truphao

Love your thinking Joef, IRS does not have a chance against talented actuaries long term. The only issue I am thinking about is the income. I think you would have to demonstrate that so much income was earned between 12/29 and 12/31 to process the valid 401(k) deferral?

Jakyasar, I am not a big expert on this but I would be concerned if amending NRA to 62 from whatever bizarre formula it were before would open another Pandora box. Some questions I would be asking myself in your shoes: 1) Do I need to protect anything (anti-cutback)? 2) If I do, how would I do that? Can the same be accomplished by changing another provisions? (vesting, eligibility, etc.) 3) How would I make clear to the client that prior years are still an issue, and that the client/prior actuary/whoever and not me is responsible? Special language in Engagement Letter? 4) Anything else as I am sure I am not thinking of everything right now?

I do not think anyone is disagreeing with age 62 per se, your original question was focused on funding and that is what stirred the pot for me . I apologize for being a troublemaker.

Agree, but I think there is a valid argument to be made that a successful high profile trial attorney can be expected to retire earlier than 62. Yes, I am stretching but what I am trying to say is falls into "facts and circumstances" area. I strongly feel that the answer is "yes". For example, husband and wife run a successful real estate business (or mortgage company) together with the wife being 5 years younger. Can I really assume they both would be working until their individual age 65 (as NRA being age 65 in the plan doc)? Or do I assume (after learning that they want to be done when the husband is 65) that that is my assumed retirement date for both of them?

I am not sure I see the legal definition of NRA and the funding calculations as interrelated as you do. For example, one of my clients is a relatively young successful MD. I wrote the plan with NRA = 62 but we fund his plan based on the assumption he will be done at 50. That is what he stated his objective is and I am comfortable operating his plan based on that assumption. I definitely agree that 55 as NRA is not "kosher" but you did not provide the facts related to years of SVC - it might be that neither of those attorney can actually retire before 62?

I will take a shot: 1) Regarding NRA - being at least 55 I do not feel too bad about it although probably not the best 2) Regarding the funding - as an actuary you should make reasonable assumptions regarding the expected retirement age. The rest will follow. I hope I am not oversimplifying.

or alternatively demonstrate non-discrimination in amounts using appropriate compensation as testing comp

While I totally agree with Lou, I think it is important to consider if the retiring person is an HCE or not. If the person is not an HCE I would be OK (I think?) giving a larger lump sum to him/her on account of the admin delay.

yes, it would be 411(d)(6) violation. You have to preserve the accrued benefit as well as optional forms based on the $1,888. What is the reason you want to change the AE? If it is to "solve" the testing, I believe you are "stuck" for 2022. For 2023 you can change to 417(e) or GAR94 table before the Pay Credit is accrued and you should be OK (I am guessing the 2023 Pay Credit will bring you over $1,888).

This is a very interesting topic, so I am going to play a "devil's advocate" for a moment. What about an idea of treating the excess over 6% as "after-tax" contribution? Obviously, this is likely not to be supported by the Brokerage House "solo 401k" document. That can be addressed by restating the solo 401k doc before December 31st, can't it be?

I am not sure I agree. The key point is to avoid the prohibitive transaction (real estate, employer securities, arm-length, etc.). Contributing “marketable securities” feels ok to me and it boils down to proper determination of the market value for the deposit. Contributing CD feels ok.

I was talking about 2022.

Here is the situation. The prospect (S corp, just husband and wife) has started 401(k) Plan in 2021 using the free plan doc from Fidelity(?). Year-to-date no contributions/deferrals have been made so the account is sitting pretty with a zero balance. Obviously, that Plan Doc does not allow for any "fancy" stuff like Voluntary After-Tax ("VAT") contributions. Now the prospect would like to do the VAT contribution and do In-Plan conversion to Roth (for 2021 - what else is new - why not wait until New Year's Eve?). So, I am trying to think through viable options (given we are already in December): 1) Take the Plan and restate it on our plan document system, have the additional brokerage account opened (to accept VAT and conversion to Roth in the Plan) and help the prospect to get it done. I am concerned that Fidelity might not accommodate the existing account without them sponsoring the Plan doc. And it might take some extra time to sort it through which will diminish the opportunity to meet the objective by December 31 2) Leave the Fidelity Plan alone (and not fund it at all) and start a new 401(K) Plan for 2021 using our platform. That would leave an "empty" plan for some time and then later on I would terminate it. The shortcomings are having an extra Plan lingering around, cost of termination, extra 5500, etc. The whole nonsense but squared.... 3) Terminate Fidelity plan and start another one. Obviously this triggers the "replacement" plan issue. But the Fidelity Plan is empty and it should have never existed in a first place? All thoughts with pros and cons are appreciated. I apologize in advance if this does not make much sense because I am not a "401(k) guy" but unfortunately an actuary. Thank you.

oh well, while we are at it, how about a plan "permanency" issue? if this is a one year 1099 arrangement this might be a problem. Devil is in details.

This is also important for Combo Plans as certain degree of coordination on key provisions (and NRA is one of them) is desired/recommended between 401(k) and DB/CB plan.

demographics works the same for New Comparability and CB designs, doesn't it? The CB wins vs New Comp given everything else is equal

you get a much better results from the Owner perspective with adding a Cash Balance plan if you are thinking in a direction of New Comparability PS design. If money is there.

A small CB Plan is terminating. 2 participants have elected deferred annuity. 3 participants with a balance of 5K did not return the forms. Cumulative value for those 5 is about 60K. Need a recommendation/reference/contact info who would underwrite this if anyone? What are the options if no insurance carrier is interested?

I concur - please note the new vesting schedule will apply to all those who have not entered the plan yet - and not to only post 1/1/2023 hires. If the objective is different, tweak the amendment language to accommodate.

I have been using anything from 3% to 6% range depending on client's objectives. Although it does not appear "illegal" to use a fixed rate below 3% I personally not comfortable pushing it lower than 3%. However, I did a couple of designs using 30/10 Yr Treasury rates (variable, oh) when the objectives were met with sub-3% rate.

Lou, Here is one word of caution. Although the Alternative Method might yield a lower premium for 2022 you will lock yourself into using the Alternative Method for 2022 and 4 following years. Which means your plan is going to miss on the recent rates increases (which are quite material) for 2023 and beyond. I would not do it a change to Alternative Method unless your plan is terminating soon.

when you do the merger effective 12.31.2022 merge "old" plan into the new one to address "permanency" issue (I am assuming "old plan" has been in existence for a while).

Establish a new PS Plan retro for 2021. You do not need to file 5500 for 2021 for that plan. You will need to file a separate 5500 for that PS for 2022. Merge existing 401(k) and newly established PS effective 12.31.2022.

I have been e-signing pdfs in Adobe for at least 4 years. I suspect there might be a waiting list in the "actuarial jail"