rodin111

The problem with that is that I don't think even the PBGC will allow anyone who is not a majority owner to opt to forego any of his or her benefits (given the fact that coercion could be involved). Plus, of course, there it is in broad daylight, evident to all. Further, spousal consent is probably mandatory for any benefits to be foregone, and the resolution does not address that. In this particular case the two owners have 50% ownership each. You are right about the spousal consent: they will probably modify the termination amendment- which was not yet adopted and signed- to include this requirement, such as "RESOLVED FURTHER: That - subject to the required spousal consent-to the extent that assets are insufficient to cover the lump sums of any majority owners covered under the terms of the plan, the remaining assets, after full distribution to all non owner participants shall be allocated proportionally to the owners based on their calculated lump sum termination benefit amounts." And the distribution package will include the spousal consent. Is there a way to bring this intent of foregoing part of the owner's benefit at the attention of the IRS at the time the 5310 is filed, or should we wait for the IRS to "ask" why listed assets are lower than the total benefits payable? Thanks again.

To "My 2 cents": As of last val (before the plan was frozen) the AFTAP was in excess of 100%. And it was so each and every year. They always contributed much more than the minimum required To David: Actually, the termination amendment resolution includes a paragraph that addresses the owners foregoing part of their benefits. "RESOLVED FURTHER: That to the extent that assets are insufficient to cover the lump sums of any owners covered under the terms of the plan, the remaining assets, after full distribution to all non owner participants, shall be allocated proportionally to the owners based on their calculated lump sum termination benefit amounts" Does the IRS require a separate document? And if yes, should this specify the $ amount of the individual and total forgone contribution for owners.? And at what point during the process should this document (if required on top of the termination amendment) has to be submitted to the IRS. Can it be submitted at same time with 5310 (with an explanation?), should we wait for some requests from the IRS? I can not find any pertinent citations, instructions, etc., and I am a little in the dark. Thanks for your help "

I forgot to state in my original post that the sponsor wants to request the IRS determination Letter upon termination by filing Form 5310. I know that the PBGC has no problems with the waiver of owner's benefit. It seems though that the IRS has a different opinion when the reported assets are less than plan liabilities upon termination. Form 5310 asks for total assets and form 6088 asks for total accrued benefits "unadjusted for for an election of a majority owner to forego receipt of a distribution under PBGC regulations " It seems that the IRS really does not like that and I heard some plans had a tough time to convince tem. Does anybody have experience with such situations? Any pertinent citations? Thanks for help.

Plan will be terminated . Plan subject to PBGC Plan valuation AFTAP is greater then 100%. Plan assets less than total termination benefits Owner want to waive part of his benefits rather than make additional contribution. Does this plan qualifies for a standard termination filing? Thank you for your help.

We have to file form 5310 for the following situation. Employer sponsors a DB and a Profit Sharing 401(k) Plans. Since inception in 2012 plans have been aggregated for testing purposes Employer is terminating the DB plan in 2016 and filing with the IRS for Determination letter (Form 5310) The plans are not safe harbor design and the DB has also non statutory class exclusions. Here are several questions: Must we answer the the questions on 5310 only for the DB (as if the other plan did not exists?. I do not see any question- excepting if the plan is part of an offset arrangement (which is not)- that leads me to think that I should take into consideration the # of participants, the 401k.m provisions, plan assets, employer contributions, etc. for the profit sharing plan. The form asks , though, if the Employer maintains another qualified plan. But the required statement requires only enough info to identify the plan The form asks if "the top heavy minimum accrual or contributions" have been made. They were made in the profit sharing plan. Should the question on form 5310 be answered YES (even though they were made in another plan?) Any help greatly appreciated Thanks in advance

These employees are pharmacy technicians:will have no problem finding another job next day, if they so choose. Te salary they get is quite competitive in the industry. The irony is that he employer has no problem paying their lump sum benefits. But did not expect some employees to resign in order to get "their lottery winnings". Even after they pay full taxes and penalty, it will still amount to more than a year of after tax take home. You also menton that there was a "poor communication of theDB plan" to the employees. I don t really see it. Would really appreciate your input. It is a small company, with about 15 participants

Thank you very much for your help.

Employer sponsors a generous DB plan. Terminated employee received the lump sum actuarial benefit. It amounted at about 2 years of salary and happily informed her former coworkers about the Employer generosity. Guess what happened next? Several other employees promptly submitted their resignation! Employer would like to amend the plan and remove the optional lump sum form of distribution. QUESTION: If such amendment is effective - let's say- January 01, 2016, would it apply for all employees that terminate employment after that date? Or only for those hired after the effective date of the amendment? ( like in the case of vesting schedule amendment) Thank you for your help.

Thank you. Just wanted to make sure....

So, the equivalent accrual rate will be 0% for participants not accruing benefits until they catch up with the frozen benefit as of the fresh start date. At least under the "annual accrual method" Is my understanding correct? Thank you Andy.

Thank you Andy Your answer seems to imply that indeed, for all discrimination tests, the participants not accruing benefits for the year solely due to th wear away limitation, are to be considered as benefiting. Therefore the equivalent accrual rates in the aggregated DB/DC will include the DB accrual based on the formula after the fresh start. Even though IN REALITY they are not getting the accrual. Is my understanding correct?

Plan sponsor has active defined benefit and profit sharing plan. At present time both plans are safe harbor (same accrual rate/allocation for all participants) Starting 2016 the DB plan will amend the formula to 5% X avg comp X years of service for the HCEs and 0.5% X avg comp X years of service for NHCE. All benefits accrued tio the date of change will be preserved (frozen), etc. Using the fresh start with wear away, some of the participants will not accrue any benefits until the benefits accrued under the new formula will equal the frozen accrued benefits. The DB and PSP will be aggregated for testing purposes. The profit sharing allocation for NHCEs will be whatever is needed to pass the aggregate discrimination tests. Question: In the discrimination tests; should the participants that do not accrue benefits due to the wear away be considered as benefiting (0.5%) or non-benefiting due to the fact that practically they do not accrue a benefit during the year? We are using current year accrual method for discrimination testing. Help is greatly appreciated.

Thanks for your input. It was an asset purchase. Still I am not sure about the documents that must be drafted by the company B, in order to take over/continue the plan. From the top of my head I can think of: 1. Corporate resolution stating that company B is taking over Company's A retirement Plan 2. Adoption Agreement amendment (Plan Sponsor Name, EIN, address, credit for past service in previous company) Anything else ? Will also check the plan Doc to see if Bankruptcy automatically trigger the plan termination. Thanks again for help

In this particular case, the person in cause was a participant for several years and got the annual accrual as specified in the plan's formula. Starting 1/1/15 (before performing 1,000 hrs) he was promoted and became member of a nonstatutory excluded class. My question did not pertain only to 2015, but also for subsequent years. Should we include him in the nondiscrimination tests as a non benefiting HCE (very helpful) or as benefiting non key HCE that gets the 2% TH accrual (potentially damaging for the tests)? Independent of this particular case, this might happen to any participant, highly compensated or not that is a participant for a number of years, then becomes s member of an excluded class. Thanks for help

Here is the story: Company A sponsors a DB plan. Recently company A declared bankruptcy. Company B - owned by the same owner as company A- purchased in auction, as the highest bidder- the bankrupt company. The purchase was approved by the bankruptcy court. Company B assumed/hired all employees of the bankrupt company and wants to continue the plan giving all employees credit past service. Question: Excepting the corporate resolution of company B pertinent to the take over and continuance of the plan and the obvious changes in the 5500 reports (name, EIN, address, etc) and the amendment of the plan sponsor information in the Adoption Agreement: Any other documents to be executed? Does the bankrupt company purchased by have to adopt also a resolution regarding the transaction? Thanks for your help

Non key HCE was a participant in the company's DB plan. In 2015 he will become a member of a nonstatutory excluded class of employees. Should he accrue the TH minimum after becoming excluded? Thanks for help

Any opinion?

Yes. See my answer to Andy

The argument of this particular actuary is that if a year of service is defined as 1,000 hours, any participant that does not satisfy a year of service will not accrue any benefit and should not be included in discriminatin testing. To me that does not sound correct : is as if in a DC plan that require 1,000 hrs and/or last day employment for a contribution we would not have to include those participants in the testing. My understanding is that any exclusion that is not a statutory one must be included in ND testing. Is it anything different for the DB plans? Thanks for your help.... Again

Thank you

VS Defined benefit plan requires 1,000 hrs for a year of credited service. Several employees terminated employment with less than 1,000 (but more than 500) hrs in 2013 and the actuary did not include them in any of the required tests. Since they are not members of a statutory excludable class, shouldn't they be included as non benefiting participants? Thanks for your help .