Discrimination in year of termination?

[Dougsbpc]

An LLC covering two 50% partners/owners has had a defined benefit plan for 6 years. They froze benefits as of 12/31/12 and terminated the plan effective 6/15/2013. They also hired 4 employees back in June 2012, all of which would enter the plan 7/1/2013.

The plan is fully funded or close to being fully funded (depending on the marklet) with the 2012 year contribution. Each of the participants have 415 limits that far exceed their accrued benefits.

Since PPA allows such high contributions, could they make a large deductible contribution for 2013 even though the plan terminated 6/15/2013? Would there be any discrimination issues with the employees that did not enter the plan by the time it terminated?

Thanks.

[Andy the Actuary]

So, it appears the question is would it be discriminatory to use assets in excess of the value of accrued benefits to increase accrued benefits for HCEs? Since the employees hired in June 2012 did not enter the Plan, it would seem that they should not be a concern. Why would you deem them includable for 401(a)(4) but excludable for 410(a) and 410(b)?

However, if there were NHCEs who formerly participated, it might be considered discriminatory in practice. Would suspect it would boil down to how long ago such NHCEs participated in the Plan. If believed discriminatory, would suspect the Plan could be amended to allocate a portion of the excess to these former participants if economically feasible.