CuseFan

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.

If you can do that with the excess and don't need to aggregate with a DCP for 2024 testing, then yes, no need to wait to terminate 12/31 to have a matching plan year.

I kind of view that stuff like extended service warranties - if you are selling me a quality product (or service) then why should I pay more for insurance that I'll very likely never need? Some insurance specialist was probably seeing all these fiduciary breach lawsuits concerning investments and thought hey, we can scare people into buying protection they'll never need and make some more money.

Here is a thought: I expect a 204(h) notice was never issued to the MPPP participants since the plan sponsor didn't think they were freezing that plan. An amendment to reduce future pension accruals goes into effect the latest of (1) the effective date of the amendment, (2) the date the amendment is adopted, and (3) the date that is 45 days (or 15 days for plans <100) later than the date the 204(h) notice is provided. By that scenario, it can be argued that the amendment never took effect and by administrative practice that holds true. If 204(h) notices were issued then this argument has some holes in it. I would suggest some legal counsel input before going this route for a better comfort level. I assume the plan document has continued to have been updated as needed, but is not on a pre-approved platform otherwise this should have been discovered long before now.

Agree with Corey, check the specific language of the resolution and if it has all that is required then maybe that would suffice as the amendment. I would also suggest client gets its attorney's blessing for treating as such.

Consider using to pay final plan expenses to use up and not have to deal with allocating the excess which might push you into a 2025 filing if those have to be determined after a PPTD of 12/31/2024.

RTFD per David