Andy the Actuary Posted April 10, 2009 Posted April 10, 2009 A DB plan is not subject to the 436 restrictions but is restricted from distributing lump sums to HCEs. We have the following for a participant who was age 60 in 2006: Compensation 2006: 200,000 2007: 165,000 2008: 90,000 Employee terminates 1/1/2009. Employee is NHCE in 2009 so may have benefit distributed in a lump sum. However, if employee defers election (to say 2010) and 401(a)(4) HCE restrictions still apply, employee becomes Former HCE in 2010 and therefore cannot have benefit distributed in a lump sum. Any disagreement? 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.
dmb Posted April 10, 2009 Posted April 10, 2009 A DB plan is not subject to the 436 restrictions but is restricted from distributing lump sums to HCEs. We have the following for a participant who was age 60 in 2006:Compensation 2006: 200,000 2007: 165,000 2008: 90,000 Employee terminates 1/1/2009. Employee is NHCE in 2009 so may have benefit distributed in a lump sum. However, if employee defers election (to say 2010) and 401(a)(4) HCE restrictions still apply, employee becomes Former HCE in 2010 and therefore cannot have benefit distributed in a lump sum. Any disagreement? Assuming the participant terminated employment in 2009, I agree that the only way this participant is not a HCE is if lump sum is paid in 2009. If not paid in 2009, pariticipant will become a Former HCE.
Andy the Actuary Posted April 10, 2009 Author Posted April 10, 2009 Thank you. This is a very strange and convoluted result. 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.
dmb Posted April 10, 2009 Posted April 10, 2009 Thank you. This is a very strange and convoluted result. Yes, this is a bit of a loophole in the HCE issue. I think there have been some threads on this board about this issue in the past couple of years.
Andy the Actuary Posted April 10, 2009 Author Posted April 10, 2009 I had searched but didn't find any -- likely a problem with my keyboarding! 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.
ScottR Posted April 16, 2009 Posted April 16, 2009 A DB plan is not subject to the 436 restrictions but is restricted from distributing lump sums to HCEs. We have the following for a participant who was age 60 in 2006:Compensation 2006: 200,000 2007: 165,000 2008: 90,000 Employee terminates 1/1/2009. Employee is NHCE in 2009 so may have benefit distributed in a lump sum. However, if employee defers election (to say 2010) and 401(a)(4) HCE restrictions still apply, employee becomes Former HCE in 2010 and therefore cannot have benefit distributed in a lump sum. Any disagreement? This is new to me. Can you elaborate a bit? When exactly does "former HCE" status begin? TIA. ... S
Andy the Actuary Posted April 16, 2009 Author Posted April 16, 2009 The year following the year of termination. 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 April 20, 2009 Posted April 20, 2009 What is the cite on that definition? Never mind. I found it winds up as the definition under 414(q). An interesting little loophole. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
Andy the Actuary Posted April 20, 2009 Author Posted April 20, 2009 What is the cite on that definition? Try 1.414(q)-1T, Q-4 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.
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