truphao

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"

what about the situation when the Plan did not get established until 2022 but Employer/Owner made the Resolution to establish the Plan on 12.30.2021 and stated in writing to defer the maximum amount allowable under the law? The Employer in my question is a Sole-Prop with no employees. I have advised against it (to stay on the conservative side) but I am still curious.

LMAO @ Oh, they know

What about amending the plan to allow in-service? I do not think there is a way around 110%.

Thank you Calavera, very helpful, I forgot to look pre-PPA although I miss those times!

neither do I as long as plan documents (both) allow that

You can wait until September 15, 2021 to set up (and deduct) for 2020. Not like you want to do that..:)

thank you, guys, great points. Fortunately, neither 415 nor non-discrim are getting in a way. Truly appreciate all the comments.

Hello DB Plans Community, Here is the situation. I just took over the defined benefit plan. It has less than 100 participants (but more than 25). All the participants are either receiving payments or terminated vested (however I am not sure it is relevant to my question). AFN for 2019 has not been issued yet. Some of the quarterly payments for 2019 Plan Year have been made late (more than 60 days late it is). Plan sponsor made the required payments by October 15, 2020 to avoid the funding deficiency for 2019 plan year. From 5500 has been filed timely without funding deficiency. I would like to issue the AFN as soon as possible since it was due October 15. Am I correct? Do I need to issue a notification to participants regarding the “late quarterlies”? I believe I do. If so, I would like to include the language notifying the participants regarding “missed quarterly payments” and “the corrective action” as part of the AFN. Where can I find a sample of the “notification and correction” language? Thank you in advance.

yes, the seller is one of the employees. The benefits going to other employees are not larger than a potential tax saving. From purchaser perspective it makes sense since the purchaser DB is really well funded on ongoing basis (almost 100% funded on termination basis). From the seller perspective it is desirable as well as a way to shift the taxation to a personal level on deferred basis (via receiving DB payments in future). Am I getting the concept correctly? How one would report it on 8594?

Totally agree however I am trying to develop a conceptual understanding rather than receive a technical advise. Basically, I am trying to get myself to a level of understanding of what to ask a tax advisor.

My client that is sponsoring a defined benefit plan is considering an acquisition of another business. In scenario 1 the purchaser makes 100% cash deal and pays $3,000,000. In scenario II the purchaser pays $500,000 and covers all employees of the acquired company in the DB plan granting past service back to original date of hire with the seller. Lets assume that the value of the accrued benefits one day after the deal is $2,500,000. How does the Scenario II impact the taxation from both the buyer and the seller perspective? How is the Form 8594 prepared to report the transaction? Are there any other considerations? All the coverage, non-discrim, participations, etc. issues before and after the transaction are non-issue. Thank you in advance.