New plan, funding and the 415 limit

[Guest ICannotDiscloseMyIdentity]

I was handed a design reportedly done by an actuary, but the amounts seem unreasonable to me:

The design is for a new plan, so no existing years of participation.

Owner, age 48 (or 47 - depends on the valuation date)

pay over $245k has 10 years of service

first year contribution $310,000

Also has another owner age 42 (or 41)

pay over $245k has 5 years of service

first year contribution $267,000

Also reportedly not a 412(i) plan.

Ummm, did I miss something really obvious that came out with PPA that allows this?

[Effen]

They do seem unreasonably high to me as well, so I think your "scam" radar is working fine.

Obviously there are lots of creative solutions to allow higher than expected contributions, so I'm not going to say it is obviously illegal, but I would want to know more.

[Guest ICannotDiscloseMyIdentity]

Okay.

I can see providing a year of prior service to get the immediate accrual of 1/10 of the dollar limit into the FT, which gives us the 50% cushion for 404 (but then the NC is zero because you're still limited to 1/10 of the dollar limit - you can't accrue more by the end of the year). I can see using the "at risk" thing for 404 to say that the entire lump sum value can be funded, but neither of those produced numbers near these, not in the ballpark, or even a couple ballparks away depending on the ballpark size you are comfortable with.

Thanks for taking a look!

[ak2ary]

So assume the 1/10th of 415 is FT

Assume also a 100 x death benefit

Under proposed regs the entire pv fut death bft was FT

Max deduction is 150% of FT

So assume a 62 NRA and you are adding the 150% of the PV of fifteen to twenty years of life insurance coverage of over 1.5 million for each guy to the max deduction you calculated

its ridiculous and the final regs fix it but you prolly get close to those numbers

[Guest ICannotDiscloseMyIdentity]

That is ridiculous - when are the final regs effective for this death benefit funding correction?

[AndyH]

calling Ned Ryerson

[ak2ary]

That is ridiculous - when are the final regs effective for this death benefit funding correction?

2010

[Guest ICannotDiscloseMyIdentity]

Yep, thanks.

Then, just to make it obvious: in 2 years, after the one doctor has contributed his $310,000 for year #1 plus a second year amount (much smaller), and he decides to start his own practice, how will he get is $450,000 from the plan?

[Effen]

Apparently he has to die.

[AndyH]

Could the gameplan be to convert it to a 412(i) at that point, or buy an annuity at a 1% discount rate?

[Guest Ned Ryerson]

calling Ned Ryerson

I heard my name called. Anyway, the proposal is fine and don't worry about getting the money out of the plan. Just make sure any plan has maximum life insurance and pays their premium ON TIME! Those docking fees ain't cheap for my yacht.

Ned out.