Jakyasar

I did and trying to determine if one exists (possibly may take the in-service route as age 63+). I am assuming 110% rule still applies as it is not related to the disability issues?

Hi I am having my first disability request in my entire career and a bit challenging to understand. This is for a cash balance plan, 2 years old. Document has a few options for benefits but do not see "lump sum". The only other option could be under "Other" which I am checking with the vendor. The participant in question is an owner/HCE and unfortunately not much time left to live so no coming back to work. He is age 63+. He checks all the requirements of being disabled, unfortunately. Currently on disability however still part of the company i.e. not officially terminated, at least that is what I am told. Still a 5%+ owner but no salary. No interest credit as provided annual at EOY. It is a fixed rate so no interim adjustments. From all the material I could find, looks like, can pay him his lump sum now, correct? He is already 100% vested. I am assuming, being an HCE, I still have to perform 110% test, correct? Anything else I am not thinking of/missing? Thank you

Assuming this is a PBGC covered plan and if the plan is underfunded, you can have a substantial owner waive their benefit (not for valuation purposes, only for payout purposes) or you can do a 4044 allocation, just in theory, thinking out loud without knowing any specifics. Also, by terminating the plan early in the year, you may have a pro-rated amortization schedule that may reduce the required contribution level substantially. The longer you wait, the more compliance issues the plan may encounter. All facts & circumstances.

Thank you all.

Hi Termination or not, isn't a "top heavy and underfunded and PBGC covered plan" exempt from 401a26 testing?

Lou, I meant Jeff's comment but thank you for clearing it out. Thank you all for your comments and have a nice weekend. Some of us will have blizzards and good luck with that.

Hi Having a discussion with someone and need outside expert opinion. I never came across with a situation like this. Sub-S corp XYZ is owned by Joe 100%. No salaries taken. LLC partnership is owner 100% by XYZ. LLC has Joe and Mary (husband/wife) as w-2 employees. LLC is setting up a DB plan LLC has income and will cover the deductible contribution and transfer the balance of the profits to XYZ. This is the way the structure was explained to me. Q1: Is the LLC DB covered by PBGC? Not a professional entity so technically not an exempt category of business. Q2: Is the above structure kosher? I am assuming the deduction is fine with the LLC Anything else I am not thinking of? Thank you

Lou, I am assuming you are responding to Lou, especially your first comment? Second part, in agreement.

Follow up scenario on this Box 1 $135,000 (box 5 less deferral plus health insurance) Box 5 $140,000 Deferral $20,000 Health Insurance $15,000 What is the gross salary for pension purposes, $155,000 or $140,000? Thank you

Sorry, reposting as hit return by mistake. Let me rephrase, system did not delete it, just applied 0% vesting and assumed TNC was $0. technically benefit is accrued and then 0% vesting applied thus the forfeiture. The system used the benefit for testing. This is the first time I have a participant terminating in the first year and that is why I am questioning it. Thank you

Let me rephrase, system did not delete it, just applied 0% vesting and assumed TNC was $0. technically benefit is accrued and then 0% vesting applied thus the forfeiture. The system used the benefit for testing. This is to me and that is why I am questioning it. I

My system forfeited and deleted the TNC

Lou, to your response for the second part, wouldn't the PS portion cover the top heavy?

I want to add another scenario to this out of curiosity. Assume existing 401k plan, only has deferral and safe harbor match, no PS provisions and/or top heavy duplication provisions. Automatically passes top heavy. Now, let's start a DB and a PS plan for 2021 today. DB will say top heavy is provided by PS and PS will say all top heavy is satisfied under the PS plan. So, 401k will have deferrals+SH match only, PS will have all top heavy/gateway and DB will have whatever benefits (some at meaningful benefit levels) Any comments on this as well? Thank you

Very complicated issue, big can of worms to open here.

Hi Sponsor has an existing PS plan. Now wants to add a DB plan for 2021. DB plan, by design will state that the PS plan will provide top heavy. However, PS plan has no provisions on how the "top heavy duplications when a DB plan is maintained" checked. In general, depending on the document type, I would put in a very detailed language explaining how the top heavy will be satisfied under the PS plan. For 2021, DB plan is on the hook for top heavy? There is no way to retroactively amend the PS plan for 2021, correct? I just cannot think of a way out of this. Any thoughts? Thank you

Looks like as long as min required is done, who cares other than matching pay credits.

It is EOY val

Hi This is theoretical question as never encountered before. Might be a silly question but I am curious. Brand new CB plan, effective 1/1/2021. For vesting (3 year cliff), no prior service is provided. Participant enters the plan on 1/1/2021 with pay credit of $1,000. Accrues 1,000 hours but terminates during the year. Thus 0% vested. Accrues the pay credit and the equivalent AB is used to pass 401a26. However, at end of year, his pay credit is forfeited due to 0% vesting, thus account balance is $0 at end of year. Does the plan sponsor need to make a deposit of $1,000 on this person's behalf? Assume minimum required contribution requirement is not an issue, whether this $1,000 is deposited or not. Thank you,

Follow up question If no minor children but Law firm does work for wife's company, what are the issues, if any?

No new deductions, they want to eat up the excess. New benefits based on new salaries (after adjusting for prior distributions) would be able to eat up the remaining excess. I am no expert on spin-offs, would that work here?

Hi Here is a new one for me. Fiscal DB Plan - 7/31 year end. Overfunded 500k. This is a husband and wife plan only. They got paid out max 415 limits (compensation not dollar) Plan terminated 7/31/2020. Benefits rolled into respective IRAs March 2021 and the excess was transferred to the QRP (profit sharing plan) by 7/31/2021 with a small remaining residue in October of 2021. The DB account is still open with $0 balance. The idea was to eat up the excess within 7 years as much as possible. They now have opportunity for large salaries for 2021/2022 and wanted to see if a new DB plan can be set up and the excess can be transferred back into the new DB for satisfying the contributions? Can this be done? If yes, I will have follow up questions. Thank you

Wow, BL at its best, thank you all for your comments even though I am not agreement with some of them (especially with no service/last day rule as lack of them would limit any amendments in the early parts of the year due to 411d6 - I am aware that many do not have the requirements). You all gave me very good thinking points to discuss with the client. Just a few quick comments: Peter, this is an LLC filing as a corporation, great idea and information, not going to work here BG, on your last comment, equivalency is not an option however it may not necessarily be discriminatory as I have all non-HCE's fully benefitting but it is not an approach I am comfortable taking. CB - adding a PS is not option just to have him get a benefit. I will check on the disability but I was not told about any. Besides as you stated, tough one to prove. Your time is much appreciated. Again, thank you all.

Hi First time for everything. CB/DC (401k+SH+PS) combo. Both plans require 1000 hours for accruals/allocations. PS requires last day rule as well. One owner/HCE got very sick and only worked 100 hours however employed on last day. The other partners want him to get CB accrual as well as PS allocation. All non-HCEs are covered under both plans and get the minimum required gateway - no exclusions. Some non-owner HCE's are excluded from CB plan but participate in DC plan - just getting 3% non-elective SH. Can an 11-g amendment be made just for this HCE and have him accrue benefits for 2021? If yes and gets benefits, should these benefits be included in the 2021 410b and 401a4testing? No issue with 401a26 as comfortable passing. With him benefitting for 2021, all my testing will still pass so issues there (checked it already) Any other suggestions I cannot think of? Thank you

Having a discussion with a CPA and not sure I understand what needs to be used. No 401k deferral. No exclusions listed in the document. This is for 2021 and for an LLC filing as an S-Corp W2 Box 1 $92,000 W2 Boxes 3 and 5 $75,000 - SS and Medicare wages Earnings summary states Gross Pay $75,000 Plus S-Corp 2% Medical premium $17,000 Reported W-2 wages for Box 1 $92,000 Reported W-2 wages for Boxes 2 and 3 $75,000 What is the compensation to be used for pension purposes? Thank you