Amendment to increase benefit after plan terminated

[Jakyasar]

One lifer DB plan.

Plan frozen/terminated 12/31/2025 with perfect funding with excess, if any, going to qualified replacement plan (QRP).

Client did not tell me about additional contributions made during 2025, simply forgot. Big amount too.

Now have quite an excess but lumpsum still under 415 limit.

Solutions for retroactive amendments?

• Amend to have a retroactive benefit increase
• Amend from QRP allocation to participant allocation

Any thoughts?

Thanks

[Bri]

Either of those sound pretty good.

[Calavera]

2nd is much easier to implement

[david rigby]

8 hours ago, Calavera said:

2nd is much easier to implement

I'm not so sure about that.  For a one-participant plan, it should be very easy to increase the benefit (it's not already in pay-status, is it?).  The increase does not have to absorb the entire amount of the excess funding; just do an amendment that increases the benefit by 5%, or 8% or whatever percent gets about 80% (for example) of the excess.  Since 415 limit appears to be irrelevant, choose whatever increase you want.  Assuming a lump sum payment that is rolled into participant's IRA, that "protects" more of the total dollars. 

Alternatively, if you put all the excess in QRP, the same protection does not apply, because it's not yet allocated, and might not be fully allocated for a few years.  What happens if the participant dies six months after the transfer to QRP?

Have I overlooked something?

[David D]

I have only set up a QRP when the owner is limited by 415 on plan termination and cannot be allocated the excess.  Most plan documents allow for the allocation of assets in a non discriminatory manner on plan termination.  Whether you need an amendment to allow for the maximum deductible contribution made prior to December 31, 2025 depends on whether the amount contributed during the year is less than the allowable maximum or not.