Predecessor Employer Service in Unit Benefit Plan

[Guest Jim Brennan]

Sole proprietor became C corp 1/1. If corp sets up unit

benefit DB plan can service with the sole prop be counted as past service for benefit purposes? Owner was only employee of sole prop for 8 years and had no qualified retirement plan. Corp has 4 employees.

[Guest]

Yes, generally you can count the service while he was self employed. I assume that the corp. perfoms a similar service as he did when he was self employed.

Some notes of caution:

Be careful about discrimination issues when recognizing past service. 401(a)4 Regs let you recognize 5 years without having to test it.

Also, the max db benefit is the lesser of 10% of the $ limit * Years of Participation or 10% of 100% comp limit * Years of Service.