CuseFan Posted March 24, 2017 Share Posted March 24, 2017 DB plan (CB format, but that doesn't matter) for law firm has multiple terminated former partners who are among top 25 restricted HCEs/former HCEs and cannot get a lump sum because plan is not, and will not after distributions, be 110% funded. Employer is interested in funding up the plan to be able to pay one particular restricted HCE, but not all of them. All the regulatory guidance I've seen appears in the context of "a" restricted employee. Favoring/discriminating for one HCE over another HCE may not have any qualified plan ramifications, but the danger may be other legal implications. I don't know if the partnership agreement stipulates anything in that regard - let's assume it does not, otherwise the answer would be easy, right? Kenneth M. Prell, CEBS, ERPA Vice President, BPAS Actuarial & Pension Services kprell@bpas.com Link to comment Share on other sites More sharing options...
CuseFan Posted March 24, 2017 Author Share Posted March 24, 2017 Partnership agreement doesn't say anything. Can the employer fund up and just pay the one HCE, telling the others sorry, still restricted? Kenneth M. Prell, CEBS, ERPA Vice President, BPAS Actuarial & Pension Services kprell@bpas.com Link to comment Share on other sites More sharing options...
My 2 cents Posted March 24, 2017 Share Posted March 24, 2017 Wouldn't the fact that this was a law firm argue against pulling a stunt like that? Watch out who you turn into enemies! Always check with your actuary first! Link to comment Share on other sites More sharing options...
CuseFan Posted March 24, 2017 Author Share Posted March 24, 2017 Yes, but put that aside - what if this was a mid-size medical practice and one owner retired and wanted a lump sum while two others left to form their own practice and also wanted lump sums, and the plan was sufficient enough to pay just one but the others would then be restricted? Could the plan pay the retiree and leave the TVRs restricted? Pay the first request but not the other two? Pay the largest, pay the smallest? What if through the receivables of one of the exiting owners the employer funded up enough to pay just that owner? i know these are all questions that stress the importance of a good partnership agreement, but what if it's a PC? Kenneth M. Prell, CEBS, ERPA Vice President, BPAS Actuarial & Pension Services kprell@bpas.com Link to comment Share on other sites More sharing options...
Mike Preston Posted March 24, 2017 Share Posted March 24, 2017 The plan administrator's fiduciary responsibilities extend to any interpretation it makes. At the least, they are inviting a law suit from the disenfranchised. They need (independent) ERISA counsel. Link to comment Share on other sites More sharing options...
My 2 cents Posted March 24, 2017 Share Posted March 24, 2017 Are disappointed doctors supposed to be better losers than lawyers? Technically, if a plan is just well-funded enough to pay one lump sum but would fall under 110% if they were to pay a second, then the first one out of the gate wins. But wouldn't it be cheaper to fund up enough to meet the full demand for lump sums than to have to try to defend against litigation? Always check with your actuary first! Link to comment Share on other sites More sharing options...
CuseFan Posted March 27, 2017 Author Share Posted March 27, 2017 Yeah, really. it does seem like if you're going to fund up it should be for all - or for all who request lump sum distributions, or do not fund up for anyone. But if the existing funded status was sufficient to pay one lump sum, then I think the Plan Administrator is obligated to facilitate that pay out and subsequent requests are SOL, agreed? Kenneth M. Prell, CEBS, ERPA Vice President, BPAS Actuarial & Pension Services kprell@bpas.com Link to comment Share on other sites More sharing options...
SoCalActuary Posted March 27, 2017 Share Posted March 27, 2017 I find it better to give the departing partner an opportunity to specify additional funding against their equity interest in the firm and its receivables. If they are willing to complete their pension funding with pre-tax dollars, everyone benefits. Link to comment Share on other sites More sharing options...
Mrmathlete Posted March 12, 2019 Share Posted March 12, 2019 On 3/24/2017 at 4:54 PM, My 2 cents said: Are disappointed doctors supposed to be better losers than lawyers? Technically, if a plan is just well-funded enough to pay one lump sum but would fall under 110% if they were to pay a second, then the first one out of the gate wins. But wouldn't it be cheaper to fund up enough to meet the full demand for lump sums than to have to try to defend against litigation? 2 cents - can you share your guidance for the “first out the gate” comment? Link to comment Share on other sites More sharing options...
Lou S. Posted March 12, 2019 Share Posted March 12, 2019 Have any of the other restricted partners requested a lump sum and been denied? Link to comment Share on other sites More sharing options...
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