Blinky the 3-eyed Fish

No, you only run one valuation. How you split up the deduction is based on what is reasonable. Isn't there an actuary you can talk to at your firm?

You actually have more than 3 calculations. You need to determine the deduction for each entity and the deduction for both the husband and wife within the LLC and the partnership. From that you can calculate the net earned income for both the husband and wife from the LLC and partnership. Add this to the salary from s-corp and you have each's compensation. Of course this is a circular calculation so have a spreadsheet that will peform the iterations.

Because you are splitting the earnings into compensation, 1/2 SE taxes and the appropriate deduction for each entity, there is no way the CPA can decide how much to deduct from each entity. That is your job. But you are correct that you will combine the salary/net earned income from each entity, plan document nothwithstanding, since all adopted the plan. When you determine the deduction for each entity, you will be able to determine the NEI for the LLC and partnership. This is of course a circular calculation. Depending on the DB deduction, you very well could be over $200,000 in total compensation.

I am not sure what you mean when you ask if recharacterized catch up contributions are disregarded. Perhaps a little example will help. Initial testing HCE ADP 5.50% NHCE ADP 3.00% Result is that the plan fails, so eligible HCE deferrals are recharacterized as catch up contributions Testing after recharacterization HCE ADP 5.25% NHCE ADP 3.00% Now you calculate the QNEC according to the terms of the plan document to bring the NHCE ADP% up to 3.25%.

The SE income is what it is. For what purpose are you trying to calculate an "ideal salary"? Are you trying to tell him what earned income he needs to make the testing work?

Keeping track of the separate sources only on paper is perfectly fine. In fact if the PS dollars did not provide for pre-NRA in-service distributions, you wouldn't even need to track it on paper as long as you never wanted to provide in-service distributions or remove the J&S.

I think you could clearly avoid giving her the gateway by disaggregating otherwise excludable employees for testing of the nonelective contribution. I do think however, that she must receive the TH minimum if you are proposing an amendment to the plan to make her eligible.

A PBGC covered defined benefit plan is winding down. The participants are 2 parents and 5 children over age 21. The parents own the company. The plan is underfunded, so I have been asked to come up with a creative way to shift more dollars to the parents, something the children are willing to do. Right now the children are not considered owning any of the corporation because of the 1563 attribution rules used for PBGC purposes, so they cannot waive benefit as majority owners. I have come up with the idea that 2 of the children can be given options to purchase the half of the company each. That would make them majority owners too and they could waive benefits. But that is not good enough, so the search continues. Any thoughts, no matter how aggressive or ridiculous, that this could be done? It is not something I have to recommend, but rather just come up with as a possibility.

It made me laugh.

Andy, I am saying that the 80% drops to 50% for the parent-subsidiary relationship only, not for the brother-sister test. Do you disagree?

You are correct on the first issue and correct on the second that ADEA will preclude you from excluding the oldest workers as a class.

That DB excluded employee participates in only a DC plan of the employer, so their TH minimum is 3%. 4% was an old rule to be able to buy back the 415(e) fraction in a TH plan and is certainly not applicable any longer unless you have an archaic document that calls for it.

Nice old school reference, Quinn.

The 50% test is for parent-subsidiary relationships, which is not the case here.

I agree with Tom that the gateway is most likely required for both terminees if you must cross-test the plan to satisfy nondiscrimination. An age-weighted schedule by design should satisfy the gradual age or service schedule requirement to avoid gateway, but by having the safe harbor nonelective, you have people receiving contributions outside of the age-weighted design. Thus, with this set up, you will have this problem each year in which someone doesn't meet the allocation requirements. You know the old adage, two safe harbor provisions don't equal a safe harbor plan.

You are right. Feel free to call the comptroller and yell at him.

Another yup.

First, have you looked at whether or not the granting of past service in the benefit formula above 5 years is not discriminatory and if so, how did you come to that conclusion?

The answer lies in whether or not A and B are related employers, i.e. a controlled or affiliated service group. If not, then yes, the MD can get PS allocations from both plans. If they are related, then the plans are effectively treated as one for the 415 limitation.

Keep in mind that the IRS is interested in protecting participants, NHCE's in general, from plan administration errors. Without looking up anything, I can tell you that obtaining spousal consent now would be the way to go, as that would make everything all better, like mommy kissing a boo-boo. Making the loan taxable is out of leftfield as a solution and would only cause the participants harm and open up more potential problems.

I am glad I could help.

Are you two on the same page? Merlin, what are the allocation conditions in the plan? What are the allocation groups in the plan?

That type of question is what I was trying to answer for you. The answer being it is not clear what reasonable and uniform are defined to be for this purpose. So, maybe that scenario is reasonable and maybe not. Maybe a cross-tested DC plan allocation is reasonable, maybe not.

I recall there have been other discussions on this board relating to this topic. The definition of reasonable and uniform for this purpose is highly speculative. The fact that 2 shareholders do not receive PS contributions could possibly meet such criteria. But the future IRS auditor of your plan might feel differently.

What is the context of your question? Since it is under the DB header I will assume that it relates to those plans. Thus for plans subject to 412 (DB, MP, and TB), then you must meet that 412©(8) criteria or the amendment cannot be considered for funding. I wonder what the "other side of the argument" is and from whom it came. If there is another side, it is news to me. An amendment to satisfy other issues (ex: a 1.401(a)(4)-11(g) amendment) that is adopted past the 412©(8) deadline, but within the 9 1/2 month deadline, would not be considered for funding.