Jakyasar

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.

Old memory, possible.

Now that my memory is working as bit better (thanks to ASEA symposium), going back in my memory lane, I believe, at one point instructions stated that no cash values to be included (I may be misremembering this) and then IRS removed that language. I did work with 412i plans but luckily had only annuities, phew. I have now decided to include them in the 5500 forms.

Hi Bill Thank you for your input, yes I am trying to follow with them and see what took place. Of course, they are all hiding from me. Hope all is well.

Here is a new one for me. Brand new CB plan. It was confirmed that 50k was deposited in March 2021. Prepared all certifications accordingly (not filed the 5500 yet). I just got a follow up statement showing a withdrawal of 30k in April 2021. Was never discussed with me not disclosed. Does not affect the MRC so it is good on that end. Does not affect 404o so no issue with deductibility. Anyone had experience like this and what is the correct course of action here? I want to make sure that I go on record with them about the penalties, if any. I also want to let them know, very sternly, that this is not a bank account, once in, stays in. Already starting on wrong foot, time to fire the client? Already becoming a liability. Thank you,

Hi Mike Thank you for the reference as I am quite aware of it and have applied the provisions in the past. My question was not about determining the fair market value. Unless I am missing it (reread again), this rev-proc does not provide an answer on whether I should be including the fair market value of the cash value when preparing the assets for 5500 filing. If I recall correctly (old memory fading), many years ago instructions were specific on not to include cash value in the assets for 5500 purposes and then they removed it. Anyway, I will include. This is the first filing for the plan and this is why I am being picky. Thank you for comments.

Not a trick question, trying to find out more, thank you

Hi DB plan with life insurance that has cash value and 5500-EZ filing. Looking at instructions for 2020 5500EZ/SF. The wording on the instructions is " an insurance company qualified to do business under the laws of a state e.g. investment contracts with insurance companies". Also from 29 CFR 2520.103-1(c)(2)(ii)(C) "investment and annuity contracts issued by any insurance company" I remember a while back instructions were specific about inclusions of insurance cash value on the 5500 forms. Do I need to include the cash value? Thank you

Sorry, my keyboard played a trick on me. I do not see how the old db plan is not a predecessor plan. Thanks for pointing out.

Also, before putting a response under "other", you may need to check with the document provider and see if it is a minor/allowable modification. This can get tricky sometimes and an input from an ERISA attorney may be needed (not saying you need to here). You may take the document out of pre-approved status inadvertently. BG5150 made a few good points.

Only a dc plan which is still active. I am aware of the definition of predecessor plan but will look further into it. However it has always been my knowledge that, once in a db plan that was terminated, the offset always follows you except for a few exceptions. I do not see the old db plan is not a predecessor plan. I am still confused about the employment and vesting credit though.

This is where I am questioning myself on the break-in-service issues since there was no payroll and possibly worked less than 501 hours annually (what if worked over 501 hours annually). Yes, this is a predecessor plan as the old db was under the same EIN/sponsor. Sorry for all these questions as I have never encountered this in the past and trying to understand on how to apply the past 12 years where this person never had a compensation. This is strictly for vesting purposes. Still not clear if all prior service should be counted which in this case, I would agree with CB Zeller on the vesting.

Based on your calculations which assumed that his prior years of service is not included, his initial date of employment is 7/1/2020. The plan started in 7/1/2019 and he was not on the payroll for the 2019 year. He has not reached NRA which is 65 and 5 YOP which would make is 7/1/2025.