414(n)(5)(B). Briefly, if the leased employees have a 10% money purchase plan with 100% vesting an immediate participation, they can be excluded as employees as far as the employer's plan is concerned. However, it only applies if no more than 20% of the nonhighly compensated workforce is leased. So, indeed the answer is "no", but now you have some background.

I agree.

Judy, in the example posed Employee A receives 6,000 as a safe harbor nonelective contribution and 23,000 as an additional nonelective contribution. There is no match in the example.

An additional note on the ASPA answer, "otherwise excludable" employees that are disaggregated for testing will not need to receive the minimum gateway if that component plan is not cross-tested. This is an example of when a participant can benefit but not need to receive the minimum gateway allocation.

IAWKJ on this one. And I too have been sleeping easily knowing I have given this advice to clients. Except that one night when my dog was barking. I just couldn't get back to sleep so I ......

OK, that was funny, Kirk.

Jpod, you CAN'T not count past service with the company sponsoring the plan. Also, notice I said there would be no reason to set up a plan without BOTH participants and assets. The situation you describe does not meet that criteria.

I think this discussion is moot. The original question was posed because of a misapplication of how the eligibility would work. Who would set up a plan in a year in which there would be no participants or assets? It's like throwing away money to administer something that serves no purpose. If there was ever a situation where someone implemented a plan with no participants or assets, their TPA or whomever facilitated the plan document should be shot.

Moe, I think you have it backwards. Years of service for vesting may be excluded prior to the effective date of the plan assuming there is no predecessor plan. Years of service for eligibility CANNOT be excluded prior to the effective date of the plan. See 410(a)(5)(A) or ERISA 202(B)(1). (I edited the above to correct an incorrect cite.)