Jakyasar

Hi I never had to deal with the following situation - takeover case: One lifer ps plan. Makes over 280k in w-2. Client makes max PS contribution for 2018 and deposited 10k extra during 2018 and paid the excise penalty. Did the same for 2019 (same as 2019) and now trying find a way not to pay the penalty but going to have to, I do not see any way out of it, am I wrong? Question(s): 10k deposited from 2018, does it apply towards 2019 limit or just becomes an asset of the plan? 10k deposited from 2019, does it apply towards 2020 limit or just becomes an asset of the plan? There is no mistake of fact here. Thank you,

Thank you, now we wait and see what they will come with.

Hi Is the suspension for 2020 RMD applicable only to DC plans and IRA's? I do not see DB/CB plans mentioned. Be safe

Thank you for taking the time and explaining. It is very clear that 25% of individual salaries come into play.

Hello Sponsor has an overfunded DB plan (active and accruing benefits). It is a family business only spouses (owners) and their children (all over age 21). It is a corporation (Sub-S). Sponsor wants a deduction for 2019. As DB is not a viable option for deduction and since no DC plan was input as of 12/31/19, the only option is SEP for 2019. 4 participants with a combined eligible salary of 500k where 25% deduction limit is 125k. As one participant is making 265k, limited to 56k which leaves 69k as additional deductible contribution. The other salaries are 150k 75k 10k Can they each get over 25% of their salaries on a pro-rata basis as long as the total does not exceed 69K? It can be done is a PS plan but not sure how SEP works here. Thank you

Thank you all for your comments/suggestions. I agree with all, the client happens to be a CPA so they will need to make a decision on this. Mr. Rigby, thank you for the reference, will check. Cusefan, plan is not set up yet and hence the question - told them that they cannot have it all. I agree with keeping in the db plan until it terminates but they will still want to transfer all into a PS plan so the problem is inevitably will come up again.

IRA is not an option for them (for whatever reason, not my call). Thought of rehiring the owner but the question now becomes, what is a reasonable pay (I am aware that this is a loaded question but as he is the owner, he can get anything - last paycheck was 7 years ago) and also how many years should he stay employed. Thank you

Hi A DB plan covers the retired owner (a corporation) and also his spouse who is part of the plan as an additional employer (sole-proprietor). Their children are over 21, for 1563 purposes. Retired owner has both DB and rollover assets in the DB plan and wants to transfer the rollover portion into the new PS plan. Eventually they will terminate the DB and will want to rollover all assets into the PS plan, may be this or next year. According to the vendor for the PS plan document, the document does not allow any new participants who are already terminated/retired thus the retired owner cannot transfer his rollover portion from the DB into the new PS plan because he can never be a participant (nor the eligibility provisions allow/have anything on it). According to the vendor, the only way out is to change some language in the document which may take out the document from pre-approved status. Has anyone seen this before and was able to find a solution? Thank you

Revisiting this as I got a bit more and different information from the CPA on this. I was told that the participant is receiving an annuity from the IRA and the amount received satisfied the RMD requirements of all IRA's collectively that he owns. From what I was told, 50% of the annuity was paid directly to the charities and 50% was paid directly to the annuitant (not sure if done monthly or in one lump sum). The annuitant received 1099s for the full amount as taxable distribution. Is this correct? Thank you for your comments

I could not bcz did not know but I found the answer to either scenario, thank you though.

Hi My apologies if this was discussed before. RMD recipient advises their broker to have 15k of the 30k RMD to be provided to charity and 15k to them. But now gets a 1099 for 30k. Can RMD's still be provided to charities? Does it matter if from a pension plan (any type) or IRA? Thank you.

It is a one person plan and cannot exceed 6.8k of psp as it violates the 25% deduction limit. I meant the catch-up for age over 50 as not applying to the 415 limit. Any comments/corrections? Thank you

Revisiting this issue as I now have the actual w-2. It is 27,200. If only ps, can do up to 6,800 @25% deduction limit As catch-up is not part of the 415(c) limit, can the client do the following? 401k deferral 19,000 PS Allocation 6,800 - may choose a lesser limit, do not know yet Total 25,800 - less than 100% of pay plus catch up 6,000 Total 31,800 Thank you for your comments.

Thank you all for your comments

Hi My apologies if this subject was discussed before. Taking over 2 plans for the same sponsor and requested the past 3 years of information as well as documents etc, the standard information which are all available in PDF format. Sponsor cannot locate them all. Sponsor contacted the prior TPA and asked for the information. In return they asked for a payment to provide the information that already belongs to the sponsor and was paid for in the past. Sponsor is very unhappy about the amounts and wants to complain to an institution about this. Is this a common practice i.e. ask for money to provide the information already belonging to the sponsor? I have dealt with this many times and unless it was some very specific calculation etc, it is usually customary to provide the information without any money. Is there a customary amount? Your comments are appreciated. Regards,

And make sure to check old rate vs new rate for a period of one year for lump sum determination.

Assuming that the participant declines to have insurance, how does a DB plan cover coverage and BRF issues - not get any coverage? One way to do is just simply get the insurance (assuming no tests are required). Of course the employee may choose not to sign any forms. Bonus question: Owner is healthy and wants insurance in the DB plan. 2 out of 3 rank&file employees are not insurable due to health reasons. What to do? Rely on average benefit percentage test based on accruals?

Very interesting, thank you

Hello Doing a little reading of the new ACT and wanted to see what others think: RMD related: Have a DB plan and the owner will turn 70 1/2 in 2020, does that mean, the RMD is not due until the calendar year he turn 72 i.e. 2021? In-service age of 59 1/2: As the new ACT lowered the in-service distribution age to 59 1/2 under defined benefit and money purchase plans (target benefit plans too), can we restart designing the DB plans with normal retirement age less than 62? Thank you

Thank you all for your contributions. Totally can exceed 100% of pay as long as it is catch up only. A happy and healthy New Year. All the best,

Hi This is a 2019 related question to confirm if my understanding is correct: 2019 w-2 is $30,000 Can I do the following: PS contribution $7,500 401k Deferral $19,500 Catch up $6,000 - not limiting to 100% of pay OR 2019 W-2 is $20,000 Can I do the following: 401k Deferral $19,500 Catch up $6,000 - not limiting to 100% of pay Thank you and happy New Year and holidays

One more addition, may buy life insurance under the plan, pay the premium from the plan assets and the face amount may cover the losses attributable to the over funding but needs to be planned carefully especially with the cash value that will be generated thru the policy. with this approach, the plan needs top continue until the policy beneficiary passes or assets go down to a reasonable level. Sometimes, it may work.

Plan is way over 1M overfunded. Adding his spouse with reasonable compensation (to be discussed with the CPA and the plan actuary) may solve this problem in the long run. Also need to discuss with the CPA and plan actuary if the spouse's past years of service can be included even if no compensation. If assets continue to grow, not much can be done to eliminate the overfunding. If they want any deduction for 2019, have them set up a 401k/PS plan for 2019 so that they can get some deduction. No more contributions into the DB plan. Sell the plan's assets??

Hello Have been filing 5500EZ for a few years as assets exceed 250k. Q1: Portion of the assets are rollover. If takes out of the rollover and rolls over into an IRA, assets will drop to 100k. Can they stop the filing? Q2: If allowed in-service distribution and rolls out all the assets into an IRA, can they stop filing? Thank you and happy holidays

Thank you, appreciate it.