Rball4

This is my take. I look only at the annuities, not the lump sums. The prior plan's 415 limit is grandfathered. Take the grandfathered 415 limit and subtract the prior plan's annuity. So under the new plan, this participant would only be able to accrue a $50 monthly annuity. Note, the participant is still considered benefiting for 401(a)(26) purposes even though the benefit is limited by the 415 limit.

Premium payments are counted as contributions on the SB.

No balance in this case, but thank you for that note.

Thank you, Lou. I knew I missed a step.

One person DB plan terminates in 2013. Owner takes RMD prior to the rollover to an IRA. Is RMD also required for IRA in year of rollover? This seems like a double-hit.

Original question mentioned 10% for plan participation years. So I was thinking of the 415 dollar limit, which only looks at participation years of service. But if the owner is not at the 401(a)(17) cap and formula is based on all years of service, then I can see 15%.

Anytime a participant is distributed money from the plan (excluding a loan), a 1099 needs to be issued.

There is nothing that prohibits naming names in the plan document, but I try to avoid it whenever possible. Since this is just for an owner though, then it should not be a big deal to include the name in the doc. Also, how do you waive participation? You just amend the plan to freeze participation or to exclude this owner.

Why amend HCE1 to 15%? That is higher than the 415 accrual, so the benefit will be limited anyway by 415.

Excise tax is due for each year there is an funding deficiency. There is no way to pay it off over several years without paying excise taxes each year. I would recommend terminating the DB Plan (have owners waive benefits as needed), then start up a 401(k) profit sharing plan. Contributions shift from mandatory to discretionary, so no more excise tax issues.

5500's will show funding deficiency, so excise taxes are due even if the plan terminates. I don't think there is any way around that. Also, you may have a PBGC reportable event.

I have seen this for DB plan terminations where a DC plan is being established (for one person plan who no longer needs high deductions). The custodian reclassifies the assets, but the money never actually moves anywhere.

level of gateway needed also depends on max HCE's benefit.

Does plan allow for retro payments? You may consider using the interest rate defined in the actuarial equivalence definition in the plan document.

Years for TH minimum benefit are top heavy plan participation years. 2006-2010 TH was satisfied by the DC plan. 2011-2012 was frozen. So I would agree that 2013 would be the only year a TH minimum would need to be calculated for. I believe minimum vesting would apply for all years. Note, plan doc may need to be restated or amended for TH provisions since now TH applies to DB plan rather than DC.

It would not matter. 415 has to do with the individual, no matter how you classify them (i.e. sole prop, s-corp, etc).

Certainly, but if they are not a professional service employer, are they still exempt from PBGC premiums?

What if it was just husband and wife where the wife owned 100% and the husband owned 0%? PBGC plan?

So constructive ownership does not apply here?

If a DB plan is close to failing testing and you get the "what happens if we fail" question from a client, you can generally say that the IRS can disqualify the plan and the contributions will no longer be deductible. That usually gets them to comply. But what if the client is a not-for-profit? If the plan is disqualified, what are the implications? Is it just possible benefit restrictions, which the client may not care about? Has anyone run into this kind of situation?

In the example the person is only 35 and not early retirement eligible, so they are not entitled to the subsidy. Straight forward age 65 deferred lump sum calc only.

Using min of 7.52% and asset return assumption from FASB calculations.

Caution, don't set the CB% too low or else you will fail 401(a)(26). Those benefitting need to have accrual rates (not CB%) greater than or equal to 0.5%.

Liquidity Shortfall?

New to insurance in DB plans, are premium payments counted as contributions on the SB, meaning that they count towards the minimum required contribution?