Floor Offset Deductibility Problem

[dan.jock]

I'm seeing this recurring problem with floor offsets.  Strategy is to provide a 5% DC contribution as the floor offset for DB.  In order to pass 401a26, this needs to be provided to everyone including the owner.  If 401a4 requires higher PS allocations to pass, we are exceeding the 6% of pay DC threshold under 404a7.  Owner would be fine foregoing his 5% PS, but then we fail 401a26 because everyone else is 100% offset. 

After a few years of 31% of pay contribs, the DB gets underfunded enough that we can get bigger contributions to fund the 412 'minimum' given by 404a7 but that still doesn't fund the full 415 LS. 

Any solutions?

[Mike Preston]

Time the DC contributions so that they end up being deducted every other year, but counted for a4 every year. You then can time the DB contributions so that the 31% applies every other year, not every year. Should be able to keep the plan well funded.  Other alternative is to stick with 6% and then top-up as needed with DB benefits.