Client (74) is a sole proprietor in a business that does music publishing and talent management. He is the only current employee and participant of his DB plan. Through good stock investments, he over funded his DB plan. Prior actuary sold business and didn't alert him to the over funding issue. New actuary informed that due to the over funding he cannot make a tax-deductible contribution this year. Plan is now valued at $4.4mm. Client is still earning approximately $400k a year in royalties and management fees. I am trying to formulate a plan for the client and would appreciate your help/guidance as this is a case of first impression for me. Here is what I have come up with thus far.
Immediately make Required Minimum Distribution for 2019
Increase plan benefits to the maximum allowable amounts under Section 415 of the Internal Revenue Code ("IRC”). What are some ways this can be done?
Freeze DB plan growth by selling stocks within the plan and investing in short and medium duration Commercial Paper.
Immediately transfer via a direct rollover the maximum lump sum amount allowable (how much is this?) to an IRA
consider employing wife and/or daughters since, as participants, they will accrue plan benefits under the plan, reducing the overfunding. Follow all compliance rules and be aware of traps for the unwary, such as ? Wife already does some work for the business. She just doesn't get compensated, yet.
Other ideas?
