steve-o Posted October 28, 2005 Posted October 28, 2005 Obviously I'm not well versed in the land of DB plans, but had this question posed to me recently... Can a business owner -- who along with his wife are the only employees of the company -- start a DB plan after reaching age 65? What are the limits, if any, of DB plan startups and payouts. Thanks for the input.
Lame Duck Posted October 28, 2005 Posted October 28, 2005 We have a number of DB plans that have started after the owner has attained age 65. The maximum benefit that can be payed out from the plan is the lesser of 100% of compensation, reduced pro rata for years of service less than 10, or the 415 dollar limt, reduced pro rata for years of participation less than 10. The 415 dollar limit of $170,000 is actuarially increased to the actual retirement age, if it occurs after age 65. If you are using a standardized prototype, normal retirement age cannot be greater than age 65 or five years of participation in the plan. RMDs must start after attainment of 70 1/2, even if the plan is still being contributed to at that time. In some cases, it may be possible to delay the start of RMDs through the use of a three year cliff vesting schedule with vesting beginning with the effective date of the plan.
david rigby Posted October 29, 2005 Posted October 29, 2005 Three? I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
flosfur Posted October 30, 2005 Posted October 30, 2005 Obviously I'm not well versed in the land of DB plans, but had this question posed to me recently...Can a business owner -- who along with his wife are the only employees of the company -- start a DB plan after reaching age 65? What are the limits, if any, of DB plan startups and payouts. Thanks for the input. I know of no law/regs prohibiting someone starting a plan (DB or DC plan) at any age. BTW, if there was such a prohibition, I am sure the Age discrimination lobby would have something to say about it.
Blinky the 3-eyed Fish Posted November 2, 2005 Posted November 2, 2005 Pax, why are you questioning three? "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
Effen Posted November 3, 2005 Posted November 3, 2005 The Plan will be Top Heavy and therefore must use either a 6-yr. graded or 3 yr cliff vesting schedule. You can exempt the Key EE's from the minimum 2% accrual, but not the vesting schedule. Therefore, the participant will either be partially vested after 2 yrs or 100% vested after 3 years. Since they are vested, this will trigger the MRDs. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.
Blinky the 3-eyed Fish Posted November 3, 2005 Posted November 3, 2005 Exactly. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
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