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Hello! I happen to be familiar with IRS Notice 2020-61, which came out today, covering the deferral of 2020 contributions to 1/1/2021 under the CARES Act. I found the Notice to be very confusing, so I thought I would start this thread as a PSA, to give pension actuaries a leg up on understanding this. This post will explain how & what interest rates are to be used in connection with DB contributions originally due during calendar 2020 under Notice 2020-61. Under 2020-61, the CARES Act EIR rule (i.e., contributions are adjusted at the EIR of the plan year containing payment date) applies for payments actually made from January 1, 2020 through midnight on January 1, 2021 (or January 4, 2021 if the provision in the current Senate stimulus bill passes). For contributions that were originally due during calendar 2020 not yet paid by midnight, January 1, 2021, the CARES Act EIR rule expires. What replaces the CARES Act EIR rule (for unpaid amounts from 2020) is a modified version of 430(j); the modifications are that the quarterly & catch-up due dates are moved from calendar 2020 to 1/1/2021, and the quarterly contribution amounts are increased (with the EIR from the plan year they pertain to) to 1/1/2021. So, for example (which is unfortunately not included as a Notice 2020-61 example), say you have a calendar year plan, with a 1/1 valuation date, not subject to quarterly contributions in 2019. Say the 2019 contribution is made on 1/1/2021. To determine whether the 2019 MRC has been met, you must discount the contribution back to 1/1/2019 at the 2021 EIR. If instead, the contribution was made on 12/31/2020, you must discount the contribution back to 1/1/2019 at the 2020 EIR. The following chart is intended to help you walk through examples provided in Q&A 2 through 6: Notice Example Topic: Discounted contributions @ val date Topic: Adjusting QRC with interest to 1/1/21 PY contribution is for EIR used: orig due date to 1/1/21 Why? Payment dates used A-2 Yes 2019 2020 CARES Act EIR rule 12/31/20 A-3 Yes 2019 2020 CARES Act EIR rule 12/31/20 A-5 Yes 2020 2020 CARES Act EIR rule 12/31/20, 6/1/20 A-6 Ex 1a Yes 2020 2020 Expiration of CARES Act EIR rule; modified 430(j) Not paid by 1/1/21 A-6 Ex 1b Yes 2020 2020, then 2020+5% Modified 430(j) 2/15/21 A-6 Ex 2a Yes 2019 2019 Expiration of CARES Act EIR rule; modified 430(j) Not paid by 1/1/21 A-6 Ex 2b Yes 2019 2020 for 12/15/20 payment; 2019 for unpaid at 1/1/21 CARES Act EIR rule; Expiration of CARES Act EIR rule; modified 430(j) 12/15/20, nothing else paid by 1/1/21

I can't find anything that explicitly states you can do this but I presume the 50% QPSA is the floor and raising it to a 100% QPSA is not an issue via an amendment to the DB plan. Thanks for any info you can provide.

I appreciated you articles and was wondering if you can help me understand irs rules re ownership vs voting control. I have a question about controlled groups for 2 corporation 1 SCorp individual A owns 100% , individual A also owns 49% of a c-Corp but has a retained proxy voting rights for an additional 5% of the c-Corp (so he has voting proxy for 54%) would both companies be a controlled group for 401k and DB plan purposes.

We have a one person DB plan sponsor: FY is calendar. PYE is 9/30/18. He contributed for the 2017 plan year in Feb 2018 and filed his 2017 tax return without extension. Then he made the 2018 deposit in September 2018 before the 2017/2018 PYE. Since he deposited the money during the plan year it will be listed on the 2017 SB but he'll deduct it in 2018. The 2017 PY max deduction doesn't cover the entire amount, but we have room in and time to amend the formula back to 10/1/2017 so it is deductible. We are concerned with the deposits during being split between the 2 tax years. I think that it is ok but would like another opinion.

NOIT went out in December 2017 for a 1/31/18 plan term date. Plan anniversary was March 1. Plan has been frozen since 2006. When the new rates went into effect March 1 the plan was more underfunded than the client anticipated. They took a couple months to figure out if they were going to go ahead with the plan term. Now they want to move forward and we're past the 180 days to file the PBGC 500. They really want to get it paid out by year end but especially by PYE. Its not clear to me what the options are. I see where you can change the proposed term date - but not more than 90 days. So have we missed that window too? Has anyone been in this situation? Is there anything we can do at this point other than start over?

Can a governmental plan mandate that participants may only select a lump sum (in lieu of a month annuity) if the value of their accrued benefit does not exceed $5,000? If so, can this be done without consent?

Hi folks, I've been reading these boards for a while, but this is my first post. Client has a DB plan (professional 100% owner and one other employee, not subject to PBGC). The owner reached age 70.5 in 2016 and received his first RMD in 2017 slightly before the required beginning date of April 1. The payment was a year's worth of accrued benefit (normal DB RMD paid annually). Per 1.401(a)(9)-6, A-1(c)(1), if the plan was ongoing, his next annual distribution should be made around that same date in 2018. However, he terminated the plan in 2017 and is an electing a lump sum at plan termination. Since it is the year of termination, I believe he can take his 2017 RMD via the account balance method using his lump sum as the balance. His employee only recently received her distribution materials and may not have made her payment election before the end of 2017, so we don't know the cost to the plan for her benefit yet (could be her calculated lump sum or an annuity contract purchase at an as-yet unknown price). Barring a large gain in plan assets at the last minute, the plan will not have enough assets to pay the owner's full lump sum, so he will forego some of it to the extent necessary. He does not want to make an additional contribution to allow the plan to pay his full amount. Therefore, we likely will not be able to calculate his RMD before the end of 2017 since the "account balance" is not yet known. Question: Does the fact that we are using the account balance method for the 2017 RMD shift the payment due date to the end of 2017, or would it still be considered timely if he takes it by March of 2018 (one year after the first annual RMD was paid)? We're aware that the RMD should be excluded from any rollover to an IRA.

I am in the process of terminating a non-PBGC defined benefit plan in which the assets are less the present value of the accrued benefits. Since the plan is not PBGC covered, I want to pay out benefits "to the extent funded"; that is, to have all participants share in the asset shortfall rather than having the owners waive/forego receipt of benefits. Mike Preston has been telling us for years that this is acceptable in a non-PBGC plan but I have questions about the logistics: Does the plan sponsor have to make some election/statement re this methodology? What do I put on the participant benefit statements since participants are 100% vested in the full AB by formula but will only receive some % of that benefit (for sake of argument we can call it 90%)? Anything else I need to consider? FYI - client is not going to file for an IRS determination letter.

I have a potential client that has 3 owners and no employees. They would like to set up a plan to defer some of the taxes. Is there any benefit to setting up a cash balance plan vs. a defined benefit plan? Or does it not matter since there are no employees and therefore no discrimination testing? Note - there will never be any employees. Thanks