dan.jock

OK, so after studying this ad naseum, I'm 100% sure service with prior entity is includable in the benefit formula. I am also sure that I cannot start 415 all over again under the new entity's plan. The question was whether I can count years of participation for the 415 dollar limit. The answer is yes as long as my document credits participation service for the back years which I think it can based on the successor employer language of final 415 regs.

I just started also in 2016 and this is all good advice so thx. I agree that without clients, it's hard to pay bills. My advice is to market your product with other CPA's and investment advisors who have at least some clue to what we do. Selling cold to a client directly or a wealth-management advisor who doesn't really do retirement plans is nearly impossible. I don't charge for proposals, takeovers, and I don't say no to anyone yet. I feel that is a luxury that is enjoyed when there is otherwise steady revenue. Cheers and enjoy!

Sole prop terminated DB plan in 2015. In 2016 he wants to start another plan in a 51% / 49% partnership. Same business. Prior plan had a 10% formula but comp wasn't maxed out. I think his 415 limit should be offset by prior plan benefits based on my understanding of "who's the employer." even though he owns less than 80%. Am I off there? If I'm not, I think I'm OK to count years of service for the 415b1B limit but can I count years of participation for 415b1A? I'd like to not count it as a predecessor employer and start YOP and 415 all over again. However, if I have to offset by prior plan benefits, shouldn't I then get to use years of participation? It seems I'm in a catch-22. If I can't then there is no benefit accrual for many years...which seems outside the spirit of this reg so I must have something wrong.

If benefit is based on comp before this year, then there is a benefit accrual. So even with $0 comp, there is a year of participation so long as the person worked the hours. Just because he didn't earn a dollar, it doesn't mean he didn't earn a year of service. Some gov't plans give service benefits to volunteers.

I understand that as long as the document allows, deferrals are part of DB compensation. Say a person makes 24,000 including catch-up in 401k deferrals and the DB annuity factor is 13. If the sole prop income after FICA is 51,200, then the person could have a DB benefit of 24,000 * 10% * 13 = 31,200, loosely, and deduct his entire net income. Am I off base here on deferrals?

Thx all. We actually have a number of plans that are overfunded when looking at deferred-to-62 factors but a straight reduction of the 415 dollar limit to the owners current age would render the plan distributable. (if that's a word) So it looked shifty in my replies above because I am thinking through the various scenarios; some with EE's, some without, and some with multiple owners where only one will retire. Lou and Calavaera's numbered responses are very helpful. Overall, I think I am giving a yellow light to the unreduced early approach. It's doable for the owners-only plan. With EE's, careful on non-discrimination. In all cases, watch for 80% and 110% as appropriate. And also pay close attention to plan language to ensure it is saying exactly what we are doing.

It is an owners-only plan. AB at age 55 currently payable at age 62. No early retirement in the plan. I figure 12,000 monthly is within the 415 dollar limit reduced 7 years. If we can amend to provide for unreduced early, the payout will be 12,000 * imm factor at age 55 which is more than def-to-62 obviously. If the AB was 17,500, the issue would be moot, but in this case, using an unreduced early makes the full 415 benefit at age 55 payable. It's kind of like taking a back door into an age 55 NRA. Since the NRA-62 rule is primarily pointed at in-service distributions, I don't see anything theoretically wrong with this approach. The only thing I can think of is since I want the 12,000 AB to be within the 415 dollar limit, I would have to make sure ppt has 10 YOP for the full limit to apply before the 7-yr reduction.

I have an owner that has a 12,000 AB at age 55 which is about near what the 415 dollar limit would be reduced to age 55. Plan wants to terminate and if I value the 12,000 as deferred to NRA (62), the plan is over-funded. What's to stop us form amending the plan to provide for an unreduced early at age 55? Applicable to all participants.