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About Zoraster

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  1. As a follow up, the current plan allows the buyback at the full acturial cost. From what I have gathered from the feedback above and additional research, the plan could be amended to allow for the Employer to pickup the contribution under 414(h)(2) provided that the employee did not have the option to receive the contributed amount directly instead of having them paid by the Employer to the pension plan. I've also gathered that the permissive service credit in order to qualify under 415(n)(3)(iii) the participant must make a voluntary additional contribution which "does not exceed" the amount necessary to fund the benefit (which means that it could be less). The current pension language requires that the service credit contribution be equal to the full actuarial cost. Below is an excerpt from the plan: The Active Participant contributes to the pension fund an amount actuarially determined such that the crediting of service does not result in any cost to the fund plus payment of costs for all professional services rendered to the board in connection with the purchase of years of credited service."My question is, when I'm amending the plan to provide for the Employer pickup contribution of the service credit can the contribution be changed to be less than the full actuarial cost in the event the Employer picks it up without changing the standard for everyone else or can that not be done? The rationale would be since the employer is paying for it either way does it matter if it is up front or down the road as a result of the increase to unfunded liability? On a practical level and the reason why I'm asking is, if the total cost was $100k that would be more problematic than paying $30k up front and absorbing the remaining $70k as an unfunded liability since we have a high funding ratio in the plan (~95% I believe). Below is the language I'm looking to add as sub points to the language above: The whole or portional amount required for the purchase of permissive service credits may be provided by a plan to plan transfer from an Eligible Retirement Plan to the pension fund. Notwithstanding the previous, the Employer may elect by formal action to pick up the whole or portional amount of the contribution required for the purchase of permissive service credits for an Active Participant or to grant whole or portional permissive service credits to an Active Participant without contribution. It is the intent of this provision that said pickup contribution shall be pursuant to IRC § 414(h)(2) and not result in reported wages, withholding, or taxable income to the Active Participant. In so doing the Employer affirms that: Any contributions, although designated as employee contributions, are being paid by the Employer in lieu of contributions made by the employee; and The Employee does not have the option to receive any contributed amounts directly instead of having them paid by the Employer to the pension plan. This language is my attempt to address what Carol had mentioned regarding the authorization for the plan to plan transfer as well as the Employer pickup contribution. The underlined section above is what my question is in regards to (I'm also hoping that the other language works as well). I'm sure the Board attorney will redline it or rewrite it entirely but I like to have my own starting point in ordinance language. I've reached out to the Board attorney and we're trying to set up a meeting after the first of the year. He should be able to answer these questions too although I like having the answers before I ask the question. If I don't get a definite answer here beforehand I'll post whatever I find out from him for the sake of closing out the information on the thread. Thanks everyone! (Especially Carol. My "additional research" mostly relied upon Carol's "Checklist of Federal Tax Law Rules Applicable to Public Retirement Systems" and the related content links; pure gold).
  2. Wow, thank you. That is exactly what I needed. I'll be setting up a meeting with the pension attorney and board chairman to draft the necessary language.
  3. I saw this question asked in this section several pages back but it was never really answered. This would be for a municipality in Florida. If the answer to the first question is "no" then the subsequent questions wouldn't apply. (Also, if I misrepresented the different IRC codes please correct me) 1. Can a governmental defined benefit plan under 414(d) be established to cover a small group of employees (city manager, department directors, maybe mid level management) since it is exempt from ERISA non discrimination rules? I saw a note where pre-ERISA 401(a)(4) applies under minimum vesting standards that suggests, "either benefits or contributions must not discriminate in favor of employees who are officers, employees, shareholders, persons whose principal duties consist in supervising the work of other employees, or highly compensated employees." I am confused because every time I see this it is in reference to vesting standards and I also see repeatedly that government plans are exempt from non discrimination standards; but this appears to be just that or is it specific to vesting. What am I missing? 2. Could a previously frozen plan be reopened but only for the select group in order to realize economies of scale (board, actuary, investment manager, etc.) or is it better to create a new plan and administration? 3. Are there any rules, state (Florida) or federal that anyone is aware of that requires there be a "board" of trustees instead of just a single independent trustee such as a financial institution? Wouldn't make sense to have a 5 member board for a plan with potentially 5 participants. Or could you just have the members sit as the board. Thanks in advance for any feedback or direction on this issue.
  4. Did you ever find the answer to this question? I'm trying to gather information on 457(f) DB plans.
  5. It is a government plan; a municipality. I'm basically receiving a 401a DC and a DB pension at the same time. If I leave the organization before I vest in the DB plan I just take my 401 DC. If I vest in the DB plan after 10 years I transfer half of what I received from the DC to the pension as basically an offset.
  6. I'm a city manager that has been working 4 years at a city with its own pension plan. I came in under a 457/401a defined contribution benefit which is fairly typical for cms. I recently renegotiated my contract that allows me to effectively participate in the pension and receive past service credits and then if I hit vesting (10 years) I transfer over my 457 balance to the pension. My Questions: 1) How do I "buy" the past service credits? Can the City cut the pension a check directly; or can they gross up my wages and then deduct it from me on a payroll deduction; or do they need to make additional contributions to my 401a/457b equal to the purchase amount and then I purchase it as a rollover/transfer? The way my contract reads; the prior service credits are a part of my compensation. 2) If I reach vesting and rollover my 457 and/or 401a to the pension, is this done on a pretax basis? 3) Do I need to amend the plan to help facilitate the above? The pension buy in language is pretty vague, suggesting just that an employee can buy back any number of years of service with the city and up to 5 years from other governmental experience; nothing really in there about 457 rollovers or payroll deduction or anything; it just says you can do it. Any insight or direction would be greatly appreciated.
  7. I'm a contracted management employee whose organization has a buy in provision to the pension for any number of years with the organization and up to 5 years for service from other organizations. When I came in I was put under a defined contribution benefit. I've got about 4 years in and I recently renegotiated my contract to where I participate in the pension while also receiving my defined contribution; if I reach vesting after 10 years I turn over my 401 contributions back to the organization. As a part of the agreement, the organization buys my past service credits into the pension as a part of my compensation, the 4 years I've been here plus 3 years from a prior organization that would qualify per the pension rules. The actuary will have to calculate the cost of what that buy in would be. My question is how should I setup the "buy in." If the amount is $50k can the organization just cut the pension a check or does it have to be routed through payroll? If it goes through payroll is the contribution made on a pretax basis? I'm protected with a gross up provision if it is post tax but that would balloon the payment for the organanization by 40%+ so I'm really hoping it doesn't have to be post tax. Any insight would be appreciated.
  8. Why setup a traditional DB plan? Creating liabilities that could extend for decades and have to be administered just doesn't seem cost effective. The cash balance pension for small groups of employee/owners is a good mechanism to put cash away well in excess of the 401 limits. Popular with attorney and doctor firms; individuals with big salaries that are reverse discriminated due to 401 contribution limits.
  9. I saw where jpod asked a similar question back in 2013 (I was hoping he may have found an answer to it). My question is how to set up a 457f defined benefit that mimics a pension; multiplier x years of service x final pay. From what I have read, after the benefit is vested you would have to calculate the value of the future stream of income and the employee pay taxes on that amount. Each year this would be updated with the new accrual (e.g. The year applied to the multiplier and the increased salary the new multiplier is applied against) and the employee would pay taxes on the difference from the previous year? What would be the best way to fund this type of DB plan? A Rabbi trust or just setting aside funds to payout a defined contribution on a vesting schedule while the employee is still employed seems fairly straight forward but how would that work for a DB plan? A rabbi trust seems questionable; what if it ran dry while the plan still had liabilities? Also, the organization would continue to have to pay to administer the plan long after the employee left. I guess this goes back to jpod's question back in 2013; could the organization purchase an unqualified annuity to pay out the defined benefit to the employee upon his retirement? Could that be setup in the original 457f agreement as an option? An annuity would seem like the best option for the employee that has left the organization (I.e. Change of heart; sticky fingers) and for the organization to remove the future liability. Any good 457f plan administrators out there for a DB type of plan like this? The organization in question doesn't really have a lot of experience with 457f plans and would need to be as turn key as possible. Thanks for the help.