HKSUN

Thank you Mike! Yes, both entities have adopted the plan. But when it comes to the earned income, things become tricky. One approach is to only use the net schedule c amount to calculate earned income, contribution amount, and then combine with the the calculation result only using W2 income. Essentially this is treating both sources of income as two different entities, and then combine them together. I'm not sure if this is valid. How is earned income supposed to be calculated in a more appropriate way?

A client has received both schedule c income and W2 income, both of which came from his own businesses (sole proprietorship and s-corp). How can we run DB calculation in this case? Should I use earned income + W2 as the compensation basis? What about deductions? How can we break down the contribution among sole proprietorship and s-corp?

So these annuity payments are not considered as eligible rollover distribution and have to be taxed?

Yeah I mean the in-service distribution will be limited to maximum 415 benefit amount for that year. So you think this is an okay way to deal with overfunding? Can it be rolled over to IRA with tax-deferred?

Husband and wife DB plan, both passed NRA of 62, are looking to terminate the plan, but plan asset value has exceeded 415 lump sum by 1 million. What are the ways to solve the overfunding issue so they can terminate the plan? One way an actuary suggested to me is having both participants start taking in-service distribution, which can be treated as eligible rollover distribution and rolled over to IRA without tax implications. But it seems to violate one of the exclusions of an eligible rollover distribution: "a series of substantially equal periodic payments over a period specified in section 402(c)(4)(A)". Is this really workable?

One-owner-employee company, definitely a controlled group. It's a different company with different EIN, but does similar business.

Thanks Lou S.! So does the 12-months waiting rule for the 401k plans start from the termination date of the prior plan or the plan year end of final plan year? For DB plans, if a client terminates the old DB under his current company, can he immediately start a new DB under his new company?

1. DC plans: have to wait at least 12 months to open a new plan to avoid successor plan issues. (or is it only applicable to 401k plan? Does the 12-months count from plan year end or plan termination date? ) 2. DB plans: no waiting period in between. (but rumor says a client has to wait at least two years to open a new DB after terminating the old DB? any special rules or regulations regarding this? )

Lou S. seems to argue that RMD should reduce the hypothetical account balance, while CuseFan states there's no more hypothetical account balance once the RMD starts. That's why I'm a little confused as to whether an account balance still exists once the RMD starts in a CB plan. Would you please help clarify a little more?

But the CB plan is still ongoing and not frozen. The only concerning event it the RMD, so I don't think the plan needs to annuitize the account balance yet. Given the account balance is not considered to be zero, should I subtract RMD withdrawal from the prior balance?

What if the interest crediting rate is actual rate of return and the return is negative? Assuming there's no pay credit with a negative interest credit, the account balance decreases, which in turn generates a smaller accrued benefit. Did you mean that the accrued benefit in this case still needs to be preserved?

Thank you CuseFan! Let's assume the CB plan is not frozen. Should the additional annuity benefit be the net increase in hypothetical account balance (pay credit + interest credit - RMD withdrawal) or straight new CB pay credit plus interest credit?

Thank you Lou! But when the plan is active (not frozen), CB plan usually does not preserve accrued benefit and PVAB right? Is it because of the frozen status that changes the CB plan to NOT preserve? Also, if we reduce the hypothetical account balance every year with the RMD amount, what happens once the hypothetical account balance is depleted after several years?

I understand that cash balance plan should follow 401(a)(9) rules (DB rules) to calculate RMD amount. My question is: do I need to adjust the hypothetical account balance to reflect RMD withdrawal? If we adjust the balance and the plan is frozen, it would result in accrued benefit decreasing, which in turn reduces the next RMD amount. Shouldn't the DB RMD with Life Annuity payment be level?