Jakyasar

Before allocating to others, one advice would be to have an input from the plan sponsor. You may choose someone because the math favors them but plan sponsor may not be happy about. Be watchful of the BRF issues as well. Also, when you say maximizing HCE's, you meant owners, correct? Bird/Bri and BG have excellent points.

Hi Another new one for me. PBGC covered plan, terminated 12/31/2022 500 is not yet done/filed with PBGC. Sponsor changed their mind, wants to continue. Can a simple notice to the participants stating "we decided not to terminate the plan" would be sufficient? I will amend the plan later to unfreeze the benefits. When terminated all became 100% vested (plan was only 3 years old and all would have been only 40% vested if not terminated). I cannot find any written document of making everyone 40% again with the reversal of termination. Anyone knows if possible? Thank you

Yes it does and yes, ratably allocated to the rank&file, unfortunately no escape.

Thank you for steering me to the right direction/advise.

You mean reallocate the 4k to the others? This is not a pooled account and the excess was done during the year. Can it still be reallocated in 2023 i.e. transfer from 415violation-participant to the others for 2022? Thank you for your comments

Hi Here is a new one never dealt with before. I found out that the client (over age 50) has an excess situation and not sure how to tackle it The plan has the following features: 401k+NESH (3% mandatory)+PS. The plan is also used as a QRP - qualified replacement plan During 2022, $136,000 was deposited with the following breakdown April 2022 - $6,500 - from biz - 2021 catch up July1 2022 - $58,000 - from QRP - 2021 NESH+PS July2 2022 - $6,500 - from biz - 2022 catch up November 2022 - $65,000 - from biz - towards 2022 NESH+PS The July2 and November deposits created a $4,000 excess deposit during 2022 i.e. over the 415(c) limit. (71,500-67,500 (max 2022 415(c) limit) = 4,000 How is this to be corrected? Any suggestion/pointing to the right direction is appreciated. Thank you

No virtual contribution is worth the paper it is written on. Must have proper paper trail

Presentation-Variable-Benefit-Plans-in-Depth.pdfPresentation-Variable-Benefit-Plans-in-Depth.pdfPresentation-Variable-Benefit-Plans-in-Depth.pdfHere is the presentation from a few years back. Hope I was allowed to post.

Hi A client who uses their DC plan as a QRP made a big booboo last year which I just found out. For 2021, they used 65k of the QRP as mandated (1/7th) and allocated from the suspense account to the individual account in 2022. No problem for 2021. However, unbeknownst to me, later in 2022, the client deposited 60k in their account (owner only) by mistake, it was not intended as they are fully aware of the QRP requirements. For 2022, according to the suspense account balance and 1/6th rule, they need to use 60k of the QRP. Given that this is 3 person pension plan, is there a way to correct this i.e. client refunds the deposit made in error during 2022 with interest adjustment back to the biz account? I do not see how but...... Otherwise, as the owner is almost at 415c limit, the 60k pretty much will have to be allocated to the 2 rank&file employees (both make 50k in salary and unfortunately one of them is the spouse of the owner aka HCE). I have never seen this before in all my dealings with QRP and wanted to ask if there is a way to correct this, something I may have missed? Thank you

I still think that a resolution should be in place for QRP purposes i.e. stating any excess will go to XYZ DC plan, something like that. I bleive it can be adopted now as it will be available 95%+ of all current participants. Having a meeting with the client and see what they want to do. Owner is nowhere close to 415. Thank you all for your comments/input.

Curious how the participant cancelled the policy (unless done thru sponsor/trustee), unless he/she is the owner/trustee. Policy is supposed to be owned by the plan and an asset of the plan. If the policy is cancelled aka surrendered, cash value is an assets of the plan and cannot simply be distributed. what am I missing here?

Hi Plan terminated as of 12/31/2022 (PBGC). PVAB as of 12/31/2022 was 710k (based on 417e rates), just calculated as just got the census. Based on this the plan was 200k underfunded due to aggressive investing. Ran the termination numbers as of 6/30/2023 and now PVAB dropped to 450k, a 36% drop. Believe it or not 5% GAR94 yielded higher PVAB than 417e. Initial estimated calculations done in 2022 showed approximately 25-28% drop. Now I have plan that is suddenly over funded by possibly 75-100k. I did the 1% safe harbor allocation method for the excess but the results were terrible (owner got only 35%) Current plan document states reversion to company for any excess. I believe one of the following can be done rather than reverting to company: Generate a spreadsheet with using 1% of average compensation and allocate the excess pro-rata based on PVAB's as of 6/30/2023. This can be done now with an amendment. Make an amendment now (after termination date) and allow the excess to be transferred to a qualified replacement plan. Undo the freeze, create a new benefit structure (possibly discriminatory allocation and test it). Restart the termination sometime in August and distribute the assets prior to 12/31/2023. Amend the plan to have a higher mortality table where everyone will get a higher PVAB Amend the plan to change the look back month - August 2022 would yield much higher results Anything else? Any comments/suggestions are appreciated. Thank you

Not a 401k expert but, why not consider the contribution as 401k deferral (assuming that the deposit amount is within 402g limits and there is a proper deferral election form)? This way, if the income is low for 2023, one does not have to worry about deduction limit, just the 402g/415(c) limit (no 25% deduction issue for deferrals only). If the income is going to be sufficiently high for the year, then factor in additional profit-sharing allocation. I agree with everyone that the plan exists, no question on that. If there is no income for the year, can you treat the deposit as "mistake of fact" and/or not penalized for the deposit as it would be a non-deductible amount? Of course, violation of 415(c) is another issue. Just thinking out loud and hope did not misunderstand this discussion. Thanks

Hi Company A is a medical office, small i.e. less than 25 active participants. Owned 100% by MD MD also owns couple of restaurants with employees. 2 part question: Q1: If all included in the DB plan, Company A being the sponsor and the restaurants being adopting employers, is this DB plan covered by PBGC? The total active participants will still be under 25. Q2: If only Company A adopts the plan and excludes the restaurants, no PBGC coverage, correct? Thank you.

I once knew an agent with his famous quote "any plan without insurance is not a kosher plan" Another actuary said "you can have insurance in your plan or you can have me as an actuary but not both". What we educate the client on and what the agent does are two different things. All depends on the client, whom they will believe. As a plan TPA, there is only so much we can do. By the way, I hate insurance in any pension plan, nothing but trouble. However, I have a write up that I provide to the agents/clients, what they do with it is their problem. I just want to make sure no incidental benefits are violated. Anyway, I put my foot down and said as of 12/31 or goodbye. I am certainly not allowing an agent dictating how to administer the db plan nor changing the method I work with for many years. Will see. Thank you for your comments, somewhat funny though.

Hi Nate My concern/question is on how to determine the CV as of 12/31/2022 if I use premiums paid after year end. This is what defines the MRC and it could be off in the thousands. Most conservative approach is to stick to what happened during 2022. I agree that nobody dictates what happens actuarially other than the actuary. But sometimes dealing with agents can be very unpleasant especially if they are trying to cover up their screw ups.

Hi DB plan with whole life insurance. Calendar plan Insurance contract/effective May 2022 and with 30k annual premium, no other illustration was provided. In December found out that premium payments were being made monthly 2.5k/month so during calendar 2022, 8 payments were made for a total of 20k, all from the corporation. I have always used premiums paid only during the plan year but now the agent is pushing me to use 4 additional payments made/to be made in 2023 so that the total of 30k is applied to 2022. I understand that they are contributions to be discounted to val date but my concern is the valuation of the CV as of the val date - EOY val. I have the 12/31/2022 CV from the insurance company and did the RP 2005-25 calculation. No issue if I was using what was paid in 2022 only. How do you incorporate the payments made in 2023 to 12/31/2022 val date and determine what the 12/31/2022 CV would be under RP 2005-25? As they are planning to make the minimum required contribution, a proper determination of all assets is imperative. Hope my question makes sense. Thanks

Sad but true. I just never saw this level of incompetence/tardiness. Best to invent time travel. Thank you both.

Ok, here is a new one I have never seen from the IRS For year end: 12/31/2020 Letter dated 2/13/2023 Re: 5500/8955 filing. Letter states that the 5500 must be filed by 10/15/2021 (you are not reading wrong) The 5500-EZ was filed on 10/7/2021 with an ACK What am I missing here? Thanks

Hi Peter, so true, so true. Thank you for your comments.

Hi Here is another new one for me. Back in 2020, CPA asked me to run a proposal for a DB plan. Did projections for 2020 and 2021, big numbers, provided consulting and also all the mandatory deadlines. Never heard again from the CPA and the prospective client. Last week I got a note from the CPA saying the client did not make any money in 2022, is $0 contribution ok? I went "huh???" Apparently, plan sponsor (one lifer) made deposits into an account (do not even know what kind as there is no plan document) for 2020 and 2021. So No document No valuation No signed SB No 5500 for 2020 and 2021 (EZ - easy fix) Other than getting an ERISA attorney involved, has anyone dealt with a situation like this and if yes, what steps were taken? Yucks

Out of curiosity (not using ASC myself), you are not talking about a straight .5% of salary but rather a pay credit that is actuarially converted to an equivalence of .5%, correct?

I saw the ADP part but not the ABPT part. As this is deferral related, not sure if the excess should be part of 401a4. Could not find anything yet. Hoping someone had to deal with this before (sadly)

Hi Here is a new one for me. 401k plan with 3% NESH and PS provisions so no ADP testing required. This is combined with CB plan and tested together. (I only handle CB plus testing) Just got the info for 2022. HCE/owner and spouse, both exceeded 402(g) limits (changed payroll companies in mid-year and they did not pay attention to the deferrals). Refunding prior to 4/15/2023. If ADP tested, the full amount would have been included, only for HCE's. Do not have any issues with the NHCE's. How for ABPT? Based on 2022 limits (20,500) or full incorrect deferral (30,000)? Assume under age 50. Thank you.

More than 5 years, no first 5 years exception here, too bad.