CuseFan

True "severance" pay is never Plan Compensation and is different from statutory post-severance compensation. If a person receives a "separation bonus" as part of their last paycheck, that may be includable depending on the terms of the plan - but if it's classified as severance it is ignored in any scenario. If this is includable post-severance compensation, and is not known until after the ASD, often a person is put into pay status based on the known (but incomplete) compensation amount and then after a final accurate benefit is calculated the future benefit payments are adjusted along with a true-up payment. Or, forms and elections are made using the aforementioned estimate prior to the ASD but then commencement is delayed for administrative reasons as the final actual benefit gets calculated and then paid effective back to the ASD. This is NOT an RASD if the QJSA forms are provided to the participant prior to the ASD. Plan language must specifically provide for an RASD and there are certain rules you must follow in calculating and communicating benefits.

agree on that as well.

Early retirement in the DCP - no harm, no foul for combo testing - and there may be employer objectives for having as David notes. CBP - do NOT include early retirement in the plan and test the combo as you would otherwise.

Sorry, saw the rest of your post and you're aware of that issue. On the 95% actives determination - not defined, but if 95%+ of the employed and covered DB population as of the PPTD are eligible for the QRP (do not think they need to be deferring and getting a match) then I think you're good. Your DB actives should have an accrued benefit but need not have been earning current accruals. For example, if you have 100 DB "actives" and at least 95 were eligible for a QRP that has a PS where you used the excess for PS, if some of those people then later terminated or failed to work the necessary number of hours, still think you're OK. I think it's a one-time determination as of the PPTD.

no can do - from a good Mercer article on QRPs: A number of PLRs say that surplus assets transferred to a QRP can’t be used to fund matching contributions earned after the transfer. This is because the transferred surplus is treated as a contribution, and Section 401(m) regulations prohibit employers from funding matching contributions before an employee’s elective deferrals have been made or before the employee has performed the services to which the contributions relate. In most cases, surplus assets are transferred to a QRP before participants have earned a match, so the surplus can’t be used for matching contributions. The article did suggest that some of the surplus could be used in the year of transfer for current year match on deferrals already made but for which matching contributions have not been funded.

So if you defer 2%, 4% or 6% you get 6% but if you defer 1%, 3% or 5% then you get 0%, 3% or 5%? I agree the RATE of match can go down on the INCREMENTAL deferral increase but not this, where the overall match decreases as deferrals increase. The plan could have a minimum deferral of 2% so that no one could defer more than zero but less than 2%, could it not? Could not it also require deferral elections in 2% increments so that only 0, 2, 4, 6, etc. were allowed? That would make more sense than what it seems they're doing.

Exactly!

There should be no SS or Medicare taxes on DB pension annuity, nor insurance. As you note, tax withholdings are just that and can be manipulated. The cost of the survivor annuity (the difference between the straight life annuity and joint & survivor option) is determinable as of the commencement date. I have not seen that done but I don't think that means it can't be done.

Like clockwork, Brian always comes through with the complete and accurate H&W answers!

And not that it matters for the answer, C's position is likely that it did not want any of the compliance liability for B's portion of A's plan that would have followed any direct transfer or merger. However, B employees now in C's plan can rollover their A plan distributions to C's plan if so desired.

And as we often say is this forum, just because you CAN do something doesn't mean you SHOULD.

401(a)(26) is good assuming prior structure was compliant. If no one benefits in 2024 then no 410(b) or 401(a)(4) concerns. If the plan was "soft" frozen (just participation) then you would need to include this person in your testing population as (s)he would not be a statutory exclusion.

How is it that basic plan records from only 5 years ago have not been retained in any fashion by either the client or TPA (or a third-party RK)? Isn't that gross negligence?

I know there is at least one H&W expert on this forum who know for certain, but I believe it's your HDHP and HSA that preclude her from contributing to an FSA, except a limited use FSA (only vision and dental, I think, but not sure) if that is offered.

Also, you seem to be asking about two different issues combined into one mashed question. One has to do with contribution allocation entitlement for the year of retirement - do they get or not get a match for that year? The other is a matter of ownership (vesting) with respect to their employer contribution account balances, are they entitled to 100% or only some lesser percentage? As Bill noted, each of these should (must) be spelled out by the terms of the plan document.

Plan is correct, his tax situation is correct, and he essentially owes the employer those funds as Bri noted - like an interest free loan from the employer, which they can arrange how to have it repaid, in my opinion.

Agree with Paul and seem to remember a similar discussion on this topic not that long ago that came to the same consensus.

Agree. Especially at that age, get the 415 years of participation clock started.

Right, the only way you get $150k average is with a denominator of two years of service, but as there was business activity in that first year (even though a loss/negative income) it is still service.

Hardship is not protected, but a general 59 1/2 in-service distribution and a distribution available upon severance are protected and can not be eliminated with respect to account balances attributable to contributions through the date of amendment. So every existing active participant would have a pre and post amendment account for every money type and fund investment - someone with 401(k), match and 6 elected funds now has 24 buckets to track instead of 12. This would be a recordkeeper nightmare, not to mention the potential for LOTS of missing participants who haven't been employed there for ages - which could become an invitation for DOL scrutiny.

Bingo! Bri hit the nail on the head.

We used to use Reliance for a long time (going back to when it was Corbel) and exclusively used the volume submitter IDP format. If we were amending a provision that was another standard checklist item, I would find a plan that had that provision and use that language to create the amendment, otherwise it was a manual crafting of the required language. We also had many plans with language modifications that were always fun to deal with and required IRS submissions. My description is for our actuarial DB/CB plan practice only. We have been off Relius for maybe 10 years now. Currently, we use FT William which our DC plan practice had migrated to earlier. The DC side uses the adoption agreement format, the DB side uses the adoption agreement format for most plans and the IDP format for others, especially those with modifications. All are pre-approved and licensed under our name as sponsor. Adoption agreements are a snap to amend, for IDP format I can change my checklist item(s) and generate another document to pull the new language into an amendment - not very difficult. If changes are extensive then we just make it a restatement. If changes are not standard (checklist) provisions then your manually crafting amendment language (and likely taking the plan out of pre-approved reliance), hopefully not a frequent occurrence.

I would say $100,000 as well - but not actually because you have to adjust those $150k years for the 50% SECA tax deduction.

No, but if he is incorporated then only W2 compensation can be considered. Unless there is some other compelling reason, I see no advantage in being a C-corp with only the potential disadvantage of double taxation. Almost always see individuals incorporate as S-corps (or LLC taxed as an S). In that case, again only W2 pay counts as pensionable, but any K1 dividend distributions left after reasonable W2 pay and pension deductions are not earned income for Medicare taxes (assuming W2 above FICA wage base). And all my numbers above assume owner-only plans, no employees, and "plan compensation" of at least the $330,000 maximum after all deductions.

As Lou alluded, he has a combined plan deduction limit on his "employer" (non-401)k) deferrals) of 31% of eligible pay - which is his net adjusted SE earnings minus those "employer" contributions limited to $330,000. This does not apply if the employer contribution to the DC plan does not exceed 6% of limited eligible pay, or $19,800 on $330,000. If $30,000 was his salary deferral and catchup, then the remaining $25,000 was profit sharing and exceeds that 6% mark. Therefore, 31% on $330,000 is a $102,300 maximum 2023 combined plan deduction. Also as Lou stated, need to bring in an actuary, and sooner rather than later, someone who can map everything out and ensure compliance. This usually requires that any DC plan contributions other than 401(k) salary deferrals are determined last to ensure such profit sharing does not exceed 6% of eligible pay after all adjustments and deductions. 2023 is still possible but much more limited on the deduction ($77,300) than desired. He could accrue a larger benefit for 2023, just deduct the entire required contribution for 2023, carrying forward the excess for a 2024 deduction - but a knowledgeable actuary/actuarial firm should be consulted to map that out for your client. And 9/15/2024 is a drop dead date for funding 2023 and a lot of steps need to be completed before then so the process should be started early enough before then - like before Labor Day if not mid-August.