Jakyasar

Hi I think it is ok but want to see what others say. Calendar plan for 2021. Only PS provisions. It is cross tested with a DB plan. Top heavy provisions only provided by the PS plan 2 rank&file employees terminated with 1000+ hours but plan has EOY requirement for allocation. Only one rank&file in the DB and already accrued the 2021 benefit. Sponsor will terminate the PS plan during 2021. However will continue working for the company. Sponsor wants to provide PS contributions in excess of gateway requirements (combo testing passes easily with minimum gateway). Cannot do that with an 11-g so need to remove last day requirement. I can do the amendment now retroactive to 1/1/2021, correct? I also have a deduction and testing related question but will ask separately. Thank you

Thank you and this is why I said I do not agree with my own statement. I was just curious if I missed something. 100% in agreement with CB and others. 30k extra for all rank&file, sure will be one pissed of plan sponsor.

Here is a question, if they only took deduction for 70k and pay excise tax on 30k, would the 30k be applicable for 2021? Given the allocation above, 70k is not the 25% deduction limit i.e. there was more room for deductions. I am not sure I agree with my own statement though. Any thoughts?

No loan option? No in-service option? Otherwise Bill's suggestion is a good one.

Cushman, I am not sure if I agree with your absolute statement. Different vendors/attorneys I dealt with are of different opinions once the restatement period is open. All depends on when you officially terminate the plan or when all distributions are completed. However I agree with you 100%, always restate if the restatement period is officially open. It is always safest bet. My 2 cents for what it is worth.

Assume 1 hour of service i.e. participant met the requirement. Thank you

Great question, I am also curious if service can be counted with no US based income?

In this case, BOD is fine but still check if you need any snap on good faith amendments.

Actually let me change the above to a DB plan, again with all the above provisions, would I need to prorate the accrued benefit?

Hi Lou Thank you for the additional information but not worried about next year yet. Plan only covers HCE's anyway so 2022 is not an issue neither is 2021. Sometimes we need those plans with no testing issues. Much appreciated.

What type of plan DB or DC? Also, check with the document vendor as they will tell you what IRS mandated amendments (although some are good faith amendments) may be needed to be adopted, if any.

Hi Here is a new one for me. New 401k plan, effective 1/1/2021 (no short plan/tax year) They decided to hire a new employee on 9/1/2021 and will pay 350k salary for calendar 2021. This employee will have an immediate entry of 9/1/2021, a special entry date amendment otherwise plan has 21/1 and dual entry for eligibility. For 401k deferrals, profit sharing allocation and testing compensation, what needs to be prorated? Assume no hour requirements for ps and 401k. Thank you

Calavera No they do not want to, this is why I suggested after 9/15. I am not sure I agree with you i.e. make a deposit prior to 9/15 so that you can open the plan for 2020 and deduct for 2021. As far as I know and always have operated under the assumption that, if deposited by the due date of the corporate return, it should be deductible for that year and not the year after (unless no room for the deduction). Others may disagree with me.

No as 401k election had to be made by 12/31/2020. No issue with ps or db plan though.

Hi I would like to get some opinions. I am doing a bit of research for a hypothetical plan design someone. I have worked with overlapping plan/tax years in the past but nothing like the following: Calendar corporation ending 12/31/2020. Filed 2020 tax return end of May 2021 with extension. Want to set up a DB plan (non-PBGC and covering owners+spouses only) effective 10/1/2020 with PYE 9/30/2021 using 2020 w-2's. Generating minimum required contribution (MRC) of 100k and 404(o) maximum of 120k. Not deposited till after 9/15/2021 so cannot be deductible for 2020. Second plan year starts 10/1/2021 and end 9/30/2022 using 2021 w-2's. This plan generates 50k of MRC and maximum 300k of 404(o). They will deposit by 12/31/2021. They want both plan years to be deducted for 2021 tax year, what ever the amount is permitted. The plan year starting 10/1/2022 and ending 9/30/2023 will be deducted for 2022 tax year and based on 2022 w-2s. There are a few different things I am trying to understand here. The last line of 1.404(a)-14(c) states The employer must use the same alternative (either for plan year commencing in tax year or plan year ending in taxable year - I have no idea about the 3rd alternative i.e. weighted average so let's leave it alone) for each taxable year unless consent to change is obtained from the Commissioner under section 446 (e).” The above item 1 is inconsistent, at least to my understanding, with the design in mind above. Am I missing something here and/or overthinking it? Separate than above 1 and 2, what is the maximum deduction for 2021 tax year regarding the DB plan? I think 300k as it is the 404(o) limit under the 2021 valuation using 2021 w-2's. It includes for MRC's for 9/30/2021 and 9/30/2022 plus some cushion. I believe this is very conservative approach but still concerned about above 1 and 2 Now, as a bonus, they want to add a 401k/PS plan for 2021. I do not believe it is an issue if the plan is calendar plan (remember no testing issues as all are HCEs). The deduction would be limited to 6% of all 2021 w-2's as not covered by PBGC. Do you agree? Your comments/expertise are appreciated.

Agreed and thank you

Both plan and limitation year, correct? Thank you

CB, thank you How about if they extended but already filed\, say in May?

Hi Looking into a new plan possibility. Company A started 4/1/2020 (with a 12/31/2020 year end) and want to set up a db/ps plan for 2020. Non PBGC 2 owners, each with 90k salary. Total 2020 compensation 180k Do you agree that there is no 415 proration here for salaries/deductions? I have always thought/did 415 limits when everyone was at maximum, never such low levels. For example, I can generate a DB deduction 100k (based on 9k salaries each) and 10.8k of ps (6% of 180k) for 2020 using full salaries? Thank you

Hi RR 76-28 states that contribution can be made after the closing of the taxable year end and still be deductible for the prior year whether company is filing on a cash basis or accrual which also references to 404(6) I am doing a little research and see if there any other regs/codes etc supporting RR 76-28 and cannot seem to find any. Are there any other codes/regs etc out there that i am not able to locate? Thanks

Hi A hypothetical question. Company A wants a DB plan starting in 2020 but they have filed their tax return on time without any extension. However, they have lots of monies and want to generate a required contribution for 2020 and deduct for 2021 tax year together with 2021 deduction (assume there is enough room for both under 404(o). What do you think? Thanks

CB, thank you for pointing out.

I hear you. An update on why this happened. Client decided to withdraw 30k because his partner's pay credit went down by 30k (due to cb plan formulation). I got the census at the beginning of the year and provided the numbers accordingly. 3 moths later, I was told that the partner's salary was 30k less (not getting into details, makes my blood boil). Based on the new census info, I redid the calculations and suggested 57k contribution. However the client, in their infinite wisdom, thought - rather than asking me, since the salary was 30k less, 27k was enough and decided to withdraw the 30k on their own making a perfectly funded plan, underfunded. What I need to find out is what to do, is there a penalty on this, just cannot seem to find it. I told them that I will not proceed until the penalty issue, if any, is resolved. Thank you

Peter So, if the bond is 10k and have automation inflation guard i.e. automatically covering 10% of the assets, are you saying "put in 10k on the 5500 form even if the assets are, say, 2M and automatic coverage is 200k?". I put in 200k because that is the actual amount of the bond per provisions and this is "true, correct and complete". Hopefully I did not misunderstand your statement.

Not institutional trustee. Good points though.