AdKu

Thanks all

A client established a brand new 401(k) plan effective 1/1/2016. According to this new plan, plan document, · All service with the employer were counted for all purposes · Service crediting methods for all purposes was elapsed time method · Eligibility was 1 month and entry with 1st day of the month following or coinciding for all contributions · 2/20 vesting schedule Six month later, 7/1/2016, this client decided to change the TPA and add a New DB plan. To simplify the combo plan testing, the new TPA changed Service crediting method with ultimately affected the vesting. According to the restated 401(k) plan, plan document · Service from the effective date of the plan were counted for all purposes · Service crediting methods for all purposes become Hours of Methods · Eligibility stays the same for deferral but changed to 1 YOS with dual entry, 1st & 7th month, for Employer contribution · 2/20 vesting schedule The client financial advisor suggested it is ok to go with the restated vesting since this is the new plan. I have hard time to buy client’s financial advisor suggestion in light of IRC §411(d)(6) anti-cutback Regulations. The reason is that 90% of the employees had at least 1 year of service and entered to the plan on the effective date of the plan, 1/1/2016. I would think all full-time employees/plan participant will have at least 20% in their employer contribution by 12/31/2016. Is this not the case?

It is an owner only Plan. As far as funding goes, it is where it needs to be (neither under nor over funded) Thank you all

What are the disclosure requirements when terminating one person Non-PBGC DB Plan (any checklist)? Does any of PBGC Standard Termination disclosure requirements including NOIT applies?

BG, it was for Enrolled Actuary Exam. Thank you all!

Data for Question Plan effective date: 1/1/2008. Type of plan: Applicable defined benefit plan (cash balance). Vesting service: Plan years in which the employee works at least 1,000 hours. Normal retirement age: 62. The plan has the most restrictive method allowed under IRC section 411 for determining vesting. The employees shown below were originally hired on 1/1/2011. No employee has left service under the terms recognized under the special rule for paternity and maternity absences. Employee 1 Employee 2 Employee 3 Employee 4 Age at hire 18 25 16 60 2011 hours 1,901 1,956 1,325 1,254 2012 hours 1,850 0 700 565 2013 hours 1,251 1,210 1,743 779 2014 hours 1,801 355 943 1,645 2015 hours 1,583 1,479 1,100 560 Question How many of the employees listed above are vested by 1/1/2016? (A) 0 (B) 1 (c ) 2 (D) 3 (E) 4 According of SOA answer key, D is the correct answer. I have difficulty to understand because if I exclude service prior to attaining age 18 under IRC section 411(a)(4)(A) then I will end up 2 employees by applying the 3 year cliff vesting for cash balance plan. Am I missing something hear? Please help.

Hi My 2 cents, Is the plan lower cash-out limit provision irrelevant when it comes to making involuntary cash-out under $5, 000 (assuming lump sum is the normal form of distribution for benefit under $5000) § 1.411(a)-11 Restriction and valuation of distributions (3) Cash-out limit. (i) Written consent of the participant is required before the commencement of the distribution of any portion of an accrued benefit if the present value of the nonforfeitable total accrued benefit is greater than the cash-out limit in effect under paragraph ©(3)(ii) of this section on the date the distribution commences. The consent requirements are deemed satisfied if such value does not exceed the cash-out limit, and the plan may distribute such portion to the participant as a single sum. Present value for this purpose must be determined in the same manner as under section 417(e); see § 1.417(e)-1(d). (ii) The cash-out limit in effect for a date is the amount described in section 411(a)(11)(A) for the plan year that includes that date. The cash-out limit in effect for dates in plan years beginning on or after August 6, 1997, is $5,000. The cash-out limit in effect for dates in plan years beginning before August 6, 1997, is $3,500. https://www.law.cornell.edu/cfr/text/26/1.411(a)-11

John, Many thanks! If I understand your answer for Scenario 1 correctly, it doesn't matter who gets the profit sharing allocation (in my case it was NHCEs) and it source (whether new money or forfeiture money) for any safe harbor plan to lose its Top Heavy exemption.

Scenario 1 The plan is a basic safe harbor matching plan where employees are also grouped in classes for profit sharing purposes. If only one class of the NHCE receive profit sharing contribution, does this trigger Top Heavy test or any other test at all (except 410(b))? due to the fact other NHCE classes didn’t receive any profit sharing contribution? Scenario 2 The plan is a 3% safe harbor NEC plan where employees are also grouped in classes for profit sharing purposes. If only one class of the HCE are excluded from getting the 3% Safe Harbor, does this trigger Top Heavy test or any other test at all (except 410(b))? assuming no other contribution except deferrals and 3% Safe Harbor

The plan cashouts limit was $5,000 before the EGTRRA restatement that changed the cashouts limit to $1,000. Is this permissible to use the old plan cashouts limit of $5,000, taking into account 411(d), to make cash distribution for benefits under $5,000 without the consent of the participant?

The check was sent to the participant but payable to the financial institution designated by the participant for the benefit of the participant as a direct rollover, according to the completed distribution election form and the attached direct rollover acceptance letter from the financial institution. However, before he participant forward the distribution check to his designated financial institution, the investment provider for his new employer retirement plan, the said plan asset was liquidated. The distribution check is in the hand of the participant with no action, and only promises to make sure that his broker will cashed the check soon. Unfortunately, the participants's present value of Vested Plan Benefit is greater than $1,000, which is the plan cashouts amount. Had anyone luck attaching other proof of plan benefit distribution to the Form 501 other than cancelled check in the last one year, for instance, a copy of the check that was sent to participants or the letter attached to the check, or even a sheet that lists participant names, the distribution amounts, distribution dates or any other?

I'm in the process of filing Form 501, post distribution certification for standard termination, with PBGC for one of my client. PBGC instructions calls for attaching a copy of the cancelled check or bank statement with the individual's name and distribution amount when filing Form 501. Unfortunately, one of the plan participant distribution check is not cashed. I called the investment provider for his employer retirement plan where the check was sent as a direct rollover for the benefit of the participant based on his election. I have learned the said plan asset was liquidated over a two month ago. I reached out to the participant to follow-up and the participant promised to get the check cleared/cash, which didn't happen still. Is there any other options? Clock is ticking and 45 days passed since the proposed plan asset distribution date that we listed on the Form 500. Although it appears PBGC will not assess penalty as long as the Form 501 filed not more than 90 days. Highly appreciated to hear your experience of filing Form 501 and associated attachments.

Thank you all!

One of my clients is in the process of terminating their DB plan in standard termination using Alternative treatment of majority owner's benefit. Can the father who has large sum of benefit in the plan forgo receipt his benefit to the extent necessary to enable the plan to satisfy all other plan benefits? Long ago the father inherited his business to his son. However, the son (who is 100% owner) has very little benefit in the plan. I read some of the discussion about Majority Owners and attribution rules (IRC 1563) on this forum particularly Mike Preston excellent explanations. I also researched some DB Plan Termination notes including 2015 ASPPA conference - Workshop 20: Plan Termination, Course 55441 – EP CPE Winter FY14 Plan Terminations, 29 CFR 4041.21 - Requirements for a standard termination, 26 U. Code sec. 1563 - Definitions and special rules, etc....

If sole prop total profit is right at 10K. Can client make a non deductible contribution of 10K to my Roth 401K? And still allowed to put 10K in the defined benefit as well?

Does the plan doc. needs to have the exclusion language stating that only hourly HCEs are excluded?

If I have different class of HCEs. Hourly HCEs are allowed to defer. Can these hourly HCEs be excluded from employer contribution including Safe Harbor Non-elective? Or at least provide them a lower percentage of Safe Harbor so that the plan passes all the compliance testing? Does the plan doc. needs to have the exclusion language stating that only hourly HCEs are excluded? Or can it be implemented as one of the many permissible testing techniques taking the fact the regulation doesn't necessary require provide safe harbor contribution to HCEs?

Due to a CPA error, some HCEs received a discretionary employer contribution and it was deposited to their respective accounts in 2015 There were many NHCEs who were suppose to receive this contribution instead of the HCEs. Is there any requirement to provide notice to the HCEs, If we pull out the already deposited discretionary employer contribution from HCEs accounts in 2016? Please advise any issues that may arrise doing so.

Thank you Effen.

Sorry, the typo. The software my office uses can generate the NOPB in accordance with the PBGC Instruction guidelines.

Yes and No. I saw the model/sample NOIT under Appendix B of the Standard Termination PBGC Filing Instructions. I didn't see sample for NOPB in the PBGC instructions. However, the software can generate the NOPB .

According to the PBGC Standard Termination instruction, sample NOPB needs to be attached. Does the sample NOPB needs to have actual plan participant info and plan benefit or can it a generic blank statement? Any information related to this item is appreciated.

If a calendar year DB Plan frozen mid June, do plan participant credited a year of service?

Than you Lou and Calavera, Can someone help me find the section of the Reg. that clearly spell out what Clavera stated above. Excerpt from the Reg. 1.401(a)(9)-6 - Required minimum distributions for defined benefit plans and annuity contracts. A-1(d) Single sum distributions. In the case of a single sum distribution of an employee's entire accrued benefit during a distribution calendar year, the amount that is the required minimum distribution for the distribution calendar year (and thus not eligible for rollover under section 402©) is determined using either the rule in paragraph (d)(1) or the rule in paragraph (d)(2) of this A-1. (1) The portion of the single sum distribution that is a required minimum distribution is determined by treating the single sum distribution as a distribution from an individual account plan and treating the amount of the single sum distribution as the employee's account balance as of the end of the relevant valuation calendar year. If the single sum distribution is being made in the calendar year containing the required beginning date and the required minimum distribution for the employee's first distribution calendar year has not been distributed, the portion of the single sum distribution that represents the required minimum distribution for the employee's first and second distribution calendar years is not eligible for rollover. (2) The portion of the single sum distribution that is a required minimum distribution is permitted to be determined by expressing the employee's benefit as an annuity that would satisfy this section with an annuity starting date as of the first day of the distribution calendar year for which the required minimum distribution isbeing determined, and treating one year of annuity payments as the required minimum distribution for that year, and not eligible for rollover. If the single sum distribution is being made in the calendar year containing the required beginning date and the required minimum distribution for the employee's first distribution calendar year has not been made, the benefit must be expressed as an annuity with an annuity starting date as of the first day of the first distribution calendar year and the payments for the first two distribution calendar years would be treated as required minimum distributions, and not eligible for rollover. The complete Reg link is below: https://www.law.cornell.edu/cfr/text/26/1.401(a)(9)-6

Don't I have to use the same account balance to calculate 2nd RMD when the 1st RMD is not paid out by the December 31 of the RMD year from a DB Plan? Background information: While the plan is on termination process in 2015, the 100% owner has attained Age 70.5. The owner elected single sum distribution from the plan to roll it over to IRA. Based on my understanding of the Reg., one can use the exception in calculating the RMD based on the Account Balance method as if DC plan. Also, since the owner participant didn't received the 1st RMD by December 31, 2015, he is due 2 RMD to be paid to him from the plan by his RBD of April 1, 2016. can someone refer/provide me the section of the Reg. that tells me to use the same account balance in the above scenario?