Nate S

If the participants have an existing balance from before the allocation date, then their actual return is appropriate; and if it's negative then so be it, they are then benefitting by getting the monies whole at this later date. If they did not have an existing balance (safe harbor non-elective?), then they would be credited with the return of the highest performing fund. Again, if all the investments lost value, then they "benefit" from getting the whole amount now. The VFCP calculator is only appropriate for late deferrals and loan payments that are to be corrected through the precepts of VFCP; EPCRS does not recognize the awarding of a flat% return for lost earnings unless the calculation of actual earnings would be burdensome. However, even then you would be restricted to a market-driven determination.

As of 12/31/2020, they are due to be paid a benefit, regardless of the measurement basis. Look at it from the perspective of a pension plan, if they aren't in pay status, no other participant has an amount that belongs to them, just the promise to be paid in the future; yet those participants would all be included. And I have never seen an auditor use anything other than a receivable amount, unless it was not a deductible allocation related to the same taxable period.

Biggest problem QDRO's have, the order's usage of the words "must", "will", and "have to" when it comes to the terms and conditions of the distribution to the AP. The order can't compel a Plan to do anything that the Plan Document doesn't already allow. As the Plan Document must say within itself, it is controlling in case of any conflict.

The only validity question I've ever asked was regarding the electronic signature the courts began attaching in 2020 instead of a wet judge's signature and clerk's stamp/embossment. But the State cite I consider to be imperative to the QDRO itself, especially if the state law has been further modified by court decision. A NY QDRO for a pension plan has to reference Majauskas; a PA QDRO for a defined contribution plan may be interpreted either of two ways with or without Smith. And as fmsinc notes, many parties live in or move to a different state from their partner, or employer, and those attorney's may have zero inkling as to what legal requirements the out-of-state employer is beholden to.

Regarding the safe harbor, as A does not have allocation conditions for the match you may be able to get around that issue and aggregate the testing, if the eligibilities are different you would have to prove it passes both ways to do so. Post-transition, if A and B are amended to mirror each other, then coverage testing will pass on a dis-aggregated basis because each group will include all the employees, and you can then test ADP/ACP on a separate basis.

I see no reason to go to the hassle of changing the val date, stick with 4/1 and treat the final accrued benefits and final assets as such. Remember, valuations can't consider future events so a 1/1 valuation would ignore the 4/1 termination and treat 2022 a full year for purposes of the minimum funding determination.

Company M as the sponsoring entity will provide their registered physical address for the Doc & 5500. The trustee must be a US entity, either the other owner or a corporate trustee will likely fill that role. Owner A may well qualify as a US Citizen, but his primary residence in a foreign country fogs that status a bit. Unless it will be a participating employer, Company K can likely be ignored as there is no controlled group with Company M, however you will want to rule out Affiliated Service Group as well; or make sure you can treat it as such so you can include it in A's compensation as well. The 1099 contractors are likely questionable. I would have him complete IRS Form SS-8(not to be filed, but for your purposes only), or separately have him answer the questions in Part II, III, & IV. There are a few key indicators in there, one of which they already violate by publicly advertising them as "employees".

Always double-check the Plan's limitation year definition before pro-rating. 1. Yes, actual compensation between 10/1 - 12/31; on a basic level, the owner(s) would have theirs applied up to the applicable compensation limit including any pro-ration. Alternatively, the Plan Administrator could "spread" the owner(s) compensation over the year based on their level of service (IRS uses service to justify the regular, year-long deposit of deferrals for owners) and recognize that portion for service from 10/1 - 12/31. 2. A half-year determination of compensation would have to be performed as of 6/30, and deemed acceptable by the Plan Administrator.

I'm assuming the termination amendment/resolution was a freeze & term since you are worried about an additional year of service? The freeze portion would not be affected by a change in the termination date. The PBGC has a complex because they're not a regulatory agency, but they're allowed to write their own rules; and it's usually best to conform to their timelines as much as possible. The designed termination date is just a counting tool, the Plan itself doesn't terminate until it's 0 - $0. Modify the term to conform to the PBGC and file an "amended" Form 500. You may or may not have needed a '21 valuation to begin with, your actuary will direct you there.

Those agents started to retire in the 2000's... As for this current crop, they have their checklists to satisfy...😵

2000%! They're a law firm, let them make the "legal" determination, or have them hire appropriate counsel to make it for them. TPA's aren't attorney's, our services to Plan's are not legally binding except upon acceptance by the Sponsor/Administrator.

The longevity of the beneficiary is usually the greatest concern. This will create a very low-value benefit amount, and usually will place the Plan in a position whereby the annual administrative carrying cost becomes excessive vs the benefit amount being paid. See actuarial & administrative per participant fees, PBGC premiums, amortized AFTAP shortfall, and the annual inherent expected asset return. Typically, a 10 - 20 year contingent benefit will be much more valuable to the beneficiary than the survivorship benefit, especially if the participant is in poor health or there is a significant age disparity. I've only had one such annuitant with a terminal diagnosis, who was seeking to take care of a child with a disability, but when the Plan terminated a couple years later and the child's trustee elected a lump sum, it was a pittance compared to what would have been left in the guarantee period.

1. Offering a variable annuity as a optional payment form is a non-starter because it must be actuarially equivalent to the normal benefit, which involves a static payment stream. If the payment stream can fluctuate, or has a guaranteed minimum, then you couldn't determine how much benefit you're purchasing for equivalency, or you have to purchase an initial payment that is less than the normal benefit equivalent to account for possible future increases. vs A. The decision to purchase a variable annuity product to provide for the payment of the participant's elected optional payment form is a fiduciary decision and must be made with all necessary and applicable due-diligence, and cannot create a benefit/right/feature that is only available on a discriminatory basis. Whose benefits are being paid in this manner? What is the cost of the annuity vs making monthly payments vs paying a lump sum? It must have a guaranteed floor as the monthly payment must be expected to be actuarially equivalent and thus cannot decrease in any future period. I would disagree with the notion that it must be capped for 415; it's not the Plan's responsibility what happens after the lump sum is paid or annuity is purchased, as long as all due diligence was demonstrated during purchase. For example, if someone took a lump sum payment in April 2020, enjoyed a 40% return through the end of 2020, and then annuitized the balance in his IRA; is the Plan responsible to then step in and say to the IRA custodian that you can't make a 140% monthly payment. No. Also, isn't it mathematically a 415 violation if the participant outlives his expected mortality and continues to get paid his benefit for an additional 5, 10, or 15 years? On a value basis, yes, but again the Plan doesn't have the ability to exercise that level of control once the payment stream begins. Considering the interest rate climate for the last 20 years, annuities serve three purposes: continue retiree payments upon plan termination(or to pay relatively smaller benefits so as to eliminate annual administration costs); use up excess assets to avoid a reversion; and provide a higher deductible contribution to a young owner in a 412 arrangement. Anything else and you have to look closely to see just how much of a commissionable benefit the sale is to the broker/agent!

And what filing is due 5 months after plan year end???

Some very reputable CPA's will also tell you that a FASB report accurately describes a pension plan's operations. As this Plan's compensation reportedly does not exclude fringe benefits, then the s-corp medical is to be included. Basic rule of thumb for w-2 comp, not including exclusions; add any pre-tax deferrals back to Box 1, then pick the biggest number on the form. Overall, assuming this is a 5% owner, you won't go wrong if you mistakenly pick the lower comp, he'll have a lessor allocation and your testing will be conducted on a more stringent circumstance. Sucks to be him though.

Yes, in this instance.

The takeover allocation was fine. You are thinking of the 414(s) safe harbor exclusions (excluding fringe benefits for example) which don't need to be tested to prove non-discrimination. Otherwise Bill has the right of it, any other exclusion that passes testing can be used for the allocation.

That depends upon the definition in the plan document. You would only be limited if the limitation year is tied to the plan year. Otherwise most docs use a 12 month or calendar year measurement.

I believe its a fringe benefit and is therefore included, unless excluded by your document.

Here, Box 14 is the s-corp 2% shareholder health insurance premium. It is subject to personal income tax but not Medicare withholding and therefore Box 1 is greater than box 5 by the amount of box 14.

Is 415 pro-rated or subject to the restriction, if any, of the "Limitation Year" in the doc?

"...it seems the client is leaving us." Did the client say as much and direct you to share this data? Maybe chalk it up to a "phishing" scam and tell the client you're ignoring it for their protection! 😇

@Sum_GuyI agree in the context of a Safe Harbor Match, these are usually excluded from the true-up if determined on a payroll basis. However, this is also noted as an "ACA" safe harbor match and I'm not clear if that makes a difference if it's eligible for EACA or QACA qualification. I would also check the account types definitions, the safe harbor match can sometimes be lumped in with the deferral account types; and seeing as the true-up provision denotes the Employer Match, this may refer to a discretionary match, or an additional discretionary match that is also safe harbor eligible. "When we asked them, they said it was because her comp had gone over the $290k pay limit for the year." Payroll systems are usually not able to track comp limits on anything but a gross basis. This is why payroll companies make crappy TPA's...(imo)

A separate group like that will always benefit from an administrative perspective of having a separate PR-qualified Plan. Also look for a custodial/record keeping company that includes a PR trust group, this can make distributions, taxes, etc. so much less complicated to manage.

The MAP-21 disclosures were due to the discretionary nature of the adopted relief.(If I remember my AFN logic correctly, the additional disclosure was only if MAP rates were used before HAFTA) If ARP is likewise discretionary i would include a similar comparison; but if it's mandatory then what good does it due to disclose a what if that can't be?