jane murray

Thank you very much Mike.

The sole proprietor's 2020 personal tax returns are on extension. The sole proprietor will currently adopt a new defined benefit plan for 2020 effective 1/1/2020. The plan's benefit formula will be 10% of average monthly compensation x years of participation. The participant's accrued benefit as of December 31, 2020 is equal to $1,916.67 (or 1/10 of the 2020 IRS dollar limit). Can the plan be designed with a $2,000.00 maximum monthly benefit and not run afoul of any IRS rules? The objective is to limit the 2021 accruals such that the required minimum contribution for 2021 is $0 or a very small amount. A year of benefit accrual service is based on 1,000 hours of service. The sole proprietor has already worked 1,000 hours during 2021. Does limiting the 2021 benefit accrual through the use of a $2,000 maximum monthly benefit violate the anti-cutback accrual rules or anything else?

Our volume submitter plan document allows for the exclusion of HCEs using the following language... Notwithstanding the foregoing, the term "Covered Employee" shall not include the following: any Employee who is a Highly Compensated Employee for the Plan Year Can the language be tweaked as follows to allow Jane Doe who is an owner HCE to participate? I would like to exclude all the other HCEs. Notwithstanding the foregoing, the term "Covered Employee" shall not include the following: any Employee who is a Highly Compensated Employee for the Plan Year with the exception of Jane Doe

thanks big tuna. does anyone else have an opinion on the matter? all opinions would be greatly appreciated.

so effectively, since her 415 dollar limit at age 70 is lets say $30,000/month and she is capped by the 415 salary limit of $22,500/month, then the benefits from the SAG-AFTRA pension plan will not reduce her benefits from her company sponsoring defined benefit plan in any way? no benefits have commenced from the SAG-AFTRA pension plan. lets assume the current age 70 benefit from the SAG-AFTRA pension plan is $5,000/month. the 415 dollar limit is reduce by $5,000/month as follows - $30,000/month less $5,000/month equals $25,000/month. since the 415 salary limit which is not reduce is less than the 415 dollar limit, she simply is entitled to $22,500?

lets assume that all of the worker's labor credited under the SAG-AFTRA pension plan is attributable to the loan-out corporation. if that is the case, would her maximum benefit under her company sponsored defined benefit plan be limited to $17,500/month ($22,500 less $5,000)? or does 415(b)(1)(B) not apply and only the dollar limit is reduced? if this is the case, would her maximum benefit under her company sponsored defined benefit plan be $22,500/month?

a client who owns a loan-out company sponsors a one person defined benefit plan and has also accrued benefits under the SAG-AFTRA pension plan. suppose the client is age 70 and her 415 dollar limit is $30,000/month and 415 salary limit is $22,500/month. she has accrued a benefit of $5,000/month under the SAG-AFTRA pension plan. do you simply reduce her 415 limit by $5,000/month so that her maximum benefit under her company sponsored defined benefit plan is $17,500/month ($22,500 less $5,000)? i've read some old threads and don't seem to understand exactly how the offset should be applied.

Suppose a Standing Election was signed by plan sponsor in 2016 that includes language that the plan will use the COB/PFB to apply towards the minimum required contribution in order to avoid an unpaid required contribution. The 2018 minimum required contribution is 100k and the plan has a 150k prefunding balance. The prior year use balance percentage is over 80%. Can the prefunding balance be used to satisfy the 2018 minimum contribution relying on the standing election that's in place? Or does a new election need to be signed that specifically states the amount of the prefunding balance that will be used to satisfy the minimum for the year?

Is this situation that uncommon and I would welcome and appreciate any practical solutions.

For a 12/31/2019 valuation, can an election by the plan sponsor be made before the end of the plan year (12/31/2019) that states the plan sponsor will burn enough of the prefunding balance so that the 12/31/2019 AFTAP and FTAP will both be at a minimum of 100%? Or does the election have to state a certain dollar amount that will be burned? In the case of an end of year valuation, you won't know the end of year liabilities until the following year and then it will be too late to burn a portion of the prefunding balance for the prior year. If the election must state a certain dollar amount that will be burned, how does everyone handle a situation like this where you want to maintain the AFTAP and FTAP at 100%? Thanks in advance for the insight.

Thanks cusefan! if plan is written to calculate lump sum as the present value of the immediate annuity, an age 50 unreduced subsidized benefit would be allowable. this assumes the 415 limits are not exceeded.

we have a defined benefit plan with a normal retirement age of 65 and no early retirement age. can the plan be amended currently to add a fully subsidized early retirement age of 50? does the IRS restrict the use of a fully subsidized early retirement age that is below a certain age or would age 50 be acceptable? for example, an employee age 45 participates for 5 years under the plan and terminates at age 50. after the amendment is made, can the lump sum benefit for this individual be calculated unreduced and fully subsidized at age 50 as opposed to deferred from age 65?

Mike, thank you very much for your expertise and guidance.

can an employer who has a solo 401(k) adopt a regular 401(k) plan and defined benefit plan for 2018 and then merge the solo 401(k) into the regular 401(k) plan sometime in 2019? the question is, can an employer have two separate 401(k) plans covering the same employee? the only employee of the company is the owner. the regular 401(k) plan and defined benefit plan were adopted earlier this year and it was recently discovered that the employer also has a solo 401(k) plan thats been in existence for the last 10 years.

one participant defined benefit plan was effective 1/1/2017. the valuation date is EOY so valuation date was 12/31/2017 for first year. can the valuation date be changed to 1/1/2018 for the second year of the plan?