Jakyasar

Hi Here is another new one for me (the day is not going well with the firsts). This might be a ridiculous question but never dealt with before. Looking at a DB plan - one lifer. AFTAP was never done so AB frozen a few years back. The plan never officially frozen - just AFTAP freeze. Did a quick run and 401a26 fails, both annual and accrued-to-date. The software program is not providing an option for accrued to date at all. I am thinking an 11-g amendment to provide meaningful benefit. I would not ask this question if the plan was hard-frozen but here the freeze is due to lack of AFTAP. Can one do an 11-g amendment and increase the AB and overwrite the AFTAP freeze? Any other thoughts/comments? I hope my question makes sense. Thanks

No in-service - 42 years old. Besides, can you amend retro to 2022 and add in-service even if even old enough? I do not think so (might be missing something here). Intent was (as was just disclosed today) to terminate early in December and roll out the assets. I am sure this has happened many times (just not to me) and there may be a way to get it fixed without involving VCP/attorney (I do not see how but no experience on this matter), just exploring others' experiences.

Hi This is a first for me. Need to see what others did in this situation and if any permissible correction is available. Frozen DB plan, one lifer. Do not know if married but to complicate, let's assume married. Plan was underfunded under 417e so no excess issues and no 415 issues. In December decides to roll over the assets into an existing SEP IRA without even hinting to me. Rollover happened on 12/15/2022 so termination resolution and distribution forms had to be executed before 12/15/2022 - neither of which is done. DB account is still open with a few dollars. What to do to correct all this? Any expert opinion/comments appreciated (other than run away - seriously thinking about it). Thanks

David Assuming the same David, I found the ERISApedia webinar from 1/9/2020, slides 48 and 49. As stated no clear guidance. I also agree with the question of "is this approach reasonable". Who makes the determination on a reasonable approach, CPA or TPA or sponsor or counsel?

Hi Here a link of a prior discussion - hopefully attached correctly. There are others out there too. FWIW Unfortunately, I do not have access to Who Is the Employer?

Thank you for your comments. How about the second option with the 401k/PS?

Correction in the middle So, the $100,000 in LLZ is all taxable. Ouch.

Hi Joe owns 3 LLC taxed as sole-props. Joe is over age 50. Joe never had any employees. Let's call them LLX, LLY and LLZ Joe has a DB (no minimum required contribution for 2022) and 401k/PS plan. Only LLX and LLY are the sponsoring/adopting employs. LLZ never adopted either plan. 2022 net schedule c income figures are given as follows (assume after adjusting for 1/2 se tax): LLX: -$20,000 LLY: $22,000 LLZ: $100,000 Because only LLX and LLY are part of the plans, only their income can be used and therefore total income that is available for 2022 is $2,000, am I correct? Because there is 401k deferral election in place for maximum deferral, $2,000 would be deposited into the 401/PS plan as part of 2022 deferrals. So, the $100,000 in LLX is all taxable. Ouch. How about the following? Start a 3rd plan i.e. a new profit sharing plan and put in $20,000 (I know, 3 plans to deal with) and merge the new plan into the old 401k/PS plan in 2023? This would be option 1 which is my favorite. However.... Let's push it further (based on a previous conversation we all had), start a new 401k/PS plan effective 12/29/2022 with PYE 12/31/2022 and full year limitation year (LLZ has been around since 2020). Now we can put away $20,000 of PS and $25,000 ($2,000 was deferred in the old plan) of 401k for 2022. What are the flaws you can detect here? Thanks

Yes, check the document and see how the TH language is written. I have seen documents that were written where TH minimum is hard coded as 5% so 3% will not fly.

Amendments states on the last line and before signature lines "in witness whereof, the parties have caused this Amendment to be executed on ____________________." No date but signed by plan sponsor and trustee. Clearly the DocuSign summary shows the date it was executed. Strangely the resolution to adopt was signed and dated. I think they will have to resign with proper dating. I am curious though would the DocuSign documentation back-up have any legal standing on the date for signing.

Yes, it is for DB, thank you

Thank you all!

Hi I have an interesting question/dilemma. I was provided a plan amendment by another person. The amendment was sent to the client by DocuSign. It has 2 pages, a resolution and an amendment. Both pages were signed but only resolution was dated. Amendment's date is left blank. As they were both sent by DocuSign to be executed, there is proof that all were executed on the same date. There is the summary too. In your opinion, would the amendment be considered as signed on the same date as the resolution? Or, it will need to be re-executed and dated tomorrow? If this was not DocuSign related, I would not accept it but because there is no evidence as to when signed. I am curious on the legality. Thank you

Hi all To simplify (apparently left a lot of holes in my question, sorry about that, hopefully the following will clarify). I do appreciate all your comments and insights. I always get a bit confused with the RMDs. 1. It is monthly benefit 2. No, they do not want to have in-service of the total amount, just the RMD 3. As the AB on 12/31/2022 is $2,000/month, if they started withdrawing on 4/1/2023, they would be receiving $2,000/month for 9 months in 2023 for a total of $18,000 They do not want to receive a payment each month. So from a practical point - just want to see what others say here: 1 . What do they get as of 4/1/2023, $18,000 or $24,000? 2. What if they miss the 4/1/2023 deadline and get the distribution in December? How much do they get? 3. Assuming 12/31/2023 AB is $3,000/month, what is the amount to be received in 2024? Thank you

Hi Participant turned 72 in 2022. The AB 1/1/2022 is $1,000 and 12/31/2022 is $2,000 Must start RMD 4/1/2023. Does not want to take it monthly, wants a lump sum withdrawal. As 9 months in 2023, is it correct to provide $18,000 on 4/1/2023 (9 * $2,000)? If taken later, would you adjust each monthly payment from 4/1/2023 to date of withdrawal by 5% (plan pre/post %). If wants to take in February 2023, would you adjust the distribution to 11*$2,000 i.e. $22,000 Any other corrections to my math/thoughts, I know I am not thinking correctly here ? Thank you

Totally agree but being cynical, let's see what and if they will come up with. Thank you

Joef I am aware of the sections but on the proration limit for salary, you can use example 2 but not example 3 as the law says for plan years beginning on or after 12/29/2022. Unless one designs fiscal plan, you can only have a 3 day plan here for a calendar plan approach. Your prior statement of a sole prop's income is determined as of 12/31/2022 for a full year. But is this case here? There is a very big difference if the full year income is 500k vs 1k in the last 3 days, very valid concern. Of course, on a worst-case scenario, simply set up a PS plan, you will only lose the catch-up, if eligible. I am aware that you can make a limitation year a full year even if you have a 1 day plan year but I am curious if they allow it with this new rule. I doubt they would take it away but... Just thinking/worrying about loud. Time to watch bad movies.

Out of curiosity, don't you have short plan year limitations? Not sure if you can have a short plan year with full limitation year. Curious what others will say. I agree that it is badly written with the enactment date of the law.

It is not an objection, just not a fan, that's it. You did not specify if the special val was for an HCE or not. I have seen where the sponsors wanted to do a special val for HCEs only and this is where I have a problem but again, that is me. Just thinking out loud, nothing else.

Yeah but many times have been done to accommodate HCE's and keys. This goes back a long time. Not a fan of plan administrator to declare a special val date. But that's me.

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.