Blinky the 3-eyed Fish

The fact that only HCE's have accrued benefits has nothing to do with 401(a)(26), but for other reasons you may have a problem. Read 1.401(a)(26)-3©. Apparently, in this case you have 2/3 of the nonexcludables with meaningful benefits and that would pass the 40% criterion. Where you run into a problem is the last sentence of 1.401(a)(26)-3©(2). That sentence seems to fit your situation to a tee. Though, because it is a facts and circumstances determination, I am not sure how the IRS has interpreted this provision historically. You could have an automatic pass of 401(a)(26) if the plan is covered by the PBGC and is underfunded. So maybe that is your out.

Wouldn't this suggestion put in jeopardy the past deductions taken for contributions? Who made this suggestion and did he/she give a detailed reason why this approach is best? Personally, I have never heard of this recommendation. Give more details as to why this plan is so overfunded. Is the person at the dollar or compensation limit? What is the amount of the overfunding? Is the employer still an active company or a shell?

I saw your related post under the small business forum. Your understanding is the same as mine, that the PS contribution for the partner/sole proprietor does not reduce the SE tax. Though I have seen accountants that do take sole proprietor plan contribution deductions on the Sch C rather than the 1040, I believe them to be incorrect in doing so.

You don't provide enough information to answer either question. Keep in mind that the 20% withholding rule applies to eligible rollover distributions. You don't say how the in-service distribution will be taken though. If it's a hardship, then that is not eligible for rollover, but if it's a standard in-service distribution, then that would be. The 10% penalty is waived for certain scenarios too lenghty to list. While, it's probable that it would apply, you need to know the rules to make the determination. I recommend a good resource book like the ERISA Outline Book by Sal Tripodi. When you are the only one at your shop having to make these basic everyday determinations, this book is invaluable.

No. There have been many prior threads on this topic if you care to search for them.

One of the requirements for excluding those terminees with less than 500 hours is that they do not benefit under the plan being tested. In a safe harbor plan where the nonelective is being provided, this exclusion can't be used because all benefit. You are doing the coverage testing incorrectly. Tom won the race and has a more thorough post.

One issue you missed is the top 25 paid HCE restrictions that often come into play in all but larger plans, and it is in these plans where the 5% owners are generally employed. This will generally preclude this approach.

Pax, the determination that the plan is TH can often be made without running the test because it is so obviously TH, but you are correct that you do need to make that determination. Jquazza, that explanation is very plausible.

Jquazza, you didn't undertand at all what I meant by my comments. In no way was I saying that you can ignore the rule or that getting close enough is sufficient. I was saying that the testing is generally not impacted by the rule that you cannot impute permitted disparity on the SH nonelective. (Now note that, as is discussed in the topic, I am talking about a cross-tested plan, not testing on a contributions basis.) I don't have time to run through the math, so I will leave that to you. Just pick a few tests that have been run by you in the past and see the difference in the end result if you ignored the rule or if you didn't. That will give you the impact of the rule.

Pax, the definition stated would mean that some statutory non-keys (i.e. former keys) would not be considered non-keys according to the document. Again, according to the document, these people would not get a TH minimum contribution. That is the problem. It's not that some statutory keys are getting the TH minimum.

Actuaries stink like fish!

I wouldn't define the document's definition of a non-key employee as simplistic, but rather as incorrect for the point you mentioned. A non-key (former or not) is entitled to the TH minimum. You need to correct the document.

There is no absolute correct answer on this. The prior discussions will outline the different methodologies people can take. Personally though, I like to take the lump sum and convert it to a benefit (to age 65 in this case) based on the current plan's actuarial equivalents. That figure is the amount of the 415 dollar limit that has been "used up", and so the rest can be funded for.

Mathematically, you will find that this rule has very little impact on the testing.

There have been many prior discussions on this topic that may enhance my response if you wish to use the search feature. That being said, the answer to your question is #1. (Of course, I am assuming the prior plan is with the same company, or a related company, as the new plan.) Also, you say that the distribution was $3,000 per month payable at 65, but it is highly unusual in the small plan world for a participant to receive a delayed annuity form of distribution or any annuity for that matter. Are you sure he didn't receive a lump sum distribution? If so, then neither of your choices are correct.

You can project any version of any table based on any number of projection scales. The scales are designed to reflect the better mortality as time passes. See how I apply what I learn. Normally, I don't have to deal with this stuff.

I am not sure I understand fully. Did the distribution take place after the valuation date passed, but before the work could be done? If that is the case, then the plan does need to be made whole, but contacting the participant is the first option. I believe Rev. Proc. 2003-44 deals with such a situation. Now, if my scenario wasn't the case then I believe you have issues. Because there is no way a participant can be entitled to a distribution, but the distribution amount is not determinable at the time the distribution is taken.

Kirk, your philanthropy warms the cockles of my heart.

Nevermind, I opened up the old actuarial books and figured it out.

I need the purchase rates for ages 45, 46 & 47 for the 1971 Group Annuity Mortality Table Projected to 2000 (Male). Help please.

He is what? Under 21?

Unless Dave is under 21, then you are right that it is not a controlled group. Thus, your plan situation is feasible. However, the SIMPLE deferrals will count toward the 402(g) limit, so watch for that.

I agree with everything Pax said.

I misquoted my cite, it's Rev. Rul. 79-237, not Proc. That cite answers the "whys".

I need to calculate a PVAB for a fireman for an impending divorce. The plan doesn't offer lump sums, so I am curious if anyone has knowledge of a mortality table that exists for such a group. I understand their life expectancy to be much shorter than the general population, both because of the job risks, but also because of the impact of the job post-retirement.