Socal.actuary

A further question I have and can't find an answer anywhere: if a participant receives a 415 lump sum distribution, but is still employed and earning service and wages, is he still considered a participant and statutory employee for purposes of 401(a)(26)? It make1s a big difference in my testing!

The regs state that an offset arrangement satisfies 401(a)(26). Thus if an employee participates in plan A under the plan terms but due to the offset doesn't accrue a benefit, he is still counted for the a(26) testing.

My question is whether if the prior benefit structure gave accruals of greater than .50% for all participants prior to the freeze would allow the plan to satisfy a(26) after the freeze date. In my case, the 2 participants have benefits at the 415 limit, and so any attempt to add a .5% accrual after the freeze would be defeated. I assume the regs permit this, I hope.

I have a similar case dealing with a(26) and frozen db plan. In my case, the plan is covered by PBGC but is overfunded, so that exception doesn't apply. However, the business operations have ceased several years ago and no employee is receiving salary or working 1,000 hours.Therefore, language requiring a minimum 0.5% accrual for service on or after the freeze date has no effect. My question is whether the client can continue to maintain the plan or must it be terminated?

We have a case where the client had a db plan for many years, which became very overfunded. A new db plan was created, with the idea of a carve out or offset between the plans. Plan A covers 2 participants and provides a benefit of 6% x service accrual and plan B provides a benefit of 8% x participation. In Year 1& 2, the benefit accrued in plan A is fully offset by the Plan B accrual, and the question is how to satisfy 401(a)(26) for plan A for these years. From what I have studied, 401(a)(26) might not be satisfied until both plans can be aggregated for (a)(26).

I had a takeover case similar to this case a few years ago, where the EA went missing in action and could not be located. The EA apparently kept all the records for this client, including the plan documents, valuations etc. The only data that we were given were the 5500ez and and 2013 Sch B. I did a search but could never reach the EA. Theory is that he was very ill and may have passed. We wound up starting a new plan and client took a taxable distribution of the existing plan assets. We discussed VCP options but client chose not to do it.

Opps. only 4 participants.

We have a defined benefit plan, covering only a Key employee, and then in 2016, 3 other employees joined the plan and accrued at least a 0.5% accrual. The plan was frozen 12/31/2016. No other employees. The question I am dealing with whether I am satisfying 401(a)(26) for this frozen plan since 2016 as there are no accruals as the plan is a hard freeze. Since there are 6 "participants", am I satisfying 401(a)(26) since 2016? I find the reg hard to follow for db plan subject to a hard freeze.