Mike Preston

I believe the 2 withdrawals would be a protected right.

Yes, for a 2017 test. Some may argue that it could be used for any year. I haven't looked at that issue in a long time so maybe somebody else has the time to look that up.

Yes, but re-read the following words: "as long as it otherwise satisfies the requirements of an -11(g) amendment."

Sure, as long as it otherwise satisfies the requirements of an -11(g) amendment.

Come back and let us know what happens, if anything.

There are certainly differences caused by the investment earnings associated with the repaid amounts (rather than the theoretical phantom interest associated with unrepaid amounts. Hence, it is possible that a plan that would otherwise be top-heavy (including all the phantom interest) would be not top-heavy (including the less than stellar real rate of return on the repaid amounts). But to say that might happen once in a blue moon seriously overstates the frequency.

...would *potentially* have a problem, yes?

None that I can think of. You got any?

You might, indeed. But you would lose.

Deep breath. While it may turn into an administrative hassle, you should not end up paying anything. If you get a notice asking for money just follow the instructions and return the form to the IRS asking them to abate the fines due to the fact that there was no requirement to file in the first place. It may take a few rounds to get everything sorted, and take a few months once the process starts.

19. §401(k) – Hardship Distributions A participant wants to know if the purchase of principal residence qualifies as a hardship if she is using the proceeds to 'buy out' the equity on her current home from her exspouse? Proposed response: Yes, because the dwelling is her principal residence and she is purchasing an interest in it that she didn’t own before. IRS response: The IRS agrees with the proposed answer. The participant is purchasing a part of her principal residence.

To the OP: there is no distributable event. To BG: Are you responding to a different post?

I have seen attorneys argue for a treatment of the transaction as a simultaneous emloyer contribution and loan to the employer. If somebody takes that position there is indeed a pt, with excise taxes.

I should also point out that I agree with Bill. A business that does not know its profits, or what it intends to do with that profit, by 12/15 has some very lazy accounting behind the scenes and is not likely a candidate for a qualified plan.

Not for deduction purposes.

There is precious little difference between a CB plan and a traditional plan in this case. Can the client establish a relationship between income and desired contribution? Such as 33% of net income before DB deduction is recognized? If so, the CB formula is trivial: 50% of plan compensation. The same thing can be accomplished with a traditional unit credit formula, with a specific percentage based on the age of the participant. Is there a minimum they are comfortable with? What about a max? Is the contribution pattern expected to shift? Anything can be designed for. If math isn't the designer's forte then a schedule can be prepared: e.g., if plan compensation is between $0 and $50,000, the amount necessary to satisfy 401(a)(26); if between $50,000 and $75,000, 50% of plan compensation; if between $75,000 and $150,000, $37,500 plus 150% of plan compensation in excess of $75,000, etc., etc. The exact same thing can be done in a CB plan as a traditional unit credit plan. Want to frontload contributions? Easy: establish a past service credit (can be done in either a CB plan or a traditional plan) and target the 404 max the first one or two years, then lower the formula to 2/3rds of ultimate goal to ensure contribution can be, if necessary, zero in years 3 and 4. It really is trivial.

But in this case we have a typo by the OP ($17,340 should have been $17,330) and each of us, in our own gentle way, is saying that the OP is getting correct information from the "benefits centre". We are all trying to give enough information to the OP so that he/she can feel more confident with the information being provided.

PBGC plans are not exempt from the ERISA bonding requirement. Who would even suggest such a thing? Citations are rarely superfluous. It would be like a asking for a citation that confirms if you follow all the rules in the IRC the plan is qualified.

Let us know if you are successful. I just finished a VCP filing for a very similar circumstance and the IRS insisted on deeming the loan. They gave the taxpayer "relief" in the form of having the taxpayer choose which year the loan would be deemed taxable in. Hope you get your re-amortization without a deem.

It depends on what language kicks in the fail safe.

If you want to see an excel implementation of an IRS example calculation, download the file below and use columns L and M to compare results. http://docs.wixstatic.com/ugd/fa3ca5_ec07f19859c940098c4be9cbdf18f0dd.xls?dn=Loan Maximum Calculator.xls

Sometimes? I'd settle for "most of the time".

You didn't read my first point thoroughly, huh?

You didn't read my first point thoroughly, huh? Look, I get it, your clients enjoy a constant relationship between total income and desired contribution. Mine don't. Income sometimes goes down (sometimes all the way to zero after consideration of the deductible DB contribution). And then there are years where exactly the opposite takes place. You like a static relationship between compensation and contribution. If that keeps your clients happy, more power to you.

I think the rationale is that Mr. X must secure Mr. Y's cooperation if he wants the plan. If he doesn't get that cooperation he can't adopt the plan. If he does so anyway the plan does not enjoy any tax benefits. Nothing unconstitutional, just bad tax returns (lots of them).