Jakyasar

Good morning all I was asked to perform a 110% test for a cash balance plan and see if an HCE is eligible for lump sum. I was told the client is eager to pay the lump sum. I have done this many times for a defined benefit plan and never needed for a cash balance plan. As I am not 100% sure, would one of the 2 methods be acceptable? 1- simply use the account balance (no 415 issue) as of distribution date (adjusted for interest credit if required) and compare to the assets as of the same date, or; 2- determine the AB's as of distribution date and convert them to lump sum using?? PVAB would be based on plan actuarial assumptions, 430 assumptions, 417e assumptions?? Any other methods that are acceptable that I am not thinking of? Also, do you provide the client the method to choose as sometimes one method would allow lumpsum where another would not? I remember this discussion sometime ago and some well known actuaries had no issue to let the client decide between 430 and 417e options (it was for a defined benefit plan), as long as the ramifications were well explained and disclosed to the client. Thank you all and have a great weekend.

Hi all I was asked the following (hopefully asking correctly): Owner of corporation got 20k salary in PPP monies and 50k salary from corporation thus 70k w-2 for 2020. Wants ps deduction for 2020. Which amount can the corporation contribute and deduct for? 50k or 70k? Thank you

Hi, any takers? Thank you

Hi Having a discussion and curious about the following for a 2021 RMD: Plan year changed during 2020. 9/30/2020 AB 2000/monthly 12/31/20 AB 3000/monthly - short plan year from 10/1/20 to 12/31/20 What is the AB used for 2021 RMD? Another scenario 9/30/2020 AB 2000/monthly but 20% vested at 400/month 12/31/20 AB 3000/monthly - short plan year from 10/1/20 to 12/31/20 but 40% at 1200/month What is the AB used for 2021 RMD? Thank you

Very interesting and educational, thank you Have a great weekend.

Hi C.B. I meant to ask as 2 separate scenarios. Scenario 1, if only in the dc plan and excluded from the cb plan. Scenario 2, if included in both the dc and cb plans. In both scenarios chooses not to defer. Only the dc plan provides top heavy requirements. Would any of your comments change? I got to be more specific next time as I type too fast sometimes. Have a great weekend and really appreciate your comments/time.

Hi C.B. You are correct in all your assumptions. His safe harbor match is over 3% so his top heavy is satisfied and as he gets on PS allocation due to 1000 hour requirement, he is not getting gateway either. Please allow me a follow up question, just curious and thought of it. If he was making no deferrals, he would not be getting any safe harbor match. If this was a dc plan only and no ps allocation, no issue of the top heavy. What happens in a combo plan assuming that he participates only in the dc plan and also in both plans? Never seen this but curious.

Hi Lou, thank you confirming my understanding.

Hi C.B. As I said senior moment since I only with non elective safe harbors in general. Thank you for reminding me about the top heavy coverage. If I understood you correctly, if he was in both top heavy plans and only DC plan provides the top heavy, not only he will get the safe harbor match but he will also get 5% gateway as a ps allocation, correct? Much appreciated.

Hi all Having another senior moment. Looking at a combo plan (both 401k and cash balance plans are top heavy) where the existing 401k plan has safe harbor match (changed to non elective for 2021) and ps allocation is last day+1000 hours and everyone in their own group. Top heavy also requires last day rule. The cash balance will be a new plan effective 1/1/2020. One employee (DOP 1/1/2019 and non-HCE) terminated 1/10/2020 and rehired 10/4/2020. He deferred a bit in the year and gets the safe harbor match. He is excluded under the CB plan. Gateway requirement is 5% Performed the combo testing and the system did not require a gateway allocation to him and passed the testing (I have others who satisfy the combo test and helping to pass the test). He should get at least 3% as the 401k plan is top heavy and did not get a warning on that either, correct? As it is safe harbor match, should have 3% of allocation, at least. Something does not smell right. I do not believe it matters if he worked under or over 500 hours. Thank you for your comments.

Hi Have not dealt with loans for couple of years and now a participant wants one. Loan procedure states prime rate plus 1%. Is this reasonable? I believe 2% is the unofficial safe harbor. Thank you

Thank you for your comments

Appleby They inherited in 2020 and also received the assets in 2020. My understanding from other comments and reading further, it is 10 years and starts in 2021. As to the ages, still no info so Q1 is out. Thank you for your time.

The rollover will be in 2020 however thank you for your time/comments.

Lou S., thank you One follow up to Q3 - does it matter if the beneficiary receives the rollover in 2020?

Trying to get to Q1. How about Q2 and Q3, in general terms? Thank you

Hi I was asked the following (not sure if a DC plan or 403(b)). Not sure if the deceased was already receiving RMD and do not know the ages of the beneficiaries. Assuming that the sisters get the amounts this year and rollover into their IRA's Q1: I do not think they need to get an RMD for 2020, correct? Q2: They need to distribute the IRAs and taxed on within 5 or 10 years? Q3: When will year 1 start? Thank you

Hi CB plan with 0/0/100 vesting. This is the second year. (Plan year is 7/1/2020 to 6/30/2021) Currently 5 eligible employees, 1 owner, 1 non-owner HCE and 3 non-HCE 2 non-HCEs are leaving (or fired - do not know yet). The only new hire is is from beginning of plan year and he is the spouse of the owner. Does not look like additional new employees to be hired for the next 6 to 12 months. Do I have a partial termination issue? Does it matter if the employees are terminating before or after 1000 hour accrual? Thank you

Any takers on this?

Yes, i/o 7/30/2020, it is 6/30/2020. I understand that you can use different definition for testing but how about 2 different plans by the same sponsor using 2 different compensation periods? Isn't this an issue for deductions? Anyway, I am having them amend the plan and match the cb plan. I love KISS method.

Hi Cannot think straight on this issue so need to ask. Sponsor FY is 7/1/2020 to 6/30/2021 and the DC+CB plans are the same period. Working with a DC person and set up a CB plan for 7/30/2020 year end and did not need to aggregate the plans for testing. For the 6/30/2020 year end, the compensation was FY of the corporation under the CB plan. It just worked. I just got a copy of the updated document for the DC plan (signed 12/1/2020) and noticed that the compensation is checked as calendar year ending within the FY. So I have 2 plans to test but 2 different compensation definitions. I must aggregate the plans for this year, do not have a choice. Any suggestions on what to do? I am trying to have them change the definition of compensation (may also need the HCE determination but this is another story). How can I test 2 different compensation definition? Thank you

Hi Newly established db plan 7/1/2020 to 6/30/2021. The owner's spouse was an employee in the past and part of a terminated db plan, 10+ years ago. I believe he may have been a part owner back then, no information on that. He has been working for the company but did not receive any salaries for the past 10 years. Does it matter if working less than 501 hours or even less than 1000 hours? They want to include him in the new plan and he will start taking salary as of 1/1/2021 i.e. mid year. Does the plan need a special eligibility amendment or he is assumed to have had employment for eligibility in the past? I believe yes. As he had nonforfeitable rights in the old db plan, if I understand correctly, rule of parity does not pay a role here?? Thank you

Hi all Have not done of these in a long time. Company started 3/1/2020 with FYE 12/31/2020 so in existence for 10 months in 2020. Want to set up a 401k/PS plan (no SH can be done for 2020 but can be done for 2021) My census Key-HCE1 - salary 285k HCE2 - salary 250k - can he be categorized as non-HCE for 2020 HCE3 - salary 200k - can he be categorized as non-HCE for 2020 Non-HCE - salary 50k What prorations are required between the salary, 401k deferral and profit sharing (ADP issues aside)? If need to prorate the salaries, what salaries do I need to use for ADP, 410(b) and 401(a)(4) purposes? If my memory serves me right, I can start the plan from 1/1/2020 i/o short year as well as the limitation year, correct? If this the case, do I need to prorate anything? Last, as the HCE's (assuming that the non key HCE cannot be categorized as non-HCE) will have enough of payroll to maximize the deferrals where the non-HCE will not, is this a BRF issue (again please ignore the ADP testing). Thank you and happy Thanksgiving.

Hi Bill The plan's effective date is prior to SS4 but execution date is after the TIN was obtained. It is not a concern to change the plan name, just seems odd. Take care and happy Thanksgiving

Yes they are but the fact that they obtained a TIN before plan was established,is that even valid? One can name the plan anything they want but still calling it a db plan when it is abc plan? Thank you for your input