CuseFan

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.

We always provide separate 204(h) notices.

Yes, and agree with chc93, usually documents are set up to provide reversion because you can always amend last minute to change and allocate in the plan.

That sounds familiar, we were just there! Funny.

I have not seen any. Maybe they updated for the new COLA but forgot to change the years? Someone dropped the ball.

Generally, you satisfy DB RMDs by commencing the benefit as an annuity, either single or joint life, unless the plan allows other options. If the plan allows a lump sum and participant so elects, then a portion of the lump sum will need to be parsed out for one or two year's worth of RMDs, depending when paid. The RMD portion can be determined as 12 or 24 annuity payments or considering the lump sum as a DCP balance and using DCP RMD methodology, which always (in my experience) leads to a lower RMD portion. If this is for an owner or HCE, the plan will need to be sufficiently funded to pay a lump sum.

https://www.irs.gov/retirement-plans/non-governmental-457b-deferred-compensation-plans The combined employer and employee contribution limit is the lesser of the 402(g) limit or 100% of pay. You obviously could not go retroactive for employee deferrals, but whether you can do that with employer contributions, I'm not sure the more I think about it because they're essentially treated the same except for the necessary timing of elections. So if adopted 12/1 retro to 1/1, would the employer contribution be limited to the lesser of $20,500 or 100% of December's pay? I don't know. I linked IRS website if you might find something helpful in there, I looked quickly but did not find anything specific on this. Maybe someone else on this forum who specializes in these plans can be more helpful. What the heck do I know? I root for a team that lost to Colgate two years in a row now, yikes!

but is that the company - Midland National in Iowa?

I think you can do the 2022 calendar year plan year effective 1/1/2022 with employer contributions only. As a nongovernmental 457, this is an unfunded NQDC arrangement. Assets can be set aside or deposited to a rabbi trust, or they can simply be bookkeeping entries. If they are immediately vested, I also think contributions are subject to FICA and Medicare taxes.

Correct, person cannot get 402(f) notice more than 180 days before the annuity starting date, which in this case I think would be the distribution date. I don't know how quickly a DCP termination d-letter happens these days, DBPs usually take 9-12 months. I think they can't issue a letter any sooner than 145 days, so maybe send out forms after four months (120 days). Unless the plan is an ESOP, part ESOP, or has some crazy provisions, I would think you'd have d-letter in time to be within those 180 days. Just a thought.

This can often be a HUGE headache (and very expensive) for small terminating DBPs and especially if they have a general lump sum option like CBPs. Those in the small plan space know that having ANY annuity insurer option is a godsend. Effen - is this Midland National Life Insurance Company in Iowa that you reference? I'd ask if they could satisfy the DOL's safest available annuity option requirement, but if they're the only option then they are also the safest option. I see they are well rated anyway. Do you know in which states they are licensed to write contracts? I briefly checked their website but couldn't find. I know New York is a problem state. Thanks

seconded

If the plan allows expenses to be paid from assets and a recent invoice that could have been paid from the plan was instead paid by the plan sponsor, the plan sponsor can submit that invoice to the plan for reimbursement.

This is a great point and should not be overlooked. If you had owner or HCEs only and gave immediate vesting but now there are NHCEs coming into the Plan and you want to add a vesting schedule, that might be an issue.

I don't think so. Years ago, back when the PS deduction limit was 15%, I did RK for the large/audited PS 401k of a very generous NFP that easily exceeded that threshold every year without issue. Total compensation and benefits still need to be reasonable but there's no hard coded limit of which I'm aware.

Yikes, I'd only roll those dice if I knew they were loaded and guaranteed to come up 7 or 11 as opposed to snake-eyes!