Jakyasar

Hi This is a new one for me and it is for AFTAP gurus out there. Looking at a possible takeover, one lifer DB plan. Effective date 1/1/2010. I just found out that AFTAP was never certified for this plan. So, each year a benefit accrual was done and funding was based on this (my understanding is that the target normal cost (TNC) needs to be funded separately each year and not the funding target (FT)). Just by looking at the various valuations provided, looks like the funding may not be an issue, both covering minimum required and maximum permissible deduction so let's leave this part alone for the time being. It is a BOY valuation. The plan document states automatic restoration. After my research, I think the freeze date is 12/31/2014 - end of 5th plan year. Am I correct on this date? Q1: What I do not seem to find is, how to restore the AB after AFTAP is certified as of 9/30/2022. For simplicity, say the AB is $1,000 per year of participation. So, if frozen as of 12/31/2014, the frozen benefit as of 1/1/2015 and on would be $5,000. This benefit would follow thru 12/31/2021. After AFTAP certification, how would 2022 AB would look like at 1/1/2022 and 12/31/2022. Q2: Another thing I read (not sure if it will fly), I can hard freeze the plan now i.e. before certifying the AFTAP and have the AB frozen at $5,000 until I amend the formula. I would appreciate any comments. Thank you

Makes sense and thank you

Out of curiosity, how is CG determined? Do they have any kids under 21? Just because they each own 100% does not necessarily make it a CG. Also, if they are not a CG, wouldn't this be a multiple employer plan? Thinking out loud and hope that I did not miss anything. How the contribution will be split will depend on the answers.

Hi XYZ DB plan is terminated with overfunded assets (100k). All participants elected to rollover their distributions to XYZ PS Plan. Total was 1M The overfunded portion was deposited into the XYZ PS plan (under qualified replacement plan rules - QRP) as excess DB assets to be allocated in the future. In preparing the final 5500 form (2021 plan year) for the DB plan, I am confused by 2 lines: 8j and 13c Are any of the above assets considered as transfers? I do not believe the participant rollovers of 1M are (they were directly deposited into the DC plan accounts from the DB plan but as rollovers) How about the QRP portion of 100k as also was directly deposited into the DC plan account from the DB plan account. Thank you

Hi Bri I am aware of the first part and thank you. It is the second part that I am thinking about.

Hi all MD office, less than 10 employees Owner also owns 2 pizza restaurants with a few employees. If a DB plan is set up just for the MD office, is it covered by PBGC? If a DB plan is set up with the pizza restaurants as additional employers but the MD office being the plan sponsor, is this DB plan covered by PBGC? Thank you

Hi Bird I am 100% in agreement with you. There is no right way to deal with this, at least from my research. I have different opinions from different people I discussed with and majority feels that opening a new account and transferring the monies by 9/15 is better than doing nothing. I provided all my findings to the client and let them decide how they want to approach this. In all my years, I have never seen this. Thank you for your input though.

Thanks for reminding me of the webcast. It was mind blowing.

Sorry, too cryptic. Will have them open another account and have the monies transferred for the old account to the new account and use the date of transfer as the contribution date. I really am not sure what the correct course of action is as I am getting different views on what to do (from other platforms too) but from what I gathered, this course of action seems reasonable and in good faith.

Hi Luke Thank you so much for your time. It is a cash balance plan for a small sponsor (corporation). The owner is the trustee. I still think it is risky and pushing them to redo the accounts prior to 9/15/2022 (minimum funding deadline). I may sound paranoid here but it is a lot of money to risk. Yet another great discussion, thank you all.

An update, per Luke's questions Got the actual statement, has a plan name and trustee name on it. It is invested with a reputable brokerage house. Not only they made 2021 contribution but they also prefunded 2022.

Hi Plan year is 7/1/2021 to 6/30/2022 Limitation year is plan year. What is the 401k deferral limit? Thanks

Not yet available to me but I believe they will close the account and transfer the contribution to a new pension account with proper title/trustee. Still not sure what to do with the earnings, if any. Thank you

Hi Luke All good questions, do not know the answers yet. I just found out that the information yesterday. I am assuming you are asking whatever was listed on the account and not the document. If I may ask the reasoning of why you are asking these questions, very curious. Thank you

Welcome to the club. Kenneth, no rolling dice, it is big money. Follow up, what happens to the interest earned on the deposit?

C.B., thanks for the additional comments. Off calendar plan is not an option especially with deferrals involved, against my rules. So will look into short plan year but still cannot wrap my head around it on how to avoid the full corporate year. Since I have no proration limitation here (salary will be around 100k), short year is fine. There will be no PS, just deferral+SH match. Thank you and Bri for the comments.

Interesting thought but nor for me, we will have them take the money back and re deposit - possibly mistake of fact that the plan did not exist. I do not think there is right way or correcting this but still good faith, at least in my humble opinion.

Hi Bri No sure what you are saying here, a lot of assumptions that may or may not fly.

Here is a new one for me. Sent docs for 2021 plan year 5/31/2022 and they executed on 6/3/2022. I now get a confirmation that they made the deposit on 5/23/2022. So, what is wrong with this picture, if anything? Am I being paranoid that they opened an account without a plan document and also without an executed plan document? Thanks for comments.

Hi Bri I do not see how 1/2 year would be different than the full year here (other than proration). Are you saying that, if 1/2 year is done, they can also do a PS allocation? I don't think either scenario matters here. Just thinking out loud for discussion purposes. I am going to set up a full year 401k+SH and move on. No other contributions.

Also, your first part statement will only work if the plan's hour/last day requirement is very liberal otherwise the plan will need an 11-g amendment and partial (or full, according to some) vesting needs to be provided.

Hi Lou I agree with your latter comment but I do not wish the client to be testing case for this, if the plan is audited. However, I am not planning to have any PS allocation, just 401k and basic SH, both 100% vested.

Hi David Yes, it is something that one needs to alert PBGC with any changes (hopefully the client will let us know). PBGC letter is very clear on that. Good point though.

Hi all An update. Finally got the determination from PBGC as NOT covered. Based on all the information they asked for (and they did ask a lot), they determined that this particular financial company is a professional entity due to the owner's credentials as well as other criteria. It took them 5 months to provide the determination. I guess never assume is the morale of this story. Just sharing.

There is no PS, only SH match and depending on if a deferral is made or not. There is no vesting issue for these 2 provisions. I may even design the plan without any PS provisions and add in 2023. Not sure if I agree with the short plan year approach.