Mike Preston

So, which of your clients do you volunteer to take on the IRS in this regard? I'm usually the first one to jump on board careful readings of Code, regs, etc. But not this time. I think it would be very, very close to malpractice to recommend your interpretation to a client. Remember: if a plan document has loan provisions which parrot the Code, intentionally exceeding the limits is not only a taxable event under 72(p), it is also a disqualifying event requiring EPCRS to cure. Too rich for my blood.

ESOP Guy, the quirk you are referring to is detailed in columns L and M of the spreadsheet I posted.

I'd say that citing the Code is fairly authoritative (although we have all seen cases where the IRS issues regulations that tries to override what the Code says). But I still don't buy it.

I think I might have been mixing up my fact patterns. I was thinking about the situation where the plan sponsor makes a contribution to the trust between the first day of the year and the date the plan's formula is amended. The reason I put a client through the tortured calculation is that there is this old TAM (that I forget the number and can't put my fingers on it at the moment (we are approaching 7/31, y'know!) that stood for the position that Bird and CuseFan put forth: if, no matter what happens between xx/xx/xx and EOY an individual has a right to share in a contribution, as of xx/xx/xx that individual has a protected right to share in the contribution). And in my case, you have a contribution having been made to a plan before the allocation formula is amended. I think a strong argument can be made that there is a protected right of some sort at the moment the contribution is made. But in the absence of a contribution being made before amendment, I would probably not object too much if the Plan Sponsor's ERISA counsel said to allocate everything with respect to the amended provisions. Unless, of course, I can find that TAM.

Try this link. Larry, OF COURSE, is correct. I don't know where the language being cited (as if it is authoritative) comes from. At the least, I would change "on the date" to "at the moment", if there is a repayment between "the day before the new loan is taken" and "at the moment". But what the OP is trying to justify seems far fetched to me. http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Loans#6 See attached spreadsheet which may clarify things. Loan Maximum Calculator.xls

I have been known to be a bit less restrictive. It gets complicated but as long as everybody gets at least as much as they would have gotten without the amendment, then recognizing an amendment works out fine. Obviously, some participants have to have a minimum of zero or else it is much ado about nothing.

Follow the SE.

I can't believe that Relius doesn't support accrued-to-date. Without permitted disparity isn't it as simple as taking a ratio of A/B where B = the annual testing benefit divided by compensation and A is the accrued to date benefit divided by average compensation and further divided by years benefitting? In other words, give me the results of the annual method and a simple spreadsheet can generate accrued-to-date testing with just a couple of inputs. Imputing permitted disparity is, I agree, a bit tougher.

Can't be remedied. Issue them ASAP. You can start crafting a mea culpa now, or wait until somebody or some thing turns on the heat.

Then you didn't go to the right sessions.

Yes, but 2 cents was clarifying point 2 from David's post.

What if it is a joint return, or there are two sources of income?

Nope.

Must be the 7/15 deadlines, but you are right. The 1/2 adjustment is not changed because a portion of the annual additions are employer contributions. Don't have time to re-do the calcs.

Sorry, should have been less cryptic. We don't know what form of distribution is being mandated (I assume it is a lump sum rollover). But it could be a taxable lump sum (taxable distribution). Actually, from what has been said it could be something else or exotic, like a 5 year installment distribution! I wasn't (at that time) talking about the pieces of paper that a plan might require in order to effect a distribution.

Sure, but I've never seen one where a household employee earned over the HCE threshold. Uncharted waters, there.

Household employee qualified plans have been around for years. The deductible limits don't change, but the ability to take a deduction is restricted. Hence, no 4972 that wouldn't otherwise apply. Don't have time to look up chapter and verse. If you need that maybe somebody else can provide.

You are confused because the steps you outline are illogical. Put some numbers in, you'll see what I mean.

Lou, one really needs to run the numbers. It matters. With a maximally effective allocation of employer profit sharing you will find that the maximum contribution does, in fact, exceed the pensionable income by a significant amount In my example, 100% of the pensionable income is deferred and the employer profit sharing is on top of that. The net result is that the total contribution is 120% of the pensionable income.

It is a bit complicated. If the $26,000 is all deferral then there is a problem because it still has to be a deferral so the max is really $20,000. However, if net income from self-employment is really $20,000 then the income from self-employment before reduction for the Self-employment Tax Adjustment is $21,520.37. Working the other way, if the employer contrbution is a little less than $3,400 ($3,373.05) the net Schedule C works out to be $16,865.25, so a deferral of $16,865.25 + employer contribution of $3,373.05 means that income from self-employment starts out $3,373.05 lower than $21,520.37: $18,147.32, but the total excluded from income is $20,238.30. YMMV

Yes, I should have used 2017 and 2018, not 2016 and 2017.

The nature of a PBGC termination is that the liabilities of a plan are assumed by them. Otherwise, they would have no incentive to audit.

Let's be clear, please. If there is a distribution in 2016 then the amount that can't be rolled from that distribution is the 2016 RMD. If there is a distribution in 2017 then the amount that can't be rolled from that distribution is the sum of (a) the 2016 RMD (reduced by the 2016 RMD satisfied by a distribution, if any, that took place in 2016); and, (b) the 2017 RMD.

Make sure to check the cash-out threshold in the document.

This is a PBGC issue. Direct all inquiries there.