truphao

existing 401(k) SH match is TH. Starting a new combo (CB + stand-alone PS) effective 1/1/2023. Owners are covered in all 3 plans. Am I correct that my new (CB +PS combo) is TH (thus, I need to give 5% immediately vested TH allocation in the PS paln) in spite of the fact it is their first year?

There are several issues at play here. 1) While the plan might not be underfunded on Funding Target basis it still can be underfunded on Plan Termination basis (Total of Accumulated Cash Balances is more than the current assets in the trust). This is for an actuary (plan actuary or an independent actuary you might hire) to review and explain. 2) 110% limitation applies to top-25 highest paid ever. It might or might not have an impact on your spouse. This is for the plan actuary to determine. Please be aware there is quite a bit of latitude how to calculate 110% test (funding basis, plan termination basis, etc.). The test needs to be satisfied AFTER the payout. Most likely your spouse (as individual participant) is not able to "manipulate" the process in your favor since this would be a plan sponsor/plan administratior function. 3) Allocation of pension expense to individual partners is definitely governed by the partnership agreements, review that carefully, ideally with legal assistantce. 4) It sounds like you are going to challenge the existing processes/administrative processes. If so, the plan's actuary might find herself in an akward position facing a potential conflict of interest. The plan's actuary job is to assure the proper administration of the plan in accordance with the legal plan document and the current laws. I personally would probably turn that type of inquiry from an individual partner down. You might want to consider hiring your own actuary for evaluation of the best options form your perspective. 5) Keep in mind that your spouse does not need to take the money upon termination. She has a right to simply leave it in and wait until the funding improves and keep earning interest while waiting. If she is responsible for underfunding of the plan or not mostly likely it would be on the partnesrship agreement level.

I think Joe gets only 3% rather than 5% in yuor example. If I recall correctly the regs refer to "participation" or "accrual of benefit" concepts. I would reread 416 regs Q&A Part M?

I am under impression that for Roth there is a requirement to have a separate subaccount within the Plan. Thus, in addition to the precise election forms management, there is an additional step of doing a physical transfer from "main" account to a Roth subbaccount.

sorry, I wish I were more helpful. My clients are all ideal and behave exceptionally well. Always communicate business changes well in advance, never dance around reasonable compenation issues and always do exactly what I tell them to do. Never inadvertently buy life insurance within the plan nor ever invest in limited partnesrships or collectible art. Aggrrhhhhh.

regarding #1 - nah, I think 3(c)(3) applies. regarding #2 - I am of opinion that retro amendment does not fly here, but I would need revisit the guidance regarding the look-backs and stability periods. There were bunch of interesting questions back in 2004/2005?? addressed by both the oficial guidnce and the Graybooks. In any case, November might work producing the result which will not interfere. Play the numbers game first before turning onto the legal creativity route. I would also model delaying the payout until 2025 while starting in-service distributions (beyond RMD amounts) to bring the assets below the formula-based benefit; thus the owner can waive upon termination. Hopefully, interest rates would come down next year but it is a speculative bet obviously.

"So APR drops to 6.30 and lump sum limit would then be 6.30 * 200K = 1,260,000" - That is your answer given the facts you provided. However, you also need to check vs LS based on 417(e) rates. Dependent on your plan documnet choice of the look-up month the final LS might be limited even further (October 2022 looks pretty bad and the whole 2024 will be facing same issues).

we would need to know a bit more about the nature of the partnership to narrow down the course of action.

IMHO, the big issue if you were even allowed to have a "solo 401(k)" (it is a marketing term, 401(k) is a 401(k)) just for yourself in a first place. Please elaborate the specifics on the business situation.

David, this is just my personal preference on account of 2 items: 1) CB Plans are much easier to explain 2) More flexibility (IMHO) to control the costs should the income change Both might be more of a perception rather than a reality. I appreciate the feedback as always.

A client (sole-proprietorship, one person, income way over IRS comp limit) has decided to install a CB plan for 2023. Unfortunately, he has already fully funded his "solo 401(k)" plan at full $66,000. So now he has to remove the excess of $23,700 (plus earnings). His "solo 401(k)" is with one of the Big 3 (Schwab, Fidelity, Vanguagrd) using their simplified "solo 401(k)" documents which does not allow for "voluntary after-tax" nor for in-plan Roth conversion. Is the following approach available (all done before December 31st): 1) Restate his plan using the customized plan document which will allow for VAT and In-Plan Roth conversion 2) Treat the excess of $23,700 as after-tax deposit 3) Do In-Plan Roth conversion of $23,700 (plus earnings) Normally, I would say no on account of timing of the deposit being made before the provision is in the document. However, I am wondering if the sole-proprietorship nature of the business changes the answer since all the compensation is deemed to be earned on December 31st?

the existing arrangements will discontinue, special situation

multiple, looking for multi-state solution, OR, TX

David, totally agree. Do you know if anyone providing plan doc services for these type of plans?

without diving into overall complexity I think it boils down to having 1 plan or several plans. On a surface this smells like it is/should have been a single plan. If so, then you might be facing incorrect prior years' testings and inappropriate F5500 filings. Then, it becomes a question regarding what is the best way to correct. You should retain a knowledgeable service provider to at least evelaute the proper course of action.

I am aware of non-applicability of ERISA. It is a good practice to have a plan document rather than operating by ordinances. I think FL is the same way as PA. Was hoping that some vendor offers those BPD and AA that are easy to manage.

Which vendor is accomodating the prototype plan document services for municipal defined benefit plans?

Which vendor is accomodating the prototype plan document services for municipal defined benefit plans?

it is a smaller of 50 participants or 40% of employees but no less than 2 people (unless 1 owner).

it is allowed if it is allowed by the Document. It is a benefit/right/feature so proceed accordingly if it is not owners-only plan.

also look for a "deemed cashout" language

let's think about the meaning of the "business' closure". If the business is sold (stock transaction), then yes, it is closed from the original Owner perspective. And the plan btw follows the business. If it is sold as assets sale (or simply stopped the business activity all together), the original business still exists albeit not doing any business activity. In that case I think there is some grace period (1 year? may be even more) before the Owner has to do something. But this really becomes a question for the CPA.

yes, the rule of thumb is that a new plan ought to be "materially different" from the one which is terminating. Obv, IRS has never defined "materially different" so it is up to a practitioner to interpret. I have seen positions taken that a different interest crediting rate (old plan 5%, new plan 3%) is a "materially different". Going from DB design to CB design feels OK.

Starting a general discussion rather than a specific question.... As we know returns during 2022 were bad, 2023 is still iffy but not exactly great either....Which means that PBGC premiums for 2024 using a lookback (1/1/2023 for BOY vals and 12/31/2023 for EOY vals) might be a quite unpleasant surprise especially for plans that started 3-4 years ago and are just hitting the "vested" point. So, I am curious what others think about the "opting out of look back": 1) Is it realistic for PBGC to approve? 2) Does the 60 days advance application to PBGC mean October 31st deadline? 3) I realize that for EOY val date it is not practical (valuation results are not available until 2.5 months AFTER the premium is due) however: I believe PBGC filing can be done on an "estimated" basis with the subsequent "true-up". Yes, it is an additional work but might be worth it? Or not? Is it likely to get approved by the PBGC? Has anyone ever done something like this? Are there any other considerations or concerns? TIA.

Lou, I am going to start a new topic on this notion.....