Cloudy

Thanks.

It’s an S-Corp, I know that’s relevant. Husband and wife 50/50 owners. I think that the child is considered a substantial owner until age 26. Therefore not currently PBGC covered because it is an owner-only plan. Agree?

CB plan covers only husband, wife, 22 year old daughter. Is this plan covered by the PBGC?

All very helpful, thank you!

Thanks. Any BRF issues?

Cash balance plan currently has immediate 100% vesting. Plan sponsor would like to change to 3 year cliff vesting effective for those hired 1/1/23 and later. Eligibility is 21 & 1, and entry is 1/1 & 7/1. What are the considerations in terms of whether or not this works?

For accrued-to-date, my understanding is that if someone is not accruing/benefiting in the current year then accrued-to-date does not change that fact. Thanks.

Question 1: One person CB plan. CB pay credit formula is a percent of compensation using only compensation greater than $150,000. If compensation is less than $150,000 is there a 401(a)(26) failure? Question 2: Company has three employees, all family / HCE's. All employees have entered the plan, but only one of the participant is receiving an annual cash balance benefit, the others are in a $0 contribution credit group. Is there any way this plan can pass 401(a)(26)?

Plan definition of compensation excludes reimbursements, etc. The only participants that have a reduced compensation for 2021 are both owners, so I don't think there is any problem in terms of 414(s). For the purpose of 401(a)(4) testing (on a benefits basis), do I have the option of using total compensation as testing comp? In this circumstance that would create an advantage since it's only 2 HCE's that have plan comp less than total comp.

Have a one person DB plan with no loan provision in the plan document. Apparently the owner / sole participant took money out of the plan because his CPA said he could do that and he had 5 years to pay it back. What is the proper way to correct the problem? Thanks.

What is a reasonable estimate for time spent by an experienced retirement plan administrator to prepare a 5500-SF filing for a DB plan including AFN, considering the assets and the participant counts have already been reconciled, the actuarial valuation report has already been completed, and the valuation software produces attachments, AFN info, etc. (Datair)? This is for plain vanilla situations, no life insurance, etc. Excluding time spent for the 8955, I am thinking 3 hours to get the it to the client for signature, and another hour or so to get it filed, is that a reasonable expectation on average?

DB plan restricted employee retired at age 62, NRA is 65. The regulations say the payment is restricted to: A straight life annuity that is the actuarial equivalent of the accrued benefit and other benefits to which the restricted employee is entitled under the plan (other than a social security supplement). The plan definition of actuarial equivalence is 8% UP84. The early retirement reduction is defined as 1/15, 1/30. The normal form is 5 C&L. Given the ER factors the plan's early retirement life annuity is much larger than the actuarial equivalent life annuity using 8% UP84. Is the subsidized ER benefit considered “other benefits”? Are the early retirement factors considered actuarial equivalence? What is the restricted payment amount in this situation?

That is what I thought initially, but after reviewing 4041.27 it reads like all participants with a lump sum greater than $5,000 need the Notice of Annuity Information at least 45 days before distribution date. I have some 2013 ACOPA webinar slides - PBGC Standard Termination and Coverage - which seems to support that.

This is a first for me. A plan participant executed their distribution election forms but passed away before the distribution was made (within a week of completing the forms). The distribution is in connection with a plan termination, the participant had not reached retirement age, and the election was for a lump sum distribution greater than $5,000. The death benefit is PVAB. I do not see that the plan document addresses this exact situation. My initial thought is that the participants elections prior to death are now not applicable since the distribution was not made, and the spouse should receive distribution election forms for a death benefit distribution. Any input would be appreciated. Thanks.

The frozen DB plan must be underfunded in order for the a26 exemption to apply.

I am not a CPA but from reading posts about the QBI deduction I am under the impression that there is some kind of reasonable compensation standard that should be applied when determining the amount of the W-2 vs pass-thru for an S-Corp owner. It’s not simply what works best - theoretically. True?

Assuming you are doing annual testing on a benefits basis, project the CB pay credit to retirement age using the CB interest crediting rate defined in the plan for the testing year (not a testing interest rate) and divide that result by an annuity factor at retirement based on the plans definition of actuarial equivalence. Divide that by testing compensation to get the CB EBAR. That assumes testing age equals retirement age.

How the payments are reported is the education I was looking for. Thanks for both replies. I would never give advice on this kind of situation, other than to advise they consult with a qualified attorney or CPA.

50% owner sells ownership in C-Corp, will be paid $500,000 per year for next 5 years as payment. Continues to work for C-Corp and draws a salary. Can this person open up an S-Corp to receive the $500,000 per year and have the S-Corp start a qualified plan just covering himself?

You could try doing the a26 test using average comp for the annual accrual method, or using the accrued-to-date method, you might get a better result.

Small DB plan is terminating 6 participants, not PBGC, not being submitted to IRS. Termination date is 12/31/18. The owner wants to take an in-kind distribution. The document does not currently allow for it, but it is an option on the prototype checklist. If the plan allowed for it, does every participant have to be given the option to elect an in-kind distribution? Could this amendment be done post-termination date? The owner (an attorney) wants to be the only participant allowed to elect an in-kind distribution. I have done a lot of plan terminations but never one that included in-kind distributions. What else do I need to look out for?

I don't know that you can condition a benefit formula on passing nondiscrimination testing, in terms of being definitely determinable.

Thank you. I don't work on these plans currently, but this question came up for a takeover opportunity. I wonder how many people that have entered the cash balance offset plan business are happy they did it, or regret it?

If a plan sponsor wants to amend the floor-offset provision out of their calendar year CB plan, would that be a straightforward as using the 12/31/18 year end hypothetical account balance with offset as the 1/1/19 beginning balance and going forward without the offset?

So, not excludable, thank you!