CuseFan

Lou is correct, especially when saying to check the document (which should always be the first point of reference). All the pre-approved plans I've seen specifically tell you what to do. For example, in FTW it's clear the person would enter 8/31/2017. Section 3.02 TRANSFERS If a change in job classification or a transfer results in an individual no longer qualifying as an Eligible Employee, such Employee shall cease to be a Participant for purposes of Article 4 (or shall not become eligible to become a Participant) as of the effective date of such change of job classification or transfer. Should such Employee again qualify as an Eligible Employee or if an Employee who was not previously an Eligible Employee becomes an Eligible Employee, he shall become a Participant for purposes of Article 4 for which the eligibility requirements have been satisfied as of the later of the effective date of such subsequent change of status or the date the Employee meets the eligibility requirements of this Article 3.

QDRO necessary for what? A QDRO is an optional legal division of retirement plan benefits. Even in a divorce a QDRO is not a given. If you aren't splitting benefits between two parties here, there is no reason for a QDRO. If you are, or the parties want to, then you need a QDRO.

Assuming there were no discretionary/non-statutory changes in the restatement, you should be OK.

They would if they were being cross-tested. As Tom noted - you test the OEs separately on an allocation basis, so that group does not need the gateway.

Exactly. The answer(s) is (are) dramatically different if you are 35 or 55, have recession-proof employment or not, married/single, primary/secondary wage earner, etc. and ultimately, what lets you sleep at night. Good luck.

I'm not a user of the software so I can't opine on its coding to produce proper results, but the simple math is that you have 12 non-excludable employees and 4 who benefit in the cash balance plan, for a participation rate of 33 1/3% which as you note fails minimum participation. It could be that there were 10 non-excludable employees at the start, so 401(a)(26) passed, but then wasn't looked at again, or the intent was to amend under 11(g) to bring in an NHCE or two as needed, or maybe there is already a failsafe provision already in the plan?

It's an actual ROR on plan assets ICR, and the plan had a loss for the year, and to get a normal accrual rate we project using the plan's current ICR (or using zero if negative). Using accrued to date, instead of projecting current credit to NRA at 0% we project the account balance, so that's only going to help if there was a history of substantial interest credits in prior years. Unfortunately, that is not the case. Thanks

Exactly. We think of PS as a qualified retirement plan contribution, but the context of the contract may solely refer to the distribution of profit sharing, i.e., essentially bonuses.

Simple, the vesting clock starts ticking on the later of the plan's effective date or the employee's date of hire.

If you were able to pay the bill, then it can be questionable whether you actually have a hardship. If you are asking if you need to make a partial payment, but not be able to make full payment in order to qualify for hardship, I think the answer is "no" that wouldn't make sense.

Also, is this income subject to SECA taxes? If not, it's not earned income regardless and not "pensionable".

Thanks Tom, all I could think about while reading this was the movie Scanners, and the Big Bang Theory episode where Sheldon tries to explode Leonard's head.

Accrued to date for 401(a)(26)?

So the document says, "if the plan fails minimum participation, then...." My contention is the plan doesn't fail because this particular benefit is meaningful. Furthermore, the plan limits participation to owners and spouses, and we have enough for 40% participation, so it's not a situation where NHCEs are not hitting that 0.5% threshold. I also read a reputable actuary's article about the problem with low interest rates and minimum participation issues, and I agree that can happen, especially with a plan covering NHCEs. The article was followed up by an attached statement/comment by another actuary in same firm that the 0.5% threshold does not apply to shareholders, but he gave no specific cite or reason for backup. Given that the IRS memo was written in the context of providing low allocations to NHCEs and claiming such to be benefiting, which they view as abusive, I can see not having to apply the threshold to owners. This was blip for 2018 because interest was negative and so we project at zero, so we may just increase this owner to 6.5% or 7% of pay to avoid "actuarial controversy" in the future, which is ironic in the context of the IRS memo and the abuses it is trying to attack.

If you have it, the Cash Balance Answer Book shows exactly how to convert the contribution credit/accrued benefit to an equivalent contribution. You may be able to restructure and pair old NHCE with young partner, testing on contribution basis, and older partner with younger NHCE on a benefits basis.

For nondiscrimination testing we have to project at zero. I agree that assuming all future years are zero is not reasonable, but I don't see a basis for using a different rate for 401(a)(26) so the math works out. My argument is more that assumption is unreasonable so ignore it and look at the facts and circumstances, which how can a 5% allocation not be considered meaningful? Just wondering if anyone out there is making that case or toeing the 0.5% line arbitrarily determined by IRS in a different world over 15 years ago?

Maybe, depends on how plan is written to calculate lump sum, usually it is calculated as the PV of the deferred NRB not the immediate annuity. Also be wary of the actuarial reductions on the 415 limit which affect the lump sum. Eliminating the plan's actuarial reduction for early commencement doesn't get rid of the 415 reduction (only the plan rate comparison), but it does buy you 3 years (65 to 62) w/o reduction.

Having a discussion with a colleague regarding minimum participation under IRC Section 401(a)(26), the IRS memo-induced 0.5% accrual rate threshold and cash balance plans that use actual rate of return interest crediting rates (ROR ICR). HCE with comp of $260k and $13k contribution credit (5% of pay) in an ROR ICR plan has a 0.39% normal accrual rate due to negative return in 2018 and zero percent projected interest, causing the plan to fail 401(a)(26) if one applied the IRS memo as if it were law or regulation (which it is not), whereas I argue that in what facts and circumstances universe (which is the law and regulation) is a 5% annual credit not meaningful, and why should a one-year interest rate hiccup/blip turn a very meaningful credit into one that is not? By that standard, every ROR ICR plan that does not have a contribution credit in excess of 6% for 40% or 50 employees would otherwise fail 401(a)(26) every year they experienced an investment loss and would be required to increase contribution credits. I find that ludicrous, and it ultimately creates a de facto (albeit indirect) interest credit floor so to speak, which you could not do directly because of the market ICR rules. So ROR is good, employee wins, ROR is bad, employee still wins - yes, that's kind of the DB premise, but it's not the market rate premise. Thoughts from those with experience on ROR ICR plans and dealings with IRS on the issue, including the 0.5% accrual rate line in the sand. Thanks

Maybe a typo? I would see what the prior version of the document had.

Exactly. Partners in a partnership don't get a W-2, but if they are in partnership retirement plan they are not eligible for deductible IRA either (assuming over income thresholds).

Plan itself was in effect for full year, just the match provision was added 7/1, correct? The plan document and it's definition of compensation should provide guidance, this isn't a Code cite issue. If pre-participation compensation is excluded with respect to a plan component (i.e., money type) and the plan clearly states the match is effective 7/1 then you should count compensation from there. Whether client wanted to base on pay from 7/1 or include full year pay should have been discussed in advance and made clear in the document.

Exactly - either way you have a correct rollover eligible amount to report and then, depending on repayment or not, an excess amount not eligible for rollover that may need to be reported.

Then you have an operational error to correct and forfeiting contributions to which they were not entitled, and attributable earnings, is the proper correction. Regarding the owner that left and rolled over the distribution - correction is not complete unless/until they inform that person and attempt to retrieve the distribution (and earnings) and correct the tax reporting.

Client is interested in a lump sum window - they did one a couple of years ago with limited success, but want to consider "sweetening the pot" to improve the take rate. Is there a way to enhance the lump sum value without also increasing the annuity benefit? My thought is no, because the QJSA must be as valuable as any other option except a lump sum determined using applicable mortality and interest. So I don't think I can just use better AE assumptions, like an artificially low interest rate, to drive up my lump sum, correct? Can I use different overall assumptions and/or calculation methodology just for the window period - as it is not considered part of the accrued benefit? For example, could I add 3 years to a person's assumed age and/or decrease the actuarial reduction for early commencement, and calculate the lump sum as the present value of the immediate annuity rather than the annuity deferred to NRA? I'm sure I can do the first part, but not sure about changing the lump sum calculation methodology. The goal is to enhance the attractiveness of the immediate lump sum compared to the immediate or deferred annuity. Thanks

Google "taxation of VEBA withdrawals" and you'll find a lot, including this, which indicates that distributions for qualified medical expenses should not be taxable. However, just because distributions were reported to IRS does not mean they were reported as taxable - double check your 1099. If you still have questions, contact the plan administrator, which should be listed in your Summary Plan Description. Hope this helps, good luck. https://www.investopedia.com/terms/v/voluntaryemployeesassoc.asp