We have a potential client (DEF) that wants to max. fund a DB plan over 4 to 5 years but wants to take as little comp. as possible. The corp. will be new - effective 1/1/2003. The 415(B) limit (reduced for participation less than 10 years) at the retirement age of the participant is about $64,000. I would like to recommend that he pay himself a salary of $64,000 for 3 years to generate this benefit. However, there is the problem of the reduction in the 100% of pay limit for service less than 10 years.
My question is: Can the Plan credit service with ABC, a prior unrelated (somewhat) employer, so that he does not get slammed by the 415(B) service reduction? Or does predecessor service credit apply strictly to eligibility and vesting? I say they are somewhat unrelated because the participant used to be an officer and minority shareholder (about 5%) of ABC, and ABC will be paying the new company (DEF) for consulting services.