I don't work on any funds that prepare a true actuarial valuation for the health fund. The only actuarial report that is prepared relates only to the post-retirement benefits and likely has very little information about the actives plan.
Since the 5500 and audit report are in the public domain, why not give them a copy (or point them to the DOL website) as they would have more relevant information.
A lot depends on the funded status of the plan. If it is underfunded, they would likely not permit this as they need the continued participation to help them recover. As David mentioned, adverse selection would hurt them. All of the younger members would likely opt out in favor of some sort of DC plan. That would leave the fund with only older (ie expensive) participants and would throw the contribution rates out of balance.
Also, this could be a double edged sword for your employer as it could trigger a partial withdrawal which could cost them more than they are trying to save.
A lot of unknowns. If i was the actuary for the fund I would tell them to reject the offer. If I was consulting with the employer, I would tell them not to expect a favorable response.
It might be helpful to seek out an actuary who works with multi-employer plans to help you with the consulting.
There was a lot of talk about the IRS going to a generational table for lump sums in 2018, which may have pushed lump sums up by 5%-10%, but the final regs came out and they stuck with the same methodology they have been using. I would expect the mortality change to be only 1% or 2%.
He really should be watching interest rates. They are much more dynamic and have a much larger impact. If rates are lower in 2018 his lump sum will be higher, if rates are higher, his lump sum will likely be lower, even with a mortality update.
No such restrictions in a qualified ERISA plan, but there might be offsets for Social Security and/or Medicare benefits.
Since there is no in-service option, they will likely need to suspend his retirement benefit if he comes back to work. If it is a bonafide consulting arrangement, then probably no problem - but the facts matter.
If he wants the guy back, best option is to amend plan to allow for in-service @ NRD, but that would need to be available to everyone.
It is a facts/circumstances standard.
First, what does the plan say about in-service distributions. Some plans permit employees to receive retirement benefits upon attainment of Normal Retirement without a separation from service. If you plan permits this, than it becomes a non-issue.
If your plan requires a separation from service, then the fact/circumstances kicks in. What was the participants intent when they left employment in December. Did anything change in January that caused them to return to work. Is it a real "consulting" job, or does the sponsor still control the "consultant".
I wouldn't be worried about the personal/sick time, but you might want to make sure the benefit was calculated with the correct compensation and service and that the additional comp/hours won't impact the benefit.
The "re-hire as a consultant" might be a more sticky issue, especially if it was pre-planned and the employee really just wants to keep working and collect a retirement benefit at the same time.
Talked a little more with the sponsor. The plan is currently 80% funded, so they would like to pay lump sums of 80% value (based on a interest rate still to be determined), no spousal consent, no relative value.
Is this a common approach? I assume it is "legal", but it doesn't feel quite right.
I am working with a non-electing church plan with a number of terminated vested participants. We are contemplating offering a lump sum window. Is there anything special about church plans that we need to be careful about related to a window?
For example - Do I need to use 417(e) rates as a minimum lump sum value? Do I need spousal consents? Do the QPSA rules apply? Would I need to offer immediate annuities?
I recognize some of this will already be addressed in the plan document, but since I haven't seen the plan document yet, I am just thinking about possible issues.
I am wondering if anyone has worked on any lump sum windows for a church plan and if they encountered anything out of the ordinary because it was a church plan?
Ahhh, what "automatic approval"? Sounds like you have some problems.
In this situation we would have done an EOY val on the date of termination and prorated the SC and Amort, if any. They need to make their final MRC and plan termination is not an excuse, although it does stop the 10% excise tax. In essence, if they can't afford to deposit he entire MRC, they need to pay a 10% excise tax on the piece they didn't contribute. Not perfect, but at least the termination stops the annual penalty.
No, you can't ever recognize a reduction in benefits for MRC. It is only used at the time of distribution of assets upon termination.
Maybe... if you are doing all that on December 23rd, then probably.
If you search the board you will find several discussions about this. No one can tell you it is ok, or not ok since it is a facts and circumstances test and only the IRS's opinion matters.
If he was vested on 12/31/15, then I would say 1/1/16. But if he was not vested on 12/31/15, then I would say 1/1/17.
1.401(a)(9)-6 Q-6. If a portion of an employee's benefit is not vested as of December 31 of a distribution calendar year, how is the determination of the required minimum distribution affected?
A-6. In the case of annuity distributions from a defined benefit plan, if any portion of the employee's benefit is not vested as of December 31 of a distribution calendar year, the portion that is not vested as of such date will be treated as not having accrued for purposes of determining the required minimum distribution for that distribution calendar year. When an additional portion of the employee's benefit becomes vested, such portion will be treated as an additional accrual. See A-5 of this section for the rules for distributing benefits which accrue under a defined benefit plan after the employee's first distribution calendar year.