starting a new DB plan for a post 70.5er

[himt4]

10/25/06

Seeing how these new RMD rules are based on accrued benefit and vesting service, it seems to me that those things should be heavily planned out when designing a new Plan for a client who is already past age 70.5. So, I would imagine that without otherwise lowering your deductible contribution amout, you should start a plan for this client with a NRA of later of age 65 & 5 years of participation. To keep the accrued benefit small you should base the formula on years of participation instead of years of service, and you should exclude vesting service prior to the plan's effective date. Does this all sound logical? Any problems with it?

And what if the client mention that he's really semi-retired and only works a couple of days a week in between his golfing. If he reports each year that he only worked, say, 728 hours, wouldn't that mean that he doesn't accrue any vesting seervice and would be 0% vested until his NRA. Wouldn't that mean that he wouldnt have to take a RMD until his fifth year in the Plan? (The plan would be written that you need 1000 hours to accrue vesting service, but no hour requirement would be needed to accrue credited service for benefit accruals). Does this all sound logical? Any problems with it?

[JAY21]

I used a few of those tricks myself, though not to the extent of having different HOS req between benefit accruals and vesting. However, that said, I can't poke any holes in your approach.

[david rigby]

you may wish to include 100% vesting upon death.

or not.

[Effen]

Also be careful that the Top Heavy rules don't force earlier vesting, but if he is working < 1000, you should be ok.

He could have a problem if he really was working more than 1000 hours, but just telling you he wasn't. But that would be his problem, not yours. Make sure you have it in writing.