Jakyasar

Hi First time doing a PBGC termination with excess assets being transferred to a qualified replacement plan - QRP. Just cannot seem to figure out the following: Here is a breakdown All participants: $3,000,000 - all rolled over to the QRP - existing DC plan - not relevant if consensual or not Excess (overfunded portion): $ 300,000 - transferred to the QRP Total DB distribution: $3,300,000 - all to QRP How do you show the $300,000 on 501? Thank you

Me too and thank you everyone for chiming in. PS - they are having nice big salaries for 2021 so deduction and 415 issues (famous last words)

Do not mail, if you can avoid it, it is a mess at IRS. You can only do EZ for 2020 and file away electronically, if you want to continue filing.

Looks like I opened a can of worms here. Bird, referring to the second paragraph, it should be applied towards 2020 otherwise how does one satisfy the 2020 3% non-elective safe harbor requirement? It is deductible in 2021 though. I think the best solution is to determine/limit the 2021 415c limits using both the 2020 SH and whatever is contributed for 2021 and not exceed. The next step is to make sure that the plan sponsor deposits everything timely starting with 2022 plan year end and not deal with any of these issues. Anyone disagree?

Bird & Lou Excuse my not understanding here (not clear to me at least), to simplify, deposit by 12/31/2021 and apply to 2020? Is that what you are saying? Thanks

Your guess is as good as mine.

I do not see any other options, are there?

Hi Lou Thanks for your comments. I thought that you could get in the 2020 SH by 12/31/2021 and till be applicable for 2020 (not a deduction question) but not being a DC person, possibly thought wrong.

Hi all I am asking the following 2 scenarios on behalf of someone who is not my client but asked me about it. They deal with a payroll company for their plan. Scenario 1: 3% non-elective safe harbor for 2020, they do not have the money to make it by Friday. They already missed the 9/15/2021 deduction deadline. I thought that they had till 12/31/2021 to finalize the 2020 SH, I thought wrong? Assuming that it can be done by 12/31/2021 (after 10/15/2021), it will be deductible for 2021. However, it will not affect the 2021 415c limits, correct? Scenario 2: Plan sponsor did not make any contribution for 2020 by 9/15/2021 corporate deadline Plan has 3% non-elective safe harbor for 2020 plus they want to make profit sharing for 2020. For the profit sharing to be for 2020, they need to deposit by 10/15/2021, correct? How about the safe harbor, let's say similar approach as in scenario 1 i.e. can make it by 12/31/2021? In both scenarios, they will have anough payroll in 2021 for the 2020 and 2021 contributions to be deductible. 415c issue, another story. Thank you

Follow up I am fairly certain that no SH notices were provided each year. What is the impact of this? Thank you

Hi I am not a DC person in general and was asked to do a favor to someone for a plan that is in trouble. Plan is a DC plan with deferral, 3% non-elective safe harbor and profit sharing provisions. Plan effective date is 1/1/2015. Only 5500 filing was done for 2015 but under DVFC program. I am assuming the document is a PPA document so should be ok as just needs to be updated for Cycle3 - no confirmed yet. I am not sure if any statutory amendments were required, to be checked. Nothing has been done since then, no filings, no SH notices, no nothing. As no letters have been received for missing 5500 forms yet, i am assuming that it is ok to file all missing years under DVFC, correct? I will have test/check each year for contributions made (or missing) and wanted to see what needs to be done if corrections are required - all may need to be done under VCP unless eligible for SCP: What if SH contributions were missed and/or not correctly calculated? What if any new employees were eligible and never provided deferral elections forms, SH allocations SPD etc? What if PS contributions were made and plan did not satisfy 410b and/or 401a4 - formula is group based i.e. not safe harbor Any other questions I am not asking? I am aware that there are a lot check when and if i get any information for each year. Usually I would like to run away from these but... Thank you

That is also my understanding i.e. must have deferrals option for at least 3 months.

Hi To confirm, if sponsor wants to set up a new 401k plan for 2021, they are late for safe harbor for 2021, correct? Same question for an existing PS plan and wants to add 401k feature for 2021. There is no way to set up any plans that have safe harbor for 2021, correct? Just checking out there. Any 401k deferral will be subject to ADP for 2021 unless they use the 5% rule, correct? Thank you

Hi I was just asked to do a 2020 run for controlled group situation - employers, 2 plans (because the payroll company will not do it - shall not be named) as a favor. Must do it prior to 10/15. No good deed goes unpunished i.e. I just checked all the provisions and unpleasantly surprised. If any of the gurus have some suggestions on testing for top heavy and also coverage, would appreciate it. Plan B is not top heavy but not sure about plan A yet as I am waiting for assets. I also do not know if combined plans will be top heavy - to be determined. Provisions of each plan are as follow: Plan A (Company A's plan) has 3% non-elective safe harbor, 401k deferral and profit sharing (1000 hours and must be employed at EOY). No compensation exclusions. For all provisions, entry date is the month following age 21/1 year service. Plan B (Company B's plan) has enhanced match (100% of elective not in excess of 6% of compensation, 401k deferral and profit sharing (must be employed at EOY - no hour requirement). Only for match, compensation is from date of entry (No way for me get this unless payroll company will provide it). For all provisions, date of entry is the next payroll period (Plan is run by a payroll company so they can do this, I guess) upon satisfaction of age 18/1 year of service. They want to have PS allocation in Plan A and none in Plan B. PS allocation for Plan A is group based i.e. needs to be tested. I need to combine both for top heavy even if each plan passes 410b and 401a4 on its own (they do). Since each plan has different safe harbor assumptions, separately top heavy for each plan is not an issue, one is 3% non-elective and the other one is enhanced match. Do I need to test them all together for coverage and non-discrimination? What would the answer be if If Plan A is top heavy, Plan B is not and combined not top heavy Neither plan is top heavy and combined not top heavy If Plan A is top heavy, Plan B is not and combined they are top heavy What am I not asking properly? I never had to test two DC plans like this. Any words of wisdom is appreciated. Thanks

Why are you expressing the net earned income in terms of deduction? The only deduction you are looking at is the deferral, the rest is simply for 415 limit purposes only. The sum of deferral plus QRP allocation is 58k and you have enough of schedule c income to support this. Assume you have 58k is w-2 of which 15k is deferral, balance 43k is from QRP thus 58k 415c limit. No deduction other than deferral. Am I missing something here?

Yes that was the issue we were discussing last week.

QRP allocation has nothing to do with deduction only for 415c limit unless you are combining deductible contribution with QRP This is easy if you have no rank and file employees since testing might be an issue.

We had this discussion last week for off calendar plans. Not quite finalized, at least to my satisfaction. I personally am not convinced that 9/15 deadline is extended. Others may have different opinions.

I will take a shot at this Assume not age 50. 100k net schedule, could be even lower, say 68k before 1/2 self employment adjustment. 43k non deductible QRP allocation as profit sharing plus 15k as deductible 401k deferral. Total is 58k which is the 415c limit for DC plans. Done.

No, val date was eoy to start with, they just made it as of plan termination date. Also, if they switched to boy because of termination only, is that considered a change?

Hi A curiosity question. I am looking at an SB prepared by another actuary for a terminated plan. It was a calendar plan with val date as of end of year. SB was prepared with 9/30 year end (term date) which is fine. When SB was filed, this val date change was filed as a funding assumption change. Is this correct? Thank you

C.B. and Mike, thank you both for your educational explanation. Very interesting approach.

Interesting, I am curious, is this because a retiring participant or applicable to any participant just because the plan sponsor wants to give more money? Assume that no test is failing, it is just "I like you and will give money even if you are not satisfying the provisions"? What section that allows this, I probably missed it during my reading (sorry very busy with the AFTAPs at this time, limited time to check all) Thank you for indulging my curiosity.

Hi Mike I reread the 11-g regs again and my take is a bit different than yours, as it has been in the past (11-g(2)) however as I seldomly use it (only when the testing fails), it is what it is, no further comments on my end. If I missed anything else, my apologies. Going back to BG5150's explanation to me "But, say a valued employee who was there for many years "retires" in December at age 62 and the owners want to reward her for her service. If the last day is hard coded, they would have to do an 11-g amendment to give her anything". Out of my curiosity and lack of experience in the above situation as explained by BG5150 (may be I am misunderstanding as well), please note that following question. I am assuming that she retired in December but before the 31st. Let's assume that the plan has last day rule and 1000 hour requirement for someone retiring during the year for an allocation. Unless there is an exception for a participant who is retired during the year (like no last day rule and/or no 1000 hour requirement), can you use 11-g amendment and go back retroactively provide an allocation just because the plan sponsor wants it, based on plan allocation provisions assumed above? Again, i hope I did not misunderstand BG5150's explanation, somehow. Thank you.

I guess I do need to revisit. Hardly use it so rusty. Thank you for pointing out.