Dougsbpc

A traditional DB plan has a special 415(b) provision that limits it to the pre-EGTRRA $140k. Would amending this be considered discriminatory? No participant was ever affected by this lower limit. The owner of the business reached NRA 65 and accrued his full benefit two years ago. His benefit has been adjusted for post-NRA increases. This year, his adjustment will be affected by the lower limit. In this case, increasing the 415 limit will only serve to allow him his age 65 accrued benefit equivalent. Would amending the 415 limit be considered discriminatory? Also, they would like to amend actuarial equivalent interest rates from 6.5% pre and post to 5.5% pre and post. I know this is a 411(d)6 protected benefit, but in this case all current participants will have higher lump sums not lower. The participants who received lump sums in the past all received lump sums that were based on 417(e) rates that were lower that what the new 5.5% actuarial equivalent rates. Would this change be considered discriminatory? Thanks.

A covered defined benefit plan was frozen in 2005. The plan is now failing the prior benefit structure test of 401(a)26 with current participants. The plan does not have sufficient assets to pay benefits given 417(e) rates. An exception applies for an under-funded plan. This exception is all about not forcing a plan with insufficient assets to terminate just to comply with 401(a)26. Problem is this exception only applies if the schedule SB indicates the plan does not have sufficient assets to pay benefits. The MAP-21 rates indicate this plan is just over 100% funded although in reality it is about 82% funded when applying the 417(e) rates. It seems that with most issues in life you get at least a random 50/50 chance of a positive outcome. With DB plans, you have an 85% chance of the worst possible outcome even with the greatest of care. Apparently, we can go back before the plan was frozen and add former participants to prove the prior benefit structure meets the 40% threshold. So I guess we can go back to 1988 and add former participants. This should work as all participants accrued at least 2% of pay before the plan was frozen. Anyone see a problem with this? Thanks.

Supposedly, a plan or plans that fail the general test can provide contributions or benefits to current participants or provide contributions or benefits to those who are not yet eligible as long as the contribution or benefit has substance. I have always been a little uneasy about the order of this. For example, suppose you are testing a DB and PSP and the PSP has a last day requirement and a current NHCE participant terminates employment 4 days before the plan year end and the plans fail 401(a)4. However, the employer has 4 new employees who have yet to meet the eligibility requirements. If the youngest of the 4 is brought in and given a 10% of salary contribution, the plans easily pass. With the few of these we have done, we always had some criteria such as the ineligible employee with the most / least hours is chosen, or all those hired before a certain date. Is it possible to simply cherry pick? Any comments / agreements / disagreements on this?

Small 401(k) Plan is sponsored by an LLP and has 7 participants. One of the 7 terminated October 2013 but has not returned his benefit elections until now. The employer informed us today that they are being acquired by another firm who does not have a plan and does not want a plan. This will be an asset purchase so the LLP will remain. The two partners will remain but the 4 employees will terminate employment with the LLP. So clearly the 4 employees will be 100% vested as this would be considered a partial plan termination. What about the one employee who terminated in October 2013 long before this happened? Would he need to be made 100% vested even if the plan will be on-going and will not terminate until next year? Thanks

A company maintains a calendar year SH 401(k) with 3% Nonelective safe harbor contribution. They just informed us today that their firm will be acquired tomorrow (always nice to be informed at the last minute). If they terminate the plan now, our understanding is as follows: 1. They do not need to provide advance notice. 2. They need to provide the 3% SH contribution based on compensation through the termination date. 3. Participants do not need to be given the opportunity to change salary deferrals. Questions: 1. Are they required to pass the ADP test from 1/1/14 through the date of termination? 2. Since the firm that is acquiring them also sponsors a 401(k) plan, would there be any problem with distributing salary deferrals (the one year rule)? Thanks.

We have a client who has a small defined benefit plan and 401(k) plan. Only he and his wife are participants. He wants to invest in Austrailian real estate. Can this be done? Thanks.

A sole proprietor does business from 1/1/2007 to 12/31/2010. He then forms a corporation on 1/1/11 and also hires an employee on that date. On 1/1/2013 the corporation adopts a SEP that requires 3 years to be eligible. Can the business owner be eligible for the SEP by counting years with his sole proprietorship? Thanks.

Have a very unusual scenario. A prospective sole proprietor client sponsors a traditional DB plan with 3 participants. His girlfriend is also a sole proprietor (in the same field) and sponsors her own traditional DB plan. Believe it or not, they just got married and she now merged her business with his. Apparently, when they met some years ago they each set up a prototype DB plan at a fund company. Is it possible to merge the traditional DB plans?

We have a 401(k) plan client that had been a 9/30 C-corporation. In late February they filed to be an S-corporation. As such, their accountant is filing a tax return for the period 10/1/2013 - 12/31/2013. Their 401(k) plan currently has a 9/30 year end. Question: can the plan be amended now (April 8, 2014) to change to a short plan year for the period 10/1/13-12/31/13 or must the amendment be prospective? Thanks

Suppose you have a safe harbor 401(k) plan with a safe harbor match. This year the employer wants to also make a profit sharing contribution. Each participant is considered their own group. Also the plan has no hours or last day requirement for a profit sharing allocation. An employee terminates 9 months into the year. Can he receive a $0 profit sharing allocation or must he get the gateway because he was entitled to the safe harbor match? Thanks.

For what it is worth, we just had an IRS audit of a floor offset DB plan and everything was fine. In this case, 7.5% of salary profit sharing was allocated to all but one participant in their 401(k) plan every year. The one participant who usually received a 15% allocation was excluded from the DB plan. In addition, the DB plan document had special language indicating that the defined contribution plan offset is the actuarial equivalent benefit resulting from employer allocations of a uniform 6% of annual salary and accumulated earnings for those eligible employees who participate in the Defined Benefit Pension Plan. I would be curious to hear what others think about carving a 6% of salary contribution offset from the 7.5% contribution allocation.

It appears there is no special treatment for RMD's from Roth accounts. So for example, if a participant has reached their RBD and they have $10,000 in a Roth salary deferral account and $5,000 in a traditional match account, the entire $15,000 is used when determining the RMD. Suppose the RMD is $600. Can they choose to: 1. Take it all from Roth? 2. Take all of it from Traditional? 3. Take some of it from Roth and some of it from Traditional? Thanks.

Thanks for the clarification. What about a plan that used the full yield curve prior to 2012? Was there a special election that had to be signed by July 5, 2013 to revoke use of the full yield curve effective for 2012 and future years? What if the interim amendment was signed prior to July 5, 2013?

A plan document interim amendment was signed 12/31/2012. As part of this good-faith interim amendment, the plan was amended effective for plan years beginning in 2012 to incorporate MAP-21 provisions and rates. As part of the amendment, a plan sponsor could elect to delay MAP-21 to plan years beginning in 2013 or to apply the MAP-21 provisions just for the AFTAP. Question: must there be a written election to the plan actuary to use the MAP-21 rates? Or does the signed amendment incorporating those rates suffice? Thanks.

Not a minimum participation issue if at least 40% benefit at least .5% per year prior to the offset. The additional requirement is that the DC plan provide uniform allocations for those who have their benefits offset in the DB plan.

Suppose a traditional DB plan provides nhces a benefit of .5% of average salary. The employer also sponsors a 401(k) plan. Could the 401(k) plan provide nhces with a 6.5% mandatory employer contribution in the 401(k) plan and meet the minimum gateway? It seems that a DB benefit is generally worth more than twice a DC contribution. The logic being a 5% top heavy minimum in a DC plan is equivalent to a 2% top heavy minimum benefit in a DB plan. Thanks

We have a potential takeover of a safe harbor 401(k) plan and a cash balance plan. The safe harbor 401(k) plan has a safe harbor match. For 2012, it appears they used the safe harbor match and profit sharing contribution to satisfy the minimum gateway. We don't believe the the safe harbor match can be used for gateway purposes. Does anyone agree or disagree? Thanks.

This is a single employer plan and there is an afiliated service group. The document appears to require the aggregation of compensation from related employers. The definition of Total Compensation for self-employed participants is earned income net of the adjustments for contributions and 1/2 SE tax. I am just not sure whether this would include losses. In other words should it be $100,000 combined with $0 = $100,000 or $100,000 -$80,000 = $10,000.

Suppose you have a calendar year 401(k) plan sponsored by a Corporation. Also an LLC adopted the plan as a participating employer. Ellen, the 100% shareholder of the corporation also has a 45% interest in the LLC. Her compensation was as follows: 1. Corporation W-2 = $100,000 2. LLC K-1 self employment income (adjusted for contribs 1/2 SE tax etc) = -$90,000 Question: Must the $100,000 be aggregated with -$90,000 for contribution allocation purposes? Or does the the corporation fund its contribution based on $100,000 of salary and the LLC fund its contribution based on $0? Thanks a million.

We are a TPA for qualified plans but sometimes get requests for nonqualified plans. Thanks.

A 1 participant DB is sponsored by a sole proprietor. We have always suggested he incorporate. In 2011 he had $0 net profit. He thought 2012 was going to be a good year so he contributed $50,000 mid year without ever consulting us. It turns out he had $0 net profit for 2012 (plenty of revenue but plenty of expenses). With his MAP-21 election his minimum would have been $0. I don't believe he can remove the contribution based on it being non-deductible. Does anyone agree or disagree? Thanks.

A Form 5500-SF was filed for a 1 participant plan for 2010 and 2011. The 1 participant is the 100% owner of the corporation that sponsors the plan. The plan has always had less than $75,000 of assets. They should be eligible to file a 5500-EZ. The question is, would they be able to file no return since they are 5500-EZ eligible but have assets less than $250,000? In other words, are they eligible to not file given they already electronically filed in the past? Thanks.

A floor-offset defined benefit plan will be terminated with excess assets. The plan is covered by PBGC so priority categories 1-6 must be followed. The allocation of excess will pass 401(a)4 on its own. Question: Must the excess allocation be provided before offset or after offset? For example, suppose a participant has PVAB of $10,000 prior to offset and an offset of $15,000 resulting in $0. Now he receives an excess allocation equal to $1,000. Is his distribution: A. $10,000 + $1,000 - $15,000 = $0 or B. $10,000 - $15,000 = $0, + $1,000 = $1,000 Thanks.

We are a plan administrator and have an outside actuary certify all the schedule SBs. Sometimes clients are quite eager to file right away. However, the actuary is often swamped between 8/1 and 10/15 (understandably). This because often many of the small clients fund late in the year. It seems like as long as the actuary delivers the certified SB by 10/15 (the filing deadline) per the 5500-EZ instructions, the SB would be considered retained with plan records. In any event, really appreciate the responses on this issue that may not have a clear answer.

For a one participant Defined Benefit Plan: The 5500-EZ instructions indicate that the schedule SB should not be filed but instead it must be retained with plan records. The instructions also indicate that the enrolled actuary must deliver the certified schedule SB to the filer no later than the filing deadline. It appears there is no requirement to actually wait for the schedule SB before filing. For example, if a client is on extension until 10/15/13 but files the 5500-EZ on 8/7/13, is that a problem if the SB is not signed until 10/14/13? Thank.