Blinky the 3-eyed Fish

No. Yes.

I agree with pax, except before contacting an attorney I would try contacting the PBGC to first confirm that no filing was made. If you find that to be the case, then call back a few days later and ask them an "anonymous" question as to what to do. Who knows how accomodating they will be? Of course, as pax mentions, you may have a document issue too.

The ease and administration of a nonqualified plan certainly is an advantage. The lack of a tax deduction though is a larger disadvantage, IMO. I fail to see how a nonqualified plan in a situation such as this with a single owner is beneficial. 401 Chaos, perhaps you could enlighten me as to why this is a desirable alternative.

Gregory's comments are right on. Without in-depth calculations for each person, there is no way they can make an informed choice, and even then you may have problems down the road. If the company budget allows, it sounds as if a floor-offset arrangement is in order. That way the participants get the best of both worlds.

What is the goal of this owner by having a separate plan? To increase the plan contributions for him? How is the current profit sharing contribution being allocated and is he receiving max DC dollars in that plan?

How is the DB PVAB typically calculated when attempting to put a value on the DB benefit when the plan does not offer lump sums? The couple is just attempting to ascertain the value of their estate at this time.

Are you sure the salaries are exactly $200,000 and not just limited to that due to 401(a)(17)?

How about this prior discussion? http://benefitslink.com/boards/index.php?s...t=0entry92008

I don't see it as an operational failure at all. The plan made a distribution that satisfied the MRD. It's just that the MRD got rolled over into the IRA. The problem is with the IRA now. I think all you need to do is contact the participant and the IRA Custodian and inform them that a portion of the rollover was ineligible to be rolled over. The 1099-R should reflect the taxable distribution and the rollover.

401(k) deferrals count in the avg. benefits test.

Does a chicken have lips?

I looked into 1-2 years ago. I can't remember the specific companies I tried, but most didn't know what I was talking about, though I was able to get one company to give a quote. Unfortunately, because this company considered it an unsecured bond, the rates were too high to purchase it. My inkling from the whole process was that this option wasn't very feasible.

Reasonable or some business purpose are not concerns, rather the issue relates to whether the benefits are definitely determinable (as pointed out by prior posts). The 2 are completely different topics.

If you don't want the PC to continue to be a plan sponsor, then yes, you need to amend the plan to remove them.

You never have to submit a demo 9. That would be your choice to have the IRS rule that the compensation is nondiscriminatory. Regarding the period to use, I would project the current year's data. Last year's was based on a safe harbor definition, so I don't see the point of using it as it doesn't represent the potentially discriminating new definition of compensation. Of course I could have just answered the appropriate questions with: No. Yes, it does make sense what you are asking.

MGB, thanks. That's twice you have provided the large plan perspective to my small plan world. LIBOR, what size plan is this?

Before answering, I wonder why you don't think it is permissible?

My understanding for the transition period 2003-2005 is that the account balance method is allowed but disallowed after that. I agree with the bitter political comment. An option I will give to clients is to take an in-service distribution and roll over the PVAB to an IRA. This of course won't be feasible where the HCE distribution restrictions apply.

SoCal, the super max he mentions is synonomous with the unfunded current liability deduction. Libor, to your questions (which I will preface by saying that this is so new I have never tried to apply it in a real world situation), first, 4972©(6) states that it applies if amounts aren't deductible solely due to 404(a)(7). This would not be the case here, where you are going over the DB deductible limit. Now 4972©(7), copied below, I read to say that you can disregard contributions not in excess of the ERISA FFL for excise tax purposes. You don't state what your FFL is, so I am not sure what additional amounts over the UCL can be contributed without triggering an excise tax. I am curious as to why anyone would want to do this. Keep in mind that the nondeductible could continue on for years, and it may very well be possible that the plan's situation could change and an excise tax could be required. (7) Defined Benefit Plan Exception.-- In determining the amount of nondeductible contributions for any taxable year, an employer may elect for such year not to take into account any contributions to a defined benefit plan except to the extent that such contributions exceed the full-funding limitation (as defined in section 412©(7), determined without regard to subparagraph (A)(i)(I) thereof). For purposes of this paragraph, the deductible limits under section 404(a)(7) shall first be applied to amounts contributed to defined contribution plans and then to amounts described in this paragraph. If an employer makes an election under this paragraph for a taxable year, paragraph (6) shall not apply to such employer for such taxable year.

The advice, "pray for no audit" could be applied to any situation a plan finds itself in. It's not advice I would formally give, however. Fcdeacy, I know Rev. Proc. 2003-44 has some discussion on missed MRD's, so you might want to thumb through it.

I agree. Although I have never seen such an arrangement where there are traditional DB benefits plus cash balance benefits under 1 plan. Odd indeed from my perspective.

I am not sure where you are referencing in the book, but I think I understand what you mean. I think a numerical example might help as applied to your situation. If the $9,000 remaining original loan was due to be paid off 12/31/06 and the $10,000 replacement loan was due to be paid off 12/31/08, then you can disregard the $9,000 as it applies to the loan limits if in the amortization schedule, the $9,000 was still paid off by 12/31/06, and then the remaining amount paid off by 12/31/08. In other words, there would be unequal repayments over the course of the loan. At least that's my understanding of the rules, albeit, a rudimentary understanding.

No comprende. What is this cash benefit option you speak of? Is it employee money or employer? If it's the latter, this is within a traditional DB plan?

By stating that the limits were exceeded, I am assuming you looked at the payoff dates, and the new loan term ends after the old loan. That being said and going on the basis that the limits were exceeded, I am not sure there is a way to legitimately correct the error and avoid $3,000 of the loan being a deemed distribution. I suppose you could ascertain that it was TPA error and "correct" the term, by shortening it to the original ending of the old loan, but I see that as merely a duck and cover maneuver without true merit.

How about posting some numerical examples? It's hard to follow your methodology in your description. I am not sure what you mean by this. You are right though that the 415 limit is applied to the participant not the beneficiary.