Below Ground Posted October 4, 2006 Posted October 4, 2006 As I read the PPA I believe that the combined plan deduction limit is now the defined benefit plan's funding requirement plus 6% to a defined contribution plan. If I am reading this right a firm could fully deduct contributions to both a DBP that has a funding requirement of 40% (I just picked this value for example) of compensation and a 401(k) Safe Harbor Matching Plan that uses a Match of 100% of the 1st 4% deferred. In fact, if I am right, the employer could put in another 2% (assuming 4% is all used up under the SHM) and deduct that contribution too. Regardless of other potential problems, is this right? Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing? QPA, QKA
Below Ground Posted October 4, 2006 Author Posted October 4, 2006 Thank you. Always nice to get a confirmation on a position. Thanks! Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing? QPA, QKA
SteveH Posted October 5, 2006 Posted October 5, 2006 Also that extra 2% could probably be given all to the owner subject to 415 limits and testing. You don't have to allocate the 6% pro rata, it can be allocated just as a new comp plan would be.
Below Ground Posted October 5, 2006 Author Posted October 5, 2006 Understood. The specific plan is a 3 life shop that has an old owner and 2 young lower paid workers. Despite notices and the enrollment seminar provided, NCE choose not to defer. Using SHM and a stacked discretionary match, the owner gets a material benefit under this plan as found. The question becomes can a DBP be used to further maximize the retirement program's value (as a whole). Past deduction limits caused a combination of plans to not work. Now we can consider using a DBP or your suggested NCP. In effect, we can now offer more choices to clients. Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing? QPA, QKA
Earl Posted October 8, 2006 Posted October 8, 2006 do you need to include the DB accruals in the AB%Test part of the ABT when cross testing if you don't pass Ratio Percentage? CBW
ak2ary Posted October 11, 2006 Posted October 11, 2006 do you need to include the DB accruals in the AB%Test part of the ABT when cross testing if you don't pass Ratio Percentage? absolutely.. the only time the db plan can be left out of the ABT is if no plan in the testing group utilizes cross testing and since you started by saying that you're cross testing, you need the db accruals
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