Jakyasar

ASC had a great webinar today and provided a list of all changes coming up. i am not sure if I can provide here but you can check their website for the material and recording. Mercer also posted one today and it is on today's BL posting.

As Cusefan stated, different options are available. Your question on what they can set up depends on a bunch of factors. Also, is this for 2022 or 2023? IC - independent contractors are not employees although there are many instances, they are not properly categorized due to the list IRS has i.e. they could be determined to be employees which require them to be paid in W-2. They need to be very careful in determining if they are truly ICs. As to what plans, it is a budgeting question. How much do they want to commit to spending? In addition, what is the demography i.e. ages, salaries, how many employees are they planning to hire in the future etc etc etc Since they terminated a 401k plan in 2022, I am assuming that they want the plan for 2023. If they want to set up a SH 401k plan, hopefully the old plan terminated prior to 10/1/2022. Otherwise, they can set up a PS plan and also add a cash balance plan, assuming they have the budget for it. Lot to discuss with them and see what they want.

David, I agree with everything you are saying. I cannot yet comment on generosity requirement of the plan until I have a meeting with the prospective client. However, in this case, ERA of 55 for a 60 year old owner where the plan started 2 years ago, benefits primarily the rank&file younglings in the plan.

1. Definitely yes, AE adjustment. Also a bit of administrative headache keeping track of multiple benefit structures at different NRAs but that is our job. 2. I do not think changing only other provisions can accomplish it, one has to look at overall structure. I did this quite a few times especially with enactment of PPA, cumbersome but doable. 3. Gently and not scaring the client, you just inform the client that you will need to make some changes to make the plan more manageable and more realistic (for a 60 year old owner) and that nothing will change. However, you need to find out if the client requested age 55 from a meeting with the prior TPA. If yes, you simply add it as an early retirement option. I will leave it to other to comment on the engagement letter issue. I am yet to decide to take case over but possibly for 2023. 4. I am sure more will come from the great minds of BL

Hi David That is something I am planning to bring to the client's attention if and when I am involved. But the document's NRA definition should be 62. Everything else can be calculated actuarially and separately. Besides, for a participant who is in their 50's and 60s, why have early retirement? Anything and everything can be easily accomplished actuarially with this age group. Again, this is all about what needs to be in the plan document and not how the plan operates. ----------------------------- Here is from my documents regarding selection of NRA NOTE: The age selected must not be earlier than the earliest retirement age that is reasonably representative of the typical retirement age for the industry in which the plan participants work. Age 62 or older automatically meets this requirement. Here is from my document if amending the NRA NOTE: If the Normal Retirement Age was 55 or greater, and less than 62, the effective date must be after May 22, 2007, and no later than the first day of the first Plan year beginning after June 30, 2008. (I am also assuming that any plan started later in time should be aware of the requirements) ---------------------------- I am not sure how the IRS would react to an NRA definition/age of less than 62 as written in the document. To be honest, I have no experience in this area. I never use less than 62 and it is so much easier to deal with the earlier ages simply by making actuarial assumptions. Afterall, everything is limited to 415(b) at any given age. Anyway, this is all I have to say. I may too rigid but in my opinion, unless proven otherwise for the industry standard, within the plan document, the NRA should not be less than 62 and I am sticking with it. Thank you all.

Thank you for being troublemaker, opened up the conversation into a good one. I’m not always clear on what I ask If I decide to take over the case, I will amend the NRA to 62 in the document. Funding will be discussed with the client and adjusted accordingly. Thank you all for your input.

Yes, the troubling issue is with the document and not the calculations. IMHO, the document should not read 55, at least not for this sponsor. This is what I am asking for and nothing else. I also agree with the fact that when calculations/funding are performed, many other factors have to come into play.

In my humble opinion, there is a difference on how you write the plan document vs how you operate/fund the plan (many factors play a role on the practicality of administration). You can fund for age 62 but keep the funding under control with the assumption that you will pay out at 50. Afterall 404 allows a very big deduction limit after a few years of operation. All you have to do is keep an eye on the 415(b) limit at any possible payout age. My concern is how you write it in the plan document and keep it kosher on paper. I always thought, one should not put in 55 as NRA (may be as an early RA) unlessw the industry standard is a lower RA. Let's see if I opened the Pandora's Box here.

The issue with item 2 is, item 1 may not be reasonable and also, the law.

Hi Looking over a possible takeover DB plan. It is 2 years old. It is for a law firm. 2 partners are in their late 40s and early 50s The NRA is written as (I have not seen this before): Later of age 55 and 5 YOP and 17 YOS. Maximum NRA is 65 and 5th anniversary of plan participation. As this is not one of those special category of employers (like football players etc), how kosher is the way the definition is written? If kosher, how would you calculate the funding requirements? I would never use less than 62 but might be missing some allowance here. Thank you

In addition, depending on when the employees became eligible, you may have 5500 filing issues i.e. cannot file EZ even if no other eligible employee is deferring, they are participants. Also, if they were eligible before 2022, you have possible additional coverage, top heavy issues, missed deferrals, etc etc etc. Solo plans are marketed for 5500-EZ filers and have no flexibility for PS allocations and SH match (not that I have seen any) Good luck

Throwing in another question for a balance forward PS plan i.e. pooled account. Same scenario above i.e. asked in November for a distribution based on 12/31/2021 balance (assume document is written this way). No action taken by sponsor/TPA (assume the worst) to provide the paperwork and also distribute prior to 12/31/2022 despite the fact the participant asked for it. If paid in 2022, 100k but now in 2023 dropped to 80k. What do you do? This is different than participant got the notice but did not return timely.

SECURE 2.0 may have some reduced penalty but only if corrected within 2 years. Looks like, the first 3 years is out of luck, at least from I understand. Depending on facts and circumstances, can always go to the IRS, cry and blame someone that the participant was not aware of not was notified, etc etc etc. Do not know all the details, just a general info.

How would you write the amendment? As an 11-g or a general amendment specifying the terminated participant by job category or name. It may not be so clear cut, just thinking out loud and curious. This would be an amendment retroactive to 2022? I do agree with the amendment should be prepared and should definitely be done as the participant may create a lot of headaches since there is a significant difference between 2021 and 2022 rates.

The CPA just said not to include, go figure.

Ok, thank you

Sorry, my question, in this case, is what DC components are used to offset?

Hi CB You are absolutely right that I did not mention what kind of offset, it the DC plan AE offset. Thank you for pointing that out.

Hi Looking at a possible takeover. This is a question on what is used for offset calculations. I have not done of these in 20+ years. DB is 50% of pay offset by 26.25% of TWB, fractional DC has 401k+PS+NESH (mandatory 3%) What is used for offset? Thank you

But 5 years in a row and TPA does not know about the account activity? I still think it is quite a stretch unless the participant never disclosed the account (happens, right?)

I am confused too, didn't the TPA provide the client with the RMD amount each year? Or, did they actually expect the client to determine his own RMD for a pension plan and withdraw? If the TPA provided the info and the client did not take it out after one year, did they inform the client about the issues? 5 years in a row is a bit too much of a stretch for not informing the client each year and continue administering the plan as if nothing is wrong. Hmmmm. Moreover, when the TPA did the annual work, didn't they notice that there were withdrawals missing? May be I am not reading the original post correctly!

As I stated, nothing is excluded. Definition is W-2. Deferrals are pre-tax, that is why listed as "less" No 125 listed. To be used for cash balance, SH, PS and testing.

Hi Need to revisit the following as I am now getting contradictory info from CPA. There are no exclusions per plan document. From W-2 Box 1 $240,000 Box 6 $225,000 On the earnings summary Gross Pay $225,000 - matches box 5 less deferral $ 20,500 plus s-corp 2% $ 42,000 - medical premium less catch up $ 6,500 Reported W-2 $240,000v - matches box 1 What to use as salary for pension purposes? Thank you

Hi I am pretty sure the answer is no but wanted to see if I missed something here. A QRP with excess assets from a terminated DB plan which is allocated every year to the plan participants as PS allocation. The plan sponsor wants to make a contribution/donation to a charitable contribution using some of these assets that are in a suspense account. As far as I know, these kinds of contributions can only be made from IRAs. Just wanted to check and see if anyone has a comment on this. Thank you

pbgc time chart.pdf Attached is a great chart for PBGC termination. For non-PBGC, 15 days is for 204(h) notice - plan freeze. There is no termination notice deadline.