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About JJRetirement

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  1. John, What you refer to as the cash balance plan contribution (a percentage of pay) is really a pay credit or accrual that defines what is credited to the hypothetical account balance for the participant. That is very different from the minimum required contribution for funding purposes, which could be higher or lower. I think "the usual advice" you refer to is that having a defined benefit plan if income is volatile may not be advised because a contribution could be required when there isn't enough income to support it.
  2. thanks - good idea. Confirms nothing much happening for DC plan changes and I don't recall anything in the news since May 24th.
  3. 401(k) plan terminating 12/31/16. They have a Volume submitter document based on 2010 Cumulative list. We will update for everything on 2015 cumulative list, but of course there will be no 2016 Cumulative list. Can anyone think of amendments that might be required as of Termination Date that are not on the 2015 list? Thanks.
  4. That design won't meet the minimum match requirements for a QACA. It isn't enough that participants who contribute 7% of compensation receive the 3.5%. You have to match (at least) 100% of the first 1% and then 50% of the next 5. In the proposed design, a participant who contributes 1% will only get half of the match that is required for a QACA.
  5. "No can do, while the beneficiary of an IRA can be a Trust the owner of an IRA can only be an individual." I don't think this is true. A trust cannot be a "designated beneficiary" under the 401(a)(9) minimum distribution rules, so the 5 year rule would generally apply for RMD purposes (unless meets requirements for a see-through trust, in which case the trust beneficiary's expected lifetime could be used-- with many exceptions and variations on the rules for sole spouse beneficiaries, multiple beneficiaries, etc) But that doesn't mean that a trust can't be the beneficiary of the IRA or a qualified plan. It may mean that using a trust as a beneficiary often isn't a good idea.
  6. Thanks rcline46 for that thought. In this case, no one is looking to transfer any credits or assets from one plan to another. The current issue is determining whether she could have started pension benefits from the City plan while working for the Board of Ed. My instinct is that even though she isn't working directly for the City when she is teaching, it's still the same Employer ( in a good faith interpretation of controlled group rules as they might apply to a governmental employer) so she needs to wait until she retires from teaching to claim her City benefits. I was hoping for some legal authority or even informal statements from the IRS about this to back up the logic (as I see it), but haven't found anything on point.
  7. Coincidentally, this is closely related to a question I just posted on termination of employment for a governmental plan. I think the definitely determinable regulation and the old rev. ruls. on which it was based does apply to governmental plans, so that in-service distributions wouldn't be permitted before the earlier or 62 or NRA even if the plan were amended to permit them. So I think the question of whether the employee is still employed needs to be answered (unless the participants in question are old enough to qualify for permitted in-service distributions).
  8. An employee was working for City A and was covered under a union contract hat provided she was an eligible employee for purposes of Plan X (a defined benefit plan). After ten years of service, Employee became a certified teacher and took a job with the Board of Education for (same) City A and is now covered under a statewide retirement system for teachers of State S and no longer an eligible employee for Plan X. Assume that her last day of work with the City was on Friday and she started teaching in the schools of City A on the following Monday. Did this employee terminate service with City A when she became a teacher or has she continued to work for the same employer and just stopped being eligible for Plan X? Must she wait until she retires as a teacher (totally leaving employment with City A or its Bd of Ed or any other subdivision or related employer) in order to commence benefits? The plan does not permit in service commencement of benefits. The plan (which is based on statutes, ordinances and collective bargaining agreements) has very imprecise language so it's really not helpful at all in determining whether or not she terminated employment. If anyone can point me to guidance on how to determine separation from employment or application of controlled group rules as may be applicable to governmental plans in such a case, I would be appreciative. Thanks!
  9. What did you decide to do with item 3f? I have a few 5307 volume submitters to file and can't figure out how to handle this question. What about plans that have had no amendments (other than the interim amendments that were submitted last time around but not considered in the DL because they weren't on the 2004 cumulative list). There is at least one modification to the VS language, so they should be eligible for 5307, but no discretionary amendments since last letter. Also, what about plans that have discretionary changes that are included in the new restatement (rather than in a separate amendment between restatements). Should the chart list the restatement as an amendment? This question doesn't make sense to me.
  10. Sorry - I should have been more specific. I am referring to the special transition rule for eligible participants in governmental plans as set forth in regulation 1.401(a)(17)-1(d)(4)(ii) [rather than the more generally applicable grandfathering accrued benefits based on the pre-OBRA '93 limit]. Under this rule, "if the plan as in effect on July 1, 1993, determined benefits without any reference to a limit on compensation, then the annual compensation limit in effect under this section will not apply to any eligible participant in any future year."
  11. This is related to a question I posted recently under Defined Benefit plans. Client recently discovered a few participants who appeared to have exceeded compensation limit. Each of these participants was participating prior to 1/1/96, and the plan had no compensation limit in effect on 7/1/93. The plan was amended back in 1995 (the TRA 86 restatement) to incorporate the limit effective 1/1/96 for all participants. Did the grandfather rule for eligible participants need to be set forth in the plan document for the plan to be able to use it?
  12. Unfortunately, 401(a)(17) is applicable to governmental plans. I don't think it comes up much because so few governmental employees run up against the limit. It was unexpected in this plan, but it happened in a few unusual cases. We aren't planning to utilize VCP for this, but there isn't any overall prohibition for governmental plans to use VCP. I know that correction for governmental 457 plans is only available outside of EPCRS, but in this case, it's a traditional defined benefit plan qualified under section 401(a) that has the error.
  13. It was discovered that a few participants in a governmental defined benefit plan had compensation over the 401(a)(17) limit. Benefits were within 415 limits. This resulted in an overpayment for a few participants who have retired but also in employer pick up contributions that were higher than they should have been. There seems to be a good amount of guidance (including last year's revenue procedure) and opinion out there on how to correct the overpayment. BUT How can the pickups be corrected? Assume that they involve years prior to 2015. My immediate thought was that the appropriate correction would be to 'forfeit' under the plan - meaning the employee would not have credit for them - which in this case really boils down to whether contributions would be paid out to a beneficiary if the participant died before receiving annuity payments at least equal to his or her contributions. Then the "Employer", in this case the municipality, would need to make the employee whole for the deduction that was taken from pay in error. The payment to the employee would be reported on a revised W-2 for each applicable calendar year, and the employee would need to re-file taxes for those years. Is there a better (easier) answer? Something that doesn't involve re-filing individual income tax returns? Also, could it be possible - consistent with EPCRS principles - to offset the overpayment by the over-contributions? For example, the plan overpaid you $5000, but you overpaid the plan $2000, so you need to pay back $3000 to the plan. Errors are very small relative to the plan size and involve only a few plan years. The intention is to self correct, not to submit under VCP. (It's understood that the plan wouldn't have reliance on the correction method without VCP compliance statement.)
  14. Thanks. I need to submit a streamlined VCP tomorrow to correct for late adoption of an interim amendment. We have an operational error we are also working to correct, but it's not ready to submit. The fee for the first is $375 and the fee for the second is $10,000. We aren't too concerned about the extra $375 as long as we get the amendment corrected by the end of the RAP when we submit our 5300, and we are still eligible to correct for operational error.
  15. Is there anything that prevents a plan from submitting a VCP for an operational error while a VCP for a nonamender failure is pending? The plan isn't "under examination" according to the definition in EPCRS.