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Jeff Hartmann

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  1. Generally, when a Cash Balance plan is adopted, the Profit Sharing plan should provide (or amended to provide) that there is no End of Year employment requirement ..... because it usually better (cheaper) to provide staff benefits in the PS plan. .... Jeff
  2. If participant born 4/11/1952 is terminated or was a 5%-owner, his Required Beginning Date is April 1, 2026 (not 12/31/2025). .... Jeff
  3. Your segment rates for 430 should be 5.03/5.27/5.59, because the first two 404 rates fall within the 95%-105% corridor of the 25-year average segment rates. ..... Jeff
  4. In my opinion, the Paul Shultz memo (from June 2002) "set the standard" [at 0.5%] for testing whether a benefit is considered meaningful by IRS. Is anyone aware of IRS challenging a 0.5%+ benefit accrual as NOT meaningful? .... Jeff Paul Shultz memo: https://www.irs.gov/pub/irs-tege/memo_060602.pdf
  5. Actually, SECURE (1.0) updated the minimum age to 72, but did not contain any language about updating the life expectancy tables. The tables updates were done by IRS regulations proposed in November 2020 (and finalized in late February 2022). Again, SECURE 2.0 just updates the minimum age to 73, but does not update the life expectancy tables. My guess is that IRS is not planning another update immediately to the life expectancy tables, but if they are planning to update the tables it would be announced well ahead of time and not take effect before 2024 at the earliest. ..... Jeff
  6. Is this for a DB or DC plan? The rules differ. I will state my answers for a DB plan ...... 1. For an annual payment by 4/1/2023, RMD payment should be the annual RMD, $24,000. April 1 is a BEGINNING date, for monthly payments, but for an Annual RMD, you should pay the entire Accrued Benefit x12 as of 12/31/2022. 2. At least $24,000, plus an interest adjustment (actuarial increase) for delayed payment that was due 4/1/2023. There is also potential 50% Excise Tax for missing 4/1/2023 deadline. What/when is the NEXT RMD payment going to be? 3. $36,000 should be received in 2024. I think this should be paid around 4/1/2024 (or 1st anniversary of 2023 payment, if earlier than 4/1/2023). .... Jeff
  7. It's unclear to me what you mean by a "Lump Sum withdrawal" ? Do you mean a "lump sum" of 12 monthly payments ($2,000 each), or a "Total Distribution" of his entire Accrued Benefit? If he is NOT terminated, does the plan permit In-Service Withdrawals of his entire Accrued Benefit? If this is a total distribution, and the plan allows In-Service Withdrawals, the total distribution might be worth around $264,000 (2,000 x 12 x approx 11 [APR] ). If by "lump sum withdrawal", you just mean 1 annual payment (vs. 12 monthly payments of $2,000) you should be able to pay a $24,000 annual RMD payment before 4/1/2023, if plan document allows annual payments of the RMD's. P.S. you didn't say whether the $1,000 / $2,000 AB's were monthly benefits or annual benefits, but the discussion implied this was a Monthly Accrued Benefit. .... Jeff
  8. FYI, PBGC Premium indexing is based upon increases in the National Average Wage Index, which increased 8.89% in 2021, so all the 2023 premiums are approx. 8.89% higher than 2022 rates. The indexing rules are part of ERISA (as amended by several later laws). .... Jeff
  9. As an actuary, I am also concerned that using the higher interest rates (over 4%) will increase the funding liabilities (Funding Target) and, if covered by PBGC, the PBGC liabilities, which can lead to fairly high PBGC Variable Premiums. For small plans wanting to pay Lump Sums to HCE's, increasing the funding liabilities can make it harder to pass the "110% test" which usually must be passed to pay Lump Sums to restricted employees (like the top-25 HCE's). .... Jeff
  10. <<if a contribution is made by the due date of the 9/30/2021 Form 5500 - 7/15/2022 - and we therefore show this as applying to the PYE 9/30/2021,>> I don't think a contribution made in July 2022 can be reported anywhere on the Form 5500 (or Schedule SB) for the plan year ending 9/30/2021. Contribution must be made by June 15, 2022 to be included in the financial reporting of the Form 5500. .... Jeff
  11. << Accrues the pay credit and the equivalent AB is used to pass 401(a)(26). However, at end of year, his pay credit is forfeited due to 0% vesting, thus account balance is $0 at end of year. >> I question that a pay credit that is already forfeited at year-end can be used to pass 401a26. How can you say this participant is "benefitting" in the Plan on the 12/31/2021 testing date when his benefit is already forfeited? In that situation, we would look for another "benefitting" participant to pass 401a26 (someone who is still active on 12/31/2021). .... Jeff
  12. In my experience with Form 5330 filings, mostly for Unpaid [DB] Contributions or Prohibited Transactions, more often than not, the filing was done long after the "filing deadline" -- typically because the filing deadline would be July 31, but we would not know about Unpaid Contributions until after the Sept. 15 minimum funding deadline. I am unaware of our ever "extending" the 5330 filing deadline, nor any penalty assessed for "late filing" of Form 5330. IRS will certainly not "reject" any Form 5330 filing just for being "late". .... Jeff
  13. As you suggest, I think the Partial Termination analysis is supposed to look at the reduction in ACTIVE participant counts. Going from 7 to 6 is only a 14% reduction, which is less than the threshold (20%?) that is supposed to trigger a Partial termination. .... Jeff
  14. PBGC did follow with an update (recognizing January 4 contributions) to their recent Technical Update 2020-2. .... Jeff
  15. Personally, I think the biggest issue in your example (CRD available only for several months during 2020) is the failure to TIMELY communicate to the participants their right to a special distribution before the expiration of such rights. i.e. what is the point of adopting such (an optional) provision if they are going to wait until 7 months after the expiration of the provision? Notwithstanding the statutory deadline of July 31, 2021, an SMM explaining this provision should have been provided immediately after adoption of the amendment. ...... Jeff
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