DB plan with no active participants

[Guest saeissler]

If a DB plan has no active participants and uses the individual aggregate funding method is it true that there will be no minimum funding required, because there is no normal cost? I am taking over a plan in this situation that has a full funding limit of $60,000 but no required minimum contribution. The only participant is a terminated participant who is the owner.

[david rigby]

Don't you first have to determine if the IA method is a reasonable funding method for a plan with no active participants? As discussed in several prior threads, the IRS is of the opinion that it is not.

[mwyatt]

You may also want to consider that in the eyes of the IRS, an "owner" in a one-person plan can never "terminate".

[Guest saeissler]

Thanks - I was afraid this was an issue.

[david rigby]

Some prior discussion on this topic can be found here:

http://benefitslink.com/boards/index.php?showtopic=22461

http://benefitslink.com/boards/index.php?showtopic=22024

http://benefitslink.com/boards/index.php?showtopic=23970

http://benefitslink.com/boards/index.php?showtopic=19730

Even if (in the opinon of the IRS) the owner in a one-person plan cannot "terminate", that still leaves a frozen plan. As discussed in the links above, the IRS expects that the method will be changed to UC in such case. That the actuary must then track experience gains/losses each year after that is merely the (administrative) price to pay.

As always, maximize your contribution range, so that a larger deductible contribution will be possible (assuming the cash is available).