Blinky the 3-eyed Fish

Note that it says, "...as of the beginning of the plan year to which the amendment applies". Who says the amendment has to apply to the first year it is being made retroactive. Possibly splitting hairs here. I do see your point. Yep. Yep again, but to make it 412©(8) compliant the overall amendment is effective to the first day of the plan year, but the provison freezing the plan is effective prospectively, or you could provide grandfathered benefits and have the freeze retroactive. 412©(8) is not an option but certainly there are other potential options like changing funding methods, actuarial assumptions or asset valuation methods.

Not laughing at you or anyone here, just the concept. Go Suns!

Bring those fake open-eye glasses for when you fall asleep.

First, I agree with pax. Next, it sounds as if your plan is being frozen by the 412©(8) amendment. (Otherwise what's the point of your questions, right?) So, in © it clearly says if you reduce the AB for funding at the time of adoption you need to file a notice with the Secretary. To even consider the notice there better be a substainal business hardship and funding waivers aren't of help. Not sure how you can read it any other way.

This statement makes it sound as if the definition of compensation in the plan is whatever definition is used for ADP/ACP testing. However, your other comments make it sound like the ADP/ACP testing uses the plan definition of compensation. I think you mean the latter, so I will go with that. Since you say the plan passes the compensation ratio test, your definition of compensation obviously satisfies a definition of 414(s) compensation. If your plan document is defining the specific compensation to use for the ADP/ACP tests, I don't see how you can ignore that without violating its terms. So yes, I think you do need an amendment and a call to see why such a crappy restrictive provision was put in the document in the first place.

We haven't loaded up the 2005 edition yet, so can't right now. Your summary though in your next to last post of what the EOB says agrees with what I was saying though, so I am not sure what my mind will change to.

Of course your current definition of pay does not satisfy 414(s) as a safe harbor and must be tested each year as well.

Did anyone hear about the recent judgment that deemed all profit sharing plans with guaranteed allocations each year discriminatory? Oh wait, that's a cash balance plan; nevermind. Every time I see talk that cash balance plans themselves, not conversions to cash balance plans, are age discriminatory, I laugh and laugh at the absurdity, the absolute utter absurdity. But this discussion has been hashed and re-hashed, so let's all wait and see what happens.

I didn't read your cite, and it may address this, but the catch-ups are determined last, after all is said and done. Some catch-ups are obvious that they are catch-ups at the time they are made, i.e. over the 402(g) limit, but others are not, like your situation. Keep in mind this scenario will most likely repeat itself and so you should proceed to figuratively shoot the person who designed this plan and then consider amending it.

You are correct that it's not a 415 violation. However, your problem is the client deferred salary that didn't exist. You can't defer $16,000 if you only have $14,000 in compensation. I realize it's not as black and white as with W-2 compensation, but the same principal applies.

Giovanni, why would you think it's okay? The plan you describe doesn't match catch-ups and you just matched a catch-up. Your situation is one of the reasons it is much harder to administer a plan that doesn't match catch-ups.

You are right about the date. It's the term date, not BOY. I should add I was referring to the assumptions at the BOY. That wasn't clear. My answer would not change if PBGC covered because I consider it a valuation determination, not a distribution determination.

That's what it sounds like, but you have the document so you are the best to judge. One thing to keep in mind though is that you have a potential nondiscrimination issue because 414(s) compensation considers compensation from all related entities.

Being it's a valuation, I would not factor in 417(e) rates into the equation to determine the present value figure, but rather would base the liabilities as determined under valuation assumptions at the BOY. This is my opinion and I haven't heard any other opinions stated on the topic, so take it for what it's worth. But I base my opinion on two things. First, above in 4.02(2), the present value term is used in this section as well, which clearly is based on valuation assumptions. Second, it is very possible for the stability period used to determine the 417(e) rate to have passed by the time the distributions are paid. It would not make sense to factor in 417(e) rates that very well may not be used in the ultimate distribution calculations.

As discussed in the link in Wmyer's post and as mentioned in the first response to your post by WDIK, the 415© limitation is an annual addition limitation. Catch-up contributions by definition are not annual additions and that is why they, when coupled with true annual additions, can exceed 100% of pay and exceed $42,000 in 2005. So in short, yes, your thinking is incorrect. As for the accounting questions before, I defer to a CPA post- 4/15.

The status is the same as on the valuation date, i.e. terminated in your case.

But they did have current liability at 1/1/04. Here is an example: Person hired 3/1/03, plan has a 1 YOS wait, so he enters 7/1/04. If the benefit is based on service and he had a YOS in 2003, well he has a CL as of 1/1/2004. You are getting hung up on the fact that they weren't participants as of 1/1/2004. The instructions are clear this is immaterial as you are deriving the counts as of the valuation date and correspondingly, you are determining the CL as of the BOY for those participants as of the valuation date.

Is the benefit formula based on service instead of participation, so that a person has a current liability upon entering the plan? The point of the instructions is that you counts are going to be those in the valuation, including those that entered during the year.

Fully-funded and at the full funding limit are not the same thing. Not enough information still, so just read the cite and you decide. This post is dragging on tooooo long.

I think the accountants are all busy this time of year. I can say though that my understanding is that an S-corp can deduct more than the W-2 paid.

I still don't understand entirely your point even if your post is just in response to Wmyers' post. You said that there is a loss of $3k in retirement benefits. Where do you get this figure? You see if there were no pass-through income and all was paid as W-2 wages, there is a $5k employer contribution, which creates a $5k loss. If there was sufficient pass-through income, then the entire $5k is utilized that year. It's only if there was $2k in pass-through income before the contribution where the $5k employer contribution would cause a $3k loss that matches your figure. So you see why I don't understand the $3k figure? Anyway, even if a loss was created, and I am no accountant for sure, couldn't this loss offset other individual income and be a benefit?

Mbozek, I don't understand your analysis. With an S-corp there still is the pass-through income to the owner that must be considered for individual taxes. The deferrals will lower the W-2 taxable income and the employer contribution will lower the pass-through amount. There is no loss of $3K in deductible benefits. I think you will find that most sole owners of an S-corp aren't in business too long and certainly don't have a retirement plan if they are only making $20K.

As stated in that promulgation, DC plans do need to be amended. I believe the amendments had to be done by 12/31/03. Now along came Notice 2003-2 and Rev. Proc. 2003-10 which delayed the requirement for DB plans only. Sorry, didn't read the question better.

They had it to the day at the LA Benefits Conference. I thought it was in March sometime, so he might be gone already.

:angry: Schultz is leaving the IRS soon and is just making waves before he goes. (Hey, there's a limit to the number of little dudes you can include in a message. I was going for the record.)