Jakyasar

WASHINGTON The Internal Revenue Service today announced cost of living adjustments applicable to dollar limitations for pen (irs.gov)

I totally agree but wanted to check if I was missing anything as usual

Hi Here is a new one for me. Having a discussion with a broker about which table to use for a DC plan RMD calculation. I never heard of this before. Age difference between the 2 spouses is 20 years. The broker wants to use uniform versus J&S table. If uniform, the RMD is 10,000, if J&S table, RMD is 7,000 (making up numbers) Q1: Can the table be optional? Q2: Assuming not optional, should not the excess 3,000 distribution be subject to in-service and 20% withholding rules? Q3: Plan normal form is lump sum and no spousal consent is required for distributions but still, need to complete a distribution election form for the extra 3,000 distribution? Q4: none of the above as they can choose between the 2 table and either number is ok under RMD rules??? Any other questions I am not thinking of/not asking? Any comments are appreciated. Thanks

Hi Lou Great ideas. Thank you

Hi Asking for a CPA friend of mine. Corporation A. Joe's year of birth is 1952. So Joe will be 73 in 2025 Joe owns 10%, Joe's wife owns 1% and Joe's son owns 89% Joe will sell 8% to his son in 2023. Is there anything I cannot think of that would allow Jow to defer RMD until forever? Also, assuming Joe needs to start RMD, 2025 is the first year, correct? Thanks

How is this different than allowing in-service distribution after NRA? Just curious.

May I ask why not doing a conversion? Cusefan has very good points and then some to the reasoning of terminating. This way, you will continue with the very high deduction limits, not to worry about prior distribution adjustments, establishing new salary history etc etc. Simply do the conversion at end of the year with the (A+B) method - only permitted method. Of course, I have no idea what the facts and circumstances are here so everything I am saying above is from my point of view.

If that is the case as Lou pointed out, on very simplistic approach (1st grade math), to get to roughly 3.4M (415 lump sum limit at 62 assuming a minimum of 10 years of participation and minimum 265k salary average), put in as the future value on the calculator, interest rate at 5.5% and number of years would be from current age to age 62 and do annual interest accumulation (this is compound interest but again who cares illustration here) For example, if you are age 52 today, making a salary of over 265k+ and want to fund the plan for 10 years to maximize lump sum at 62, on average you need to contribute approximately 250k (could be different if you calculate beginning of year deposit vs end of year deposit) Now for cash balance purposes, if you want to maximize, you can show a pay credit of 250k/year on the participant statement. Year 2 would show 250k plus the interest credit plus another 250k pay credit and so on. As others mentioned, contribution, in practicality, does not match the pay credit due some other factors like return on investments, IRS mandated segment rates etc etc etc. As I said, this is a very very simplified version of the calculations. A lot more goes into though. On a side note, on the participant statement, there is no limit shown, just what your document states - contributions made are not on the participant statements but on SAR/AFN to be provided to the participants. There are some programs out there that may insert "exceeded 415 limit". Everyone is different. FWIW.

Hi Luke Both numerator and denominator are the same. 2 active and 3 terminated, all have benefits in excess of 0.5% on the average in the past. I am not sure about the top heavy response as no key is benefitting in either plan and only PS provisions exist, no 401k deferrals or SH.

As an addendum for the prior benefit structure, there were no other terminated participants paid out so what you see is what you have. Does it matter if the 3 terminees (terminated in prior years) are not fully vested? Reread 1.401(a)(26)-3 and may be there is hope to pass under prior structure rule but again fried brain and would love to hear from the gurus out there.

Hi Totally fried brain so will ask the following stupid questions Frozen CB plan (frozen early 2023 hard freeze i.e. no new entry+ no accruals to anyone): Top heavy Title I (no PBGC) Underfunded i.e. assets are less than the total account balance Covering 2 owners and a few previously terminated participants. 2 additional non-owner employees, one HCE and one non-HCE categorically excluded PS Plan: Not top heavy Only PS provisions No contribution for 2023 Top heavy benefits are provided under PS plan and only to non-keys (no top heavy provisions under the CB) Combined plans are top heavy and plans were aggregated in the past for testing. Questions: I believe I have to pass 401a26 within the CB plan i.e. at least 2 must get meaningful benefit, agree? If prior benefit structure would work, how would I test it (I am always confused with this). I have 2 active and 3 inactive participants, all with meaningful benefits prior to freeze. Any thoughts on this? Assuming I need to provide the meaningful benefits and only to the 2 non-owner participants, I do not have to provide any top heavy under the PS plan as long as the keys do not get any allocation in either CB or PS plans, agree? What else am I not thinking of/asking about? Thank you.

Report the attorney to the proper authorities, totally illegal. Unbelievable.

Wow, thank you for additional comments. I am trying to avoid any ugly threats, will see if I am hired first.

Thank you, nice advice but I am not yet hired nor have decided to take over the client. I doubt PBGC will allow me to be filing coordinator yet, especially without the client's consent/approval nor I want to be.

Trying to avoid any unpleasant experiences with prior TPA. Lou, I am aware of the reasons but I was asked why and that is why trying to get some info for 2023, I have nothing to work with at this time. So I told the sponsor to pay and if needed to be corrected, will do later. Also, thank you for the suggestion but I think the sponsor is clueless prior TPA never explained anything to them. If I accept this plan, I have a feeling I am going get a lot crap info, if any. To be seen.

Prior TPA will not provide any access. I tried to get in with my access hoping to get something but to no avail.

Hi May be taking over a DB plan where prior TPA is most uncooperative. Client does not have any prior PBGC filings and got a premium payment that seems to be high, according to him. He does not remember what happened in the past 2 years. Like EFAST for 5500SF, is there a way to find a list of prior PBGC filings? Thanks

Sometimes you miss it if you are making a lot of dough. I will suggest Brenda's approach.

Your guess is as good as mine.

Thank you for the input

Hi Question for 401 gurus. Non-HCE participant deferred $8,000 on 2022 w-2 (1,000 per paycheck) and terminated after 8 paychecks. Just found out that they deposited another $1,000 without a paycheck i.e. $9,000 was deposited during 2022. As only $8,000 was on the w-2, how is this corrected? Earnings are pennies as all invested in cash. Thanks

I do not see how retroactive termination is possible. no paperwork in place. As Tom said, 1 year rule would not have been satisfied but it is a moot point, you do not have a resolution to terminate going back to 2021. You mentioned the plan is frozen for some years now. Let's assume hard freeze and no 401a26 issues (you mentioned not covered by PBGC so may have issues, up to the actuary to decide/test) Given no benefit accruals and severe underfunding the only cost is usually generated thru amortization of shortfall. Did they try the new 15 year amortization schedule as it would reduce the required contribution somewhat? Just my 2 cents.

If this is for 2022, I do not know the answer but if for 2023, you can simply amend one of the plans now and be done with.

Hi Someone I work with told me that line 19 - discounted contributions - attachment is not required unless the plan is subject to quarterly payments i.e. if less than 100% funded in the prior year. I reread the instructions on SB and seems to be supporting this. I always attach to avoid any misses. Any comments are appreciated.

Allow me to take it up a notch and make an argument - good or bad From FIS attachment Paul provided "In Private Letter Ruling 201229012, the IRS ruled that a plan does not include the compensation of a participant who is only eligible for the elective deferral portion of the plan (i.e., not benefiting under the nonelective or matching portions of the plan)." In literal reading, it states that "the participant is only eligible for deferral" i.e. excluded from PS portion of the plan. If I read this literally, I agree that the compensation is not included in 404 On the ASPPA-ASAP, last paragraph, 6th line from the bottom, it states "401k only participant". Again, in literal reading, possibly excluded from the PS allocation. Let's keep in mind that a PLR is an opinion and not the law and specific to a certain plan. Just playing both sides here. IMHO, always provide a minimal allocation, whatever you are comfortable with but definitely not $1 unless the salary is $10 or less.