C. B. Zeller

This might meet the definition of an orphan plan. There are rules under EPCRS for determining a new plan administrator and terminating an orphan plan. See https://www.irs.gov/retirement-plans/plan-sponsor/fixing-common-plan-mistakes-using-epcrs-to-terminate-an-orphan-plan

Loan payments can be suspended during an unpaid leave of absence of up to 1 year. This does not extend the 5 year maximum loan term. The outstanding balance of the loan should be reamortized into level payments upon the participant's return to work.

The 415 limit doesn't change - but catch-up contributions are not considered when applying the 415 limit. You have deferrals of 22,500. That exceeds the 402(g) limit by 4,000, so 4,000 of that is reclassified as catch-up. The remaining 18,500 deferral continues to be counted as annual additions. Then you make an employer contribution of 38,500. Add that to your 18,500 and you now have 57,000 in annual additions. This exceeds the 415(c) limit by 2,000 so 2,000 of your 18,500 deferral is reclassified as catch-up. So you end up with annual additions of 16,500 (deferrals) + 38,500 (employer) = 55,000 which satisfies 415, plus 4,000 (exceeded 402(g) limit) + 2,000 (exceeded 415(c) limit) = 6,000 catch-up contributions.

If anyone is interested in a mathematical analysis of this question, here is something I put together a while ago. Hopefully this puts the question to bed for anyone who is still unconvinced. https://drive.google.com/file/d/1A2V2lkI6r9kL9YQPLA7beRmcmCOwJ6PU/view

New comp does not mean cross-tested! Well, it kinda does, but the way the term "new comp" is used really means "allocate based on groups with each participant in their own group." You can still test on allocation rates with permitted disparity.

Here are a couple of older discussions I found: And another one discussing the topic from the other angle, i.e. what if you started RMDs while still employed because you were a 5% owner, then subsequently become not a 5% owner, do you have to continue taking RMDs (yes you do):

It definitely does seem like it goes against the spirit of the RMD rules, but the definition is pretty black-and-white. Besides the code section mentioned above, see also reg 1.401(a)(9)-2 A-2(c). It's also been discussed on these boards before, I'll see if I can't dig up a link. For what it's worth, I agree with your example, assuming that the S-corp did not exist until after the end of the calendar year in which he turned 70-1/2.

It is correct that the RBD is based on whether or not you were a 5% owner in the year you turned 70-1/2, so if the company did not exist in that year then you cannot be a 5% owner for purposes of 401(a)(9). HOWEVER: If the entity that would be adopting the plan is a sole proprietorship, then consider that a sole proprietorship is considered to be indistinguishable from the owner. Does an individual own 100% of themselves? At all times or only when business activity begins? It is not clear what the implications of this are for RMDs. If the plan you were intending to adopt is a profit sharing plan, then there must be recurring and substantial contributions in order to have a bona fide plan. If it is just set up to hold an rollover for an indefinite period of time then it would be considered terminated. Also, consider the risks if the IRS decides that the arrangement is not legit for whatever reason. The penalties for non-payment of RMDs is quite steep. I wouldn't play games with it.

Depends what you mean by "not active." Does the 3rd partner have comp that is eligible for deferral and simply elected not to defer? Then include him in the test. Is he a limited partner that contributes capital to the partnership but not any personal services? Then he would not be included.

Assuming that there was not a blackout period and this was simply a change of funds... The requirement to provide a notice 30-60 days before the available investments change is part of 404(c). Therefore the plan was not in compliance with 404(c) during the period of time from when the investments changed to at least 30 days after the date that the notice was provided. Plans are not required to comply with 404(c) so there isn't a risk of disqualification, but the sponsor could potentially be at risk as a fiduciary for any losses that occurred. Essentially a participant could come back and say, if I had been provided this notice in a timely manner I would have done X, but since I wasn't given the opportunity, the investments did Y and I'm holding the plan sponsor responsible for the difference. I don't think there is a prescribed correction for this type of failure. What I would say is give out the notice now, and if anyone raises a stink, be prepared to credit them any earnings that they might have earned had they been able to make a timely election.

I agree the plan is not required to accept the payment (unless it would otherwise accept a rollover contribution from a terminated former participant). The new tax law extends the deadline for an individual to roll over a qualified loan offset by making the payment to an IRA or other qualified plan, it does not require the plan that originally held the loan to extend the period that it will accept repayment.

A colleague of mine had a plan that was under IRS audit a number of years ago. The IRS agent insisted that the BOY count on the 5500 should be equal to the prior year 5500 EOY, regardless of any new entrants/class exclusions that were effective on the first day of the year. This "rule" is not in writing anywhere so maybe you can take your chances and use a different BOY count from the prior EOY.

The pay credit does not have to be based on current compensation, it can also be a flat dollar amount! Really it could be almost anything else you can think of as long as it satisfies the rate of accrual rules of 411(b). Your document software might not support formulas other than percentage of pay or flat dollar amount, but that is a separate issue.

Any chance your session will be available on a webcast at some point in the future? LA is sadly not on the agenda this year.

The ability to use the extra funding cushion from expected future salary increases is a good reason to use a traditional DB design. Hopefully we will get 404(o) regs one day that will provide some parity for cash balance plans.

I have to disagree about the one-life cash balance plans. It is still easier for the average business owner to understand accrued benefits when said benefits are expressed as pay credits and interest credits. And since they're always interested in eventually taking a lump sum benefit, it makes it simple when designing the plan to demonstrate how those pay credits and interest credits add up to their eventual lump sum.

Even if Title I of ERISA does not apply, the plan is still subject to IRC 4975. Since it's an S-corp, the owner's wages are reported on a W-2 and the deferrals must be withheld by the end of the year. Once they are withheld from pay they become an asset of the plan and use of plan assets by a disqualified person is a prohibited transaction (exemptions notwithstanding). Like ETA said, there are no black-and-white rules on this, but the DOL 7-day safe harbor is probably a reasonable standard.

The effective date of a restatement is generally the first day of the plan year in which the restated document is adopted. However a retroactive amendment, particularly an -11(g) amendment, can be effective back to the first day of the prior plan year provided it is adopted in time. For example you could adopt a restatement in April 2019, effective 1/1/19, then adopt a corrective amendment in September 2019 effective 1/1/18. Are there any issues with adopting an amendment with an effective date prior to the effective date of the document being amended?

The 401(k) and 401(m) features must be disaggregated and tested separately. If there is a profit sharing or other employer nonelective contribution happening in the 401(k) plan, then it may be permissively aggregated for testing with the profit sharing plan and/or cash balance plan. The profit sharing and cash balance plans may be permissively aggregated for testing. It is not required however most common plan designs will not pass without being aggregated. For top heavy, see the mandatory aggregation rules in the 416 regs. In particular, all plans which cover a key employee, or covered a key employee in the last 5 years, must be aggregated for top heavy. All plans which must be aggregated in order to pass coverage and nondiscrimination must be aggregated for top heavy.

What do you mean by "Roth profit sharing?"

Since distributions can commence immediately upon termination, the definition of "earliest retirement age" from 1.401(a)(20) A-17(b)(2) applies. Consequently the definition of QPSA from 417(c)(1)(A)(i) applies. In other words, the QPSA is the survivor annuity if the participant retired and took an immediate annuity the day before death. Which from what you described sounds like it means no subsidy.

If you want to play it safe(r), make it profit sharing only for 2018 and deferrals/match effective 1/1/19. If all employees have the same opportunity to defer, then you could make the 401(k) effective in December, but consider the timeliness of the contributions. Assuming at least some of them are W-2 employees, their deferrals must be withheld from their pay by 12/31 and invested within 7 business days*. Will the investment provider be ready to accept contributions by then? *7 business days is the safe harbor for small plans, and the requirement is that they be segregated from the employer's general assets, not necessarily invested. However it seems unwise to keep the money (which is now a plan asset) uninvested.

The minimum funding standard is equal to the target normal cost plus the shortfall amortization charge. There could be no minimum required contribution in the first year if they obtained a waiver of the minimum funding standard, but in the second year the waiver amortization charge would apply and amortizations of prior funding waivers cannot themselves be waived. Does the schedule SB show a funding deficiency?

Thanks for the reply. It turned out that the employee actually terminated employment with B before the end of the year, so that answered the question for us. I am still curious to know though if there is a definitive answer in the original situation.

If this is a 414(k) arrangement, e.g. voluntary after-tax employee contributions in separate accounts in a DB plan, then "Rev. Rul. 69-277 provides that a pension plan may permit distribution to an employee of amounts attributable to the employee's after-tax contributions prior to the employee's termination of employment." (as cited in rev rul 2004-12) The only other situation I can think of that allows DC contributions in a DB plan is the rare and elusive 414(x), a.k.a. DB-k plan. If you have one of those, then I think 401(k) rules apply.