Jeff Hartmann

Generally, when a Cash Balance plan is adopted, the Profit Sharing plan should provide (or amended to provide) that there is no End of Year employment requirement ..... because it usually better (cheaper) to provide staff benefits in the PS plan. .... Jeff

If participant born 4/11/1952 is terminated or was a 5%-owner, his Required Beginning Date is April 1, 2026 (not 12/31/2025). .... Jeff

Your segment rates for 430 should be 5.03/5.27/5.59, because the first two 404 rates fall within the 95%-105% corridor of the 25-year average segment rates. ..... Jeff

In my opinion, the Paul Shultz memo (from June 2002) "set the standard" [at 0.5%] for testing whether a benefit is considered meaningful by IRS. Is anyone aware of IRS challenging a 0.5%+ benefit accrual as NOT meaningful? .... Jeff Paul Shultz memo: https://www.irs.gov/pub/irs-tege/memo_060602.pdf

Actually, SECURE (1.0) updated the minimum age to 72, but did not contain any language about updating the life expectancy tables. The tables updates were done by IRS regulations proposed in November 2020 (and finalized in late February 2022). Again, SECURE 2.0 just updates the minimum age to 73, but does not update the life expectancy tables. My guess is that IRS is not planning another update immediately to the life expectancy tables, but if they are planning to update the tables it would be announced well ahead of time and not take effect before 2024 at the earliest. ..... Jeff

Is this for a DB or DC plan? The rules differ. I will state my answers for a DB plan ...... 1. For an annual payment by 4/1/2023, RMD payment should be the annual RMD, $24,000. April 1 is a BEGINNING date, for monthly payments, but for an Annual RMD, you should pay the entire Accrued Benefit x12 as of 12/31/2022. 2. At least $24,000, plus an interest adjustment (actuarial increase) for delayed payment that was due 4/1/2023. There is also potential 50% Excise Tax for missing 4/1/2023 deadline. What/when is the NEXT RMD payment going to be? 3. $36,000 should be received in 2024. I think this should be paid around 4/1/2024 (or 1st anniversary of 2023 payment, if earlier than 4/1/2023). .... Jeff

It's unclear to me what you mean by a "Lump Sum withdrawal" ? Do you mean a "lump sum" of 12 monthly payments ($2,000 each), or a "Total Distribution" of his entire Accrued Benefit? If he is NOT terminated, does the plan permit In-Service Withdrawals of his entire Accrued Benefit? If this is a total distribution, and the plan allows In-Service Withdrawals, the total distribution might be worth around $264,000 (2,000 x 12 x approx 11 [APR] ). If by "lump sum withdrawal", you just mean 1 annual payment (vs. 12 monthly payments of $2,000) you should be able to pay a $24,000 annual RMD payment before 4/1/2023, if plan document allows annual payments of the RMD's. P.S. you didn't say whether the $1,000 / $2,000 AB's were monthly benefits or annual benefits, but the discussion implied this was a Monthly Accrued Benefit. .... Jeff

FYI, PBGC Premium indexing is based upon increases in the National Average Wage Index, which increased 8.89% in 2021, so all the 2023 premiums are approx. 8.89% higher than 2022 rates. The indexing rules are part of ERISA (as amended by several later laws). .... Jeff

As an actuary, I am also concerned that using the higher interest rates (over 4%) will increase the funding liabilities (Funding Target) and, if covered by PBGC, the PBGC liabilities, which can lead to fairly high PBGC Variable Premiums. For small plans wanting to pay Lump Sums to HCE's, increasing the funding liabilities can make it harder to pass the "110% test" which usually must be passed to pay Lump Sums to restricted employees (like the top-25 HCE's). .... Jeff

<<if a contribution is made by the due date of the 9/30/2021 Form 5500 - 7/15/2022 - and we therefore show this as applying to the PYE 9/30/2021,>> I don't think a contribution made in July 2022 can be reported anywhere on the Form 5500 (or Schedule SB) for the plan year ending 9/30/2021. Contribution must be made by June 15, 2022 to be included in the financial reporting of the Form 5500. .... Jeff

<< Accrues the pay credit and the equivalent AB is used to pass 401(a)(26). However, at end of year, his pay credit is forfeited due to 0% vesting, thus account balance is $0 at end of year. >> I question that a pay credit that is already forfeited at year-end can be used to pass 401a26. How can you say this participant is "benefitting" in the Plan on the 12/31/2021 testing date when his benefit is already forfeited? In that situation, we would look for another "benefitting" participant to pass 401a26 (someone who is still active on 12/31/2021). .... Jeff

In my experience with Form 5330 filings, mostly for Unpaid [DB] Contributions or Prohibited Transactions, more often than not, the filing was done long after the "filing deadline" -- typically because the filing deadline would be July 31, but we would not know about Unpaid Contributions until after the Sept. 15 minimum funding deadline. I am unaware of our ever "extending" the 5330 filing deadline, nor any penalty assessed for "late filing" of Form 5330. IRS will certainly not "reject" any Form 5330 filing just for being "late". .... Jeff

As you suggest, I think the Partial Termination analysis is supposed to look at the reduction in ACTIVE participant counts. Going from 7 to 6 is only a 14% reduction, which is less than the threshold (20%?) that is supposed to trigger a Partial termination. .... Jeff

PBGC did follow with an update (recognizing January 4 contributions) to their recent Technical Update 2020-2. .... Jeff

Personally, I think the biggest issue in your example (CRD available only for several months during 2020) is the failure to TIMELY communicate to the participants their right to a special distribution before the expiration of such rights. i.e. what is the point of adopting such (an optional) provision if they are going to wait until 7 months after the expiration of the provision? Notwithstanding the statutory deadline of July 31, 2021, an SMM explaining this provision should have been provided immediately after adoption of the amendment. ...... Jeff

Cost of living increase this year is only around 1.18%, so most plan limits will not increase in 2021. The only expected increases for 2021 are: DC limit $58,000 Compensation limit $290,000 The September 2020 CPI report will be issued by DOL early tomorrow morning, which will "finalize" my projections, but I don't expect a large enough change (up or down) in the CPI-U index to affect any other limit. ..... Jeff

This is the explanation that we are providing on Form 5500-SF, line 11b: [x] No. Other. PBGC Notification is not required yet because the Funding Deadline is January 1, 2021.” .... Jeff

Without (yet) addressing EVERYTHING in your post, I want to say that the 2020 Effective Interest Rate only applies to contributions deposited between September 16 and December 31, 2020. Furthermore, this 2020 rate only applies to discounting the contribution amount back to September 15, 2020, with the remaining discounting (back to 1/1/2019) using the 2019 Effective Interest Rate. Contributions deposited on or before (the original due date) September 15, 2020 are discounted using the 2019 Effective Interest Rate. P.S. I was disappointed to see that the IRS rules did not "technically correct" the error in the law. That is, ALL discounting should be at the 2019 rate, to be consistent with all prior rules under PPA. ... Jeff

I don't work much with plans requiring an Audit, but I am wondering if Audit reports always recognize ALL deposits of contributions receivable, or are they mainly concerned with the Assets already physically there at the end of the plan year?

The key advice now is to WAIT for guidance from IRS on this. Extend your filing deadline (from July 31 to October 15), if this is not done automatically by IRS announcement in June or July. With funding deadlines later than October 15, 2020, IRS has to give some relief in the deadline for filing 2019 Schedule SB to at least 1/1/2021 (if not the end of January 2021). It would be crazy for IRS to do nothing, forcing us to show "Unpaid Contributions" as of the filing deadline that are actually not due until later. For any plans that do file a 2019 Schedule SB before the extended Funding Deadline, showing an Unpaid Contribution , I think they should be filing an AMENDED 2019 Schedule SB after the minimum funding has been completed before the extended 1/1/2021 deadline. The 2020 Schedule SB should not be showing any Unpaid (2019) Contribution if the 2019 contributions were timely deposited before 1/1/2021. .... Jeff

I have seen several instances of immediately starting a new DB plan the year after the old plan "strategically" terminated. There was no attempt to "double up" the 415 limit .... Typically, the old plan had fixed interest credits and the new plan has design changes, such as Actual Rate of Return. .... Jeff

When you say "preparing for their 5500 audit", when was this SAR due ? (Are you talking about LAST year's SAR?) .... Jeff

What else is new "As of yet there is no guidance ........ " In the absence of guidance, I drafted my own simple Election Form for a few of my plans that otherwise would have decreased their AFTAP 10%, below 80%, on April 1, 2020 .... to avoid the requirement to send Benefit Restriction Notices in April (not withstanding possible Notice relief given by DOL on the day that AFN's were due). In my election form, I made the election automatically "revoked" if the Actuary issues a subsequent 2020 AFTAP. I hope "guidance" does not prohibit doing that. .... Jeff

CARES Act says "...... a plan sponsor may ELECT ...... "(to use the AFTAP for plan year ending in 2019). I don't believe that AFTAP certification has been "waived" if there is no such election made. Absent any election, I think that June 30, 2020 is your AFTAP deadline. I think it would be risky to wait until AFTER June 30 to certify AFTAP or make the election to use prior AFTAP. ..... Jeff

My understanding is that you need to file 5330 return for each year 2017, 2018, 2019. You may have to also file for 2020, depending on when/how the correction was made. .... Jeff