DBnme

https://www.milliman.com/en/insight/nondiscrimination-testing-minimum-allocation-gateway

CB/DC plans. The CB plan froze in 2022 and no participant earned a CB accrual for 2022. The top-heavy minimum is provided in the DC plan. Due to the CB plan freeze the DC plan TH minimum will be 3% rather than 5%, correct? Top-heavy has always been provided in the DC plan. The DC document is ftwilliam.

If you are using the average benefits test to pass coverage rather than the ratio percentage test, the nondiscriminatory classification test is part of the test. 1.410(b)(4)(b) says in part-An enumeration of employees by name or other specific criteria having substantially the same effect as an enumeration by name is not considered a reasonable classification. I believe this applies to the definition of eligible employee not to the benefit formula groups. I looked at a plan the other day that literally defined eligible employee as "John, Susan, Jim, Betty. All other employees excluded." I would say that plan could not pass coverage based on the Average Benefits Test.

Appreciate the replies and helpful info. How would one go about correcting the situation? As stated there were "excess contributions" in terms of 415, but not necessarily for 404. I'm assuming actuarial valuations and tax returns would need to be revised? Would contributions need to be returned or could they be carried forward?

Sole proprietor with no employees, business started in 2018, plan effective in 2018. This is a takeover plan. Using made up numbers this is what has happened each year from 2018 - 2020: earned income = $100,000 and pension contribution = $99,000. In my mind that means that "plan compensation" is $1,000, which means that since there is no salary history prior to the plan effective date there are going to be a number of problems, not the least being the 415 limit since since 3 year average average comp is $1,000. Am I missing something here wrt plan comp and 415?

In a perfect world this is where your client's CPA would make an appearance.

Doing a DB plan termination. Of the 40 participants with a lump sum greater than $5000, two selected an annuity. We had everything set for June 1 lump sum distributions but the plan sponsor is only now dealing with the annuity purchase. Am I correct that because the Notice of Annuity Information is just now going to be provided they cannot pay the lump sums until the 45 day advance notice requirement is met?

Calendar year DB plan with approx. 50 participants. Covers all employees, 21 & 1 eligibility. 1000 hours required for accrual. Plan sponsor is considering freezing for 2020 but it may be that 3 or 4 participants will have worked 1000 hours by the freeze date. How will that work for 401(a)(26)? Does the fact that a few participants accrue nullify the frozen plan exemption? Note that the plan is slightly underfunded on a plan termination basis.