Jakyasar

Thank you both for your input, I am in 100% agreement.

One thought, how about VCP?

In total agreement on that. I guess no way out of this.

This is not one of those situations where self-correction can be applied, correct? I already mentioned attorney was looking for some options I did not think of/know.

If this was discussed before, my apologies. This is unchartered territory for me. Helping a CPA friend. For a new db plan effective 1/1/2022 that is still not adopted as of today. One of his clients deposited 200k into an account by 4/18/2023 and filed the 2022 tax return without an extension. I do not understand how the broker accepted this deposit without an executed plan/trust document. This client's actuary either never told him about the document deadline or did not do it or dropped the ball or there was a miscommunication, who knows. I do not have all the facts. So, the bottom line, there is no plan document signed by 4/18/2023 and prior to any deposits. Apparently, the actuary is now trying to file form 5300 for an "advanced determination on the qualification of the plan", whatever that means. Are there any corrective measures that can be done here? Assume no resolution was signed by 4/18/2023. Thanks in "advance".

Logically (if there is one), as long as the plan is active (as of disqualification date), shouldn't the SB be done, even if for a short year? Also, what is the harm doing one other than paying an actuary? Was this plan covered by PBGC? If yes, how is PBGC taking this? As Luke said, does the plan cover and non-substantial owners? If yes, what happens to their benefits? Thinking out loud.

RIP Tom Finneran. He had a session on this a few years back with Jim Holland.

Oh yeah, East coast/West coast, 2 different schools. 15k is assumed to be actuarially adjusted. I do not believe that the amount should not be adjusted. You got paid a LS 15 years ago which should not be the same value today. The question here would be how to adjust it from 15 years ago to the date of 415 determination i.e. what actuarial assumptions. This is another unresolved discussion. I am approaching from the most conservative angle i.e. using 100% of pay limit aka 24.4k and reducing it by 15k (prior distribution) and applying 417e@73@5.5% and coming up with the most conservative 415 LS, IMHO. Tx for your comments

Hi First thanks for the link. I am quite aware of the MASD issues but that is not what I am trying to understand here. The question, simply put, which method do I use for determining the remaining AB, based on 100% of pay or AE of 415 dollar limit at attained age? I am leaning on 100% of pay, to be very conservative. In my case, it is fine but if someone wanted to push the limits, would the dollar limit be reasonable? The rest is he said/she said.

Hi Might be a stupid question, also made up numbers to understand the method. Assume all calculations are for 2022. 73 year old has a prior db distribution, let's say $15,000/month after all actuarial calculations. done many many moons ago. The new salary average for 2022 is $24,444.44/month - 100% of compensation limit (385k+290k+305k averaged) 415 dollar limit is $30,000 - made it up. What is his 415 maximum AB? 1. Is it $24,444.44/month less $15,000/month i.e. $9,444.44? OR 2. Is it $30,000/month less $15,000/month i.e. $15,000/month? If it is (1) then the 415 LS would be $9,444.44 * APR @ 2022 417e table @73 @5.5% (assume plan AE assumptions provide much higher LS)? What am I missing here to determine max 415 AB and LS? Thanks

Do not remember but cycle 3 may have some adjustments/limitations to certain formulation. Just because it was allowed in PPA document does not mean it is in cycle 3. Check with the vendor.

As long as the plan document allows it, why not?

Great, faaaar less complicated. Just watch for the document's distribution provisions e.g. in service and things like that.

I think the term describing the actual CV to be distributed is interpolated terminal reserve (if my memory serves me right) and yes it has to be done under RP 2005-25 - written to avoid springing cash values, ahhh the good old days. Remember that, it is a distribution and subject to whateevr the plan states like spousal consent, any QJSA requirements etc etc etc. Assuming that this is a DC plan, right? If a DB, far more complicated.

Addendum, permissively disaggregated may not require gateway, just remembered. All my plans I work on are all top heavy and require to be aggregated for testing, no option there. So my posting applies to my plans specifically. Just FYI

I was just at ASEA and asked on the podium. The general response was that if anyone gets a top heavy (in my case already getting 3% NESH), they get gateway which I always provide (hopefully I did not misunderstand). But never more than the gateway unless need them to get additional under 11-g which is almost going to be a moot point due to the new amendment rules coming up i.e. can adopt an amendment retroactively to prior year by the due date of the sponsor tax return including extension (this was discussed on the podium). One advantage of 11-g is that you have an extra month for s-corps and partnerships (c-corps and sole-props extended is 10/15 aka 11-g due date anyway) Again, this is only for participants who worked over 1000+ hours. My software agrees with me also. FWIW

Testing together

Hi CB/DC combo, cehcking something resuklted by sofftware. DC has 401k deferral+NESH+PS 401k+SH eligibility age 21 and no service i.e. immediate entry (this was amended to be effective in 2022 and on - prior was 1 year wait) PS portion eligibility age 21, 1 year service after 1000 hour service with dual entry PS allocation 1000+ hours and last day CB eligibility age 21 and 1 year service after 1000 hours and dual entry Overall gateway is 7.5% ow which 3% comes from NESH Q1: EE hired on 8/15/2021 and active as of 12/31/2022 - works 40/week - does this employee get a PS allocation under gateway requirement? Q2: same as Q1 except EE terminated 10/31/2022 - does this employee get a PS allocation under gateway requirement? Q3: same as Q1 except EE was hired on 7/5/2021 and active as of 12/31/2022 - does this employee get a PS allocation under gateway requirement? Thanks

I had all my clients retain a real estate agent (someone reputable and not family related) and provide a formal appraisal, nothing like "well, I think it is worth so and so". It was all provided on official letterhead, FWIW. Sometimes nothing is good enough but this was better than nothing. When clients provided their own estimates, I did not accept it. They grumbled about the fees for an appraisal but at the end of the day, they understood that upon an audit, a formal appraisal was much more acceptable so they did it. The moral of the story, do not have RE in the plan (together with life insurance 😀)

And be consistent i.e. do not flip flop from cash to accrual or vs every year. Check what was done int he past.

As a person who have dealt with RE in DB plans, always refer to an ERISA attorney as there are so many things that can go wrong especially when it comes to expenses. Also, spending 1.5M does not necessarily increase the property value by 1.5M so could generate a loss (or a tremendous return). I am assuming you are not worried about overfunding/losses as the total expenses between purchasing and renovations add close to 2.9M. Also, what will happen to the RE once the plan is closed (RE belongs to the plan and not to individual)? The plan sponsor may not necessarily purchase for their own use (attorney question) Just my 2 cents (and a few additional unsolicited cents) based on experience.

Hi DB plan effective 1/1/2021. Owner was 73 years old in 2021 and the vesting was 100% as of 12/31/2021. Plan was not signed till July 2022. So, when is the RMD due? Thanks

I think I agree with the 12/31/2023 date. As to how to get the RMD in a terminated plan and without any election is some something I am not sure Will continue researching. So unnecessarily complicated.

He turned 73 in 2023 and became 100% vested in 2023. RBD is one the questions I am asking for.

Fiscal cash balance plan. 6/30 year end. Plan terminated 6/30/2023. Spouse of owner participant is required to get first RMD due to becoming 100% vested as of 6/30/2023+attaining age 73. He has only 3 YOP so was vested in year 3 which ended on 6/30/2023. There is a possibility that the distribution will be postponed to 2024 as there is a contribution due. 1. When in the first RMD due 12/31/2023 or 4/1/2024 (or prior if distribution done earlier) 2. If due 12/31/2023, because the plan is in termination status, can the RMD be calculated based on account balance? Thanks