Dougsbpc

It may or may not be bigger than a breadbox. Actually, we took over this plan along with their 401(k) plan. When we set up the CB plan on our system, we matched the prior valuation numbers, although when running 401(a)26 several participants were under 1/2% of pay and therefore less than 40% receiving meaningful benefits. We would like to propose increasing those benefits to just more than 1/2% of pay.

A small non-pbgc cash balance plan will terminate as of December 31, 2016. Can voluntary correction be part of the determination letter request? Thanks!

Have always used Qualified Joint and Survivor at current age as the normalization factor for the most valuable benefit when testing a traditional DB plan. We have used this even if testing with a DC plan that does not have QJSA as the normal form of benefit. If testing a Cash Balance plan I assume we need to use Lump sum available as the normalization factor for the most valuable benefit when testing correct? Thanks.

Small 401(k) plan provides vesting credit to the profit sharing account based on years of service. Each year of service is a year in which an employee worked at least 1,000 hours. For allocation purposes, there is no hours requirement. The document indicates that a participant will be 100% vested upon the later of attaining age 65 or 5 years of participation. The document does not define a year of participation. This plan has a participant who was 75 when she became eligible. She now terminated employment at age 83. She worked less than 500 hours in each of those years. Is she 0% vested or 100% vested in the profit sharing portion? Thanks.

Recently took over a profit sharing plan where the one owner participant died in 2014. He was 80 when he died so he had already been taking RMDs. His spouse is the sole beneficiary and she is almost exactly his age. The plan has about $6M of assets. In 2014 the participant already took his RMD by the time he died. It looks like his beneficiary (his spouse) was paid an RMD in 2015 based on the Uniform Lifetime table. Per the plan document, the 2015 (and now 2016) RMD should be based on the single life table. Since they were both the same age, it should have been the single life expectancy at age 81 for 2015 and 82 for 2016. I am not aware of any exception to using the single life table other than if she would have rolled over the death benefit to her own IRA back in late 2014. Then the 2015 RMD and beyond could be based on the uniform table. It looks like VCP for 2015 and a large RMD for 2016. Question: Can she now roll over the balance of her death benefit to an IRA and then be able to use uniform lifetime table for 2017 and beyond? Could she instead somehow roll over the balance of her death benefit inside the plan and be able to use the uniform lifetime table? The plan accepts rollovers from ineligible participants. Thanks!

Suppose we need to go to the average benefits percentage test to pass 410(b) if we include the folks hired after 12/31/2006 as includable but not benefitting. Does that change anything?

Have four 25% owners of a corporation. The corporation sponsors two 401(k) plans with no match that are cross-tested for profit sharing. Plan 1 covers all employees hired before 1/1/2007 and Plan 2 covers all employees hired after 12/31/2006. Plan 1 provides profit sharing from 5% to 15% of salary. Plan 2 provides profit sharing of 2% of salary to all eligibles. The 4 owners (and the only key employees) participate only in plan 1. No key employees participate in plan 2. Each plan meets the reasonable classification test of 410(b). Each plan passes the ratio percentage test of 410(b) considering only its own respective eligible employees. Each plan passes non-discrimination (401(a)4) and ADP test considering only its own respective eligible employees. Plan 1 would be top heavy by itself. Plan 2 would not be top heavy by itself but both plans together would be top heavy 67%. Question: My understanding is that if each plan can pass coverage and nondiscrimination on its own and only plan I has key employees, the top heavy minimum and gateway need not be provided in plan 2. Agree or Disagree? Thanks a million!

Have a 401(k) plan where the 100% business owner did a Roth conversion back in late 2011. He now has a Roth account and a traditional account under the plan. His required beginning date is 4/1/17 but he wants to take RMDs in 2016. My understanding is that: 1. We calculate the RMD separately for each account. 2. He can take each portion at different times during 2016 as long as the total of each is taken by December 31, 2016. 3. The 5 year requirement is waived for his Roth portion because that consists entirely of his conversion. Does anyone agree / disagree with the above? Thanks.

We have a prospective client that has 50% ownership in two entities. They do not have a controlled group but meet most of the criteria of being an affiliated service group. They are in the lending business. They basically attract investors and then make loans to businesses in a specific industry. The prospect has a lot of knowledge in that industry. Generally, a service organization is one in which capital is not a material income producing factor. In this case, capital is a material income producing factor. In every other respect, the entities resemble service organizations that together provide services. Would these be considered service organizations? Thanks.

We have a former client who sponsored a 401(k) plan for more than 12 years. They left us for an insurance company about 3 years ago. We received a letter firing us 3 years ago. The plan was always clean so its doubtful that anything is wrong with the plan. A former employee is suing the plan sponsor. As part of that, we received a subpoena for plan all plan records. All 12 years and all records. Question: For all the years we handled the plan, we provided the plan sponsor with excellent very detailed reports and plan documents. Can we bill the client for our time? It will involve a considerable amount of it when we are talking about 12 years of all records. That would be 5 years from when the employee became a participant and 7 years before she became a participant. That plaintiff's attorney mentioned that they already enclosed the $15 check payable to us and that will be all we get. We would not be looking to make money, just cover our costs.

Is anyone familiar with a self-directed cash balance plan? Are they even possible? I saw some old posts where this was discussed but nobody was familiar with the specifics. We have a group of physicians that would like to have a self-directed cash balance plan. Each physician would have their own brokerage account. Thanks.

Often, accrued-to-date works very well with a plan that has operated as comp-to-comp contribution allocation for years and then switches to a cross-tested plan. We had an accounting firm client that had 3 partners who were getting older and wanted to sock away as much as possible before retirement. They kept the same 8% annual contribution to everyone but the partners were able to have the maximum for a number of years. This was partially due to the fact that they had a comp-to-comp plan for many years along with using accrued to date.

Have a 1 participant traditional DB with approximately the following: Rollover account: $500k assets Funding Account: $950k assets PVAB $500k The one participant business owner is 68 and has participated 10 years. The AFTAP was not done timely so benefits are frozen. He would like to take an in-service distribution of $100k. We know he cannot do that with his pension benefit. Is there any chance he can take this from his rollover account inside the DB plan? Thanks.

We administer a 60 participant 401(k) plan where one of the owners of the plan sponsor never wants to see one dime of traditional money in his account. I explained to him that the profit sharing contribution must be traditional, but once deposited he can convert to Roth. In this case, the plan sponsor decides each year if they want to make a profit sharing contribution. If so, they contribute it March 15 for a December year end. For example, for the 12/31/15 valuation, we showed the $35,000 profit sharing contribution as traditional receivable. Then when contributed on March 15, 2016, we gave him a Roth conversion form. He signed the form March 16, 2016. We will provide him a 1099-R in January 2017 showing the conversion taxable for 2016. He now wants to get as close as possible to never having any traditional money in his account. He wants his 2017 profit sharing contribution funded to his directed account January 1, 2017 and convert it to Roth the first week of January. Meanwhile everyone else (referred to him as traditional losers), will need to wait for their allocation until March 15, 2018. Other than potential discrimination in operation for the timing of deposits, does anyone see a problem funding before year end and immediately converting to Roth? Thanks.

I don't believe a contribution to a pension plan can be in any form other than cash correct?

Have a small defined benefit plan and 401(k) plan covering only the owner. He started as a sole proprietor and adopted both plans as such effective 1/1/2014. Without any communication, he incorporated effective 1/1/2015. We just found out about it now. Would it be possible to have the corporation adopt both plans as a successor employer and plan sponsor effective for the 2015 year now in late February 2016? I wonder what happens as he would have no sole proprietor income in 2015 but has W-2 salary.

Have a plan sponsored by one employer with a September year end with a participating employer with a December year end. They are related employers. Plan assets are pooled. We have suggested they spin off and create two separate plans. They mentioned that it will be a disadvantage from a plan investment standpoint to do this. We are thinking they could have two plans and a combined trust. The document is silent on the subject. We have certainly seen combined trusts before but all had the same plan year. Does anyone see problems with having two plans sharing a combined trust with different year ends? Thanks.

I am not certain, but I think maybe the first year of a plan is considered the determination year for top heavy purposes. But believe catch-up contributions are not subject to top-heavy.

We have a client who has moved to this from the recordkeeper direct platform. I agree. I laughed when I read your comment about wondering if this was not ready for prime time as I was thinking the exact same thing. For the first two months I gave them the benefit of the doubt and just chalked it up to maybe just not being accustom to the system. When processing the first participant loan I ask their technical support person where their promissory note was. She responded by telling me that the promissory note is considered executed by the participant signing the check. No promissory note document? No. Then I thought, ok we are just way behind the curve somehow. They are driving the new Google driverless car and we are at the roadside next to our broken down 1970s model not even aware of what is possible. Then I received a copy of a promissory note from the plan sponsor that was produced by American Funds. At least receiving that was a relief. It was completely incorrect and did not follow how the American Funds data form was completed. We have run into a number of other problems. This is unfortunate because their Recordkeeper Direct is an excellent platform. Has anyone had a different experience?

An employer sponsors a 50 participant 401(k) plan. They recently leased an employee for the first time. She has now been working with them for 6 months and now the plan sponsor wants to hire her. Even if she would have stayed with the leasing organization, she worked 35 hours a week and after one year would be considered "substantially full time" and would have had to be included in the plan. The leasing organization does not maintain a plan of any kind. Would the 6 months of service with the leasing organization count toward hours for eligibility and vesting once they hire her as an employee? Thanks.

They do also live in a community property state.

Thanks all for the helpful responses. It turns out that she owns 1% of the stock of his corporation. Under the spouse exceptions of 1563, A indicates that the individual does not , at any time own directly any stock in such corporation. So it would appear they do not meet the exception and have a controlled group. This will work out fine in their scenario. Does anyone disagree?

Husband and wife each own 100% of their own companies. His company has 10 employees and hers has about 20. Since they are married each is deemed to own 100% of the others stock. So we have a controlled group. If each sponsors its own cross-tested 401(k) plan, I would think both plans must be aggregated for the following: 401(a)4 410(b) ADP / ACP tests If any of the above do not require aggregation can they be permissively aggregated? In this case, 401(a)4 and the ADP test will be helped by aggregation. Thanks.

Is it possible for a participant to take a new loan 8 months after he defaulted on a previous loan? Suppose he had a vested balance of $80,000, took a $10,000 loan and promptly defaulted. The $10,000 loan is deemed and he receives a 1099-R. But suppose he then repays the loan. My understanding is the repaid loan becomes basis and then he can take a new loan. I think the requirement is that the loan on the books must be repaid before the participant qualifies for a new loan? Agree? Disagree? Thanks.

Have a covered DB plan that will terminate with insufficient assets. The plan sponsor has two 50% shareholders (both deemed majority owners) who will forgo a portion of their accrued benefits rather than fund the difference to have a standard termination. Since the two owners are Key and HCEs, does it matter that they do not want to reduce their benefits proportionately? For example, is there any problem with shareholder A absorbing almost all of the shortfall and shareholder B absorbing almost none of the shortfall. Both shareholders are ok with this. Is a disproportionate reduction possible? What about a non-covered DB plan with insufficient assets that only has 10 key employee participants. Must there be an ERISA 4044 allocation? I would think any allocation would be fine as any allocation would be nondiscriminatory. Does anyone agree or disagree? Thanks.