CuseFan

Not an option - more than 6% ER was contributed to DC so there is a 31% combined plan deduction limit for 2022, end of story. Can still do CB for 2022 and deduct up to that 31% total for 2022 and deduct the rest for 2023. Maybe the 2023 total max CB deduction is high enough to cover that residual 2022 plus the 2023 minimum, maybe not - it could be 2024 before deductions catch up. They can try to remove the 2022 PS in excess of 6% and maybe it never gets caught, but if it does, you've got some 'splaining to do Lucy and I don't think IRS will buy the excuse.

Post-severance compensation is different from severance pay. The employee would be entitled to the former if employment continued and its treatment for retirement contributions must be specified in the plan document. However, the employee is only entitled to the latter as a result of discontinued employment and such severance is NEVER considered plan compensation.

No for DBPs and only cash is cash.

Agree with Lou - your 415 clock and comp reset.

There was also environmental Armageddon going on all over the country, so if you were in an area that had a Federal weather disaster you may have an extension for that as well. Good luck.

good catch, thanks

ONLY IF separation occurred after age 55 does the code 2 exception apply, one cannot age into the age 55 exception. This was the old early retirement provision exception in the code that then got modified to treat people the same whether or not their plans had early retirement provisions.

not words I expected to see in the same post Luke! I'd say leave such humor attempts to the actuaries, but ...

I do not deal with these directly but have consulted with advisors and their clients, communicating their need to restate their SEP onto a prototype and get off the 5305 platform so they could adopt a defined benefit plan, and no one had come back to me saying they couldn't do that so I'm assuming this can be done.

You do not say what type of pension plan this is - there are a few possibilities and the answers vary depending on plan type. If it is a defined benefit plan, including a cash balance plan, it is subject to ERISA minimum annual funding requirements. If the plan is frozen (no current benefits are being earned) then if the plan is well funded the employer may not need to physically contribute. My guess, by your comment that you have $250k, is that this is a cash balance pension plan. Your employer, saying they will stop contributing, was stating very generically (I assume) that they are freezing the plan and will stop adding contribution credits to your account. Your account will still be required to get credited with interest according to plan terms until it is distributed, whether after your termination of employment or the plan's termination. Regardless, the employer will need to fund the plan each year in accordance with ERISA requirements or be subject to excise taxes. Also note as a large plan (assuming over 100 employees) it is required to have an annual audit by qualified CPA. Finally, each year you are required to get an Annual Funding Notice that describes the relative health (funded status) of the plan. If this is a money purchase pension plan, then it is like a profit sharing 401(k) except with required annual contribution obligations. Employers may amend these plans to cease future contributions but your account continues to be invested as before but w/o those future contributions. I encourage you to review your Summary Plan Description(s), or request them if you can't locate. The industry trend for larger companies has certainly been away from pension plans and emphasizing 401(k) plans. Regarding your individual retirement outlook, I suggest consulting a qualified and trusted advisor. Maybe your employer has resources (financial wellness plan?), the advisor to the 401(k) plan, your accountant? Good luck.

Agree with Luke, whatever assumptions are used should be fair and reasonable. Getting signed releases on agreement of benefits might be worthwhile. The NQDC plan is ultimately a contract between the employer and employee, and litigation from a disgruntled employee thinking they might have been shorted is obviously something you want to avoid. As for assumptions, without any plan defined parameters maybe apply the ASC assumptions, assuming they had to report this liability on their financial statements.

If the person's income is subject to Canadian income tax and not US income tax, then yes.

Check the document and/or SERP agreement and/or any other related forms, a well-drafted set of documents would answer most of these. If the plan calls for full vesting upon plan termination then I don't see how you can discount for vesting probability. Interest and mortality assumptions play a big part as well and should be specified somewhere, even if through reference to a qualified DB plan, if any. For the 45-year-old, I would calculate the current (distribution date) LSPV of the accrued 5-year installment benefit payable at age 60 or whenever the benefit could actually be payable. Make sure you comply with the 409A plan termination accelerated payment rules, terminating all like plans and paying benefits within the specified window period.

If you have no coverage issues (assuming you can't statutorily exclude per Peter) then I strongly suggest excluding the employee and maybe give them more in pay. Interestingly (or annoyingly) it's the complexity of Canadian retirement plan rules that are the big headache, and more for the employee than the employer if I remember. Do everyone a favor and make it easier by excluding.

If that initial DOH and 12 hours are not disregarded, which it appears they are not, I agree that DOP is 1/1/2023.

If you have new comparability and cross-test your profit sharing (and maybe SHNE), you project those contributions to NRA and convert to annuity at NRA. Depending on specific plan demographics, proposed designs should be tested at different NRAs to see which is most advantageous. However, if adding a CB in the near future is a real consideration, then I suggest NRA no earlier than 62 unless you want to amend later and track separate balances with different NRAs.

Yes - NRA is an important definition when doing nondiscrimination testing, combo or not, and lots of profit sharing contributions with 1000 hour and last day rules have exceptions for normal retirement (among others). It is also relevant to note that ANY separation on or after the date a person qualifies for normal (or early, if applicable) retirement is considered "retirement" regardless of whether the person terminated/retired voluntarily, was laid off or involuntarily terminated.

Interest rates for minimum DBP lump sums will increase substantially for annuity starting (distribution) dates in 2023 which will dramatically reduce lump sum payouts. I thought I read someone's article within the last month or so that said such reduction is in the 15% range, which would take $315k down to $270k. This impacts the owner as well.

You may want to dig into the 415 aggregation rules, since it appears owned >50% of each (LLC and sole prop) during the year and maybe a combined 415 limit applies. I don't know if you need to look at the year as a whole or aggregation doesn't apply because the >50% ownership in the entities didn't overlap. Maybe making any new solo plan effective say 6/1 makes that moot? But then a short PY means prorated comp and 415 dollar limits which may or may not impact this person.

So the owner sold off the business but is now a self-employed independent contractor providing services to the business he sold, correct? Yes, this person can do qualified plan(s) based on this income (assuming it is earned income from self employment).

Great stuff Peter. I agree that most major RKs could possibly have a Sharia-compliant investment offering (I know we do) and a brokerage window may not be necessary.

and seriously explore/discuss merging the plans

If the plan permits, person can opt out of employer plan(s) BEFORE (s)he would enter the plan. However, if this person is kept out under any method (election or plan provision), (s)he is not excluded from coverage and nondiscrimination testing.

Agree - not your responsibility. Lot's of issues - is this a continuation of pay including a continuation of benefits, is it accrued sick and or vacation time, (are hours of service being properly credited) or is it severance?

Great comments by Bill. Check the exact language of your agreement. Also, what would have happened had you spent more time than estimated and time charges exceeded $20,000? If agreement said "estimated to be between $15,000 and $20,000" then I think you should invoice actual $12,000 in time charges. If it says "fee will range between ..." then I think you're OK to bill the $15,000. Finally, if you employ a "realization percentage" to your hourly rate (e.g., staff person's hourly rate is $200 but you routinely accrue time charges at 80% (so $160), and at realization your time charges are under $15,000 but at higher realization they exceed it, I think you're ethical to charge $15k - BUT, make sure whatever you do is supported by the language in your service agreement. Regardless, if you charge less and communicate to client that records were better and you were more efficient than expected and so time charges are less than estimated, you may earn some good will "brownie points" in addition to taking the ethics question off the table.