Some great information on this site, thanks to you all!

I have a somewhat unique divorce situation, and need advice on how to calculate the value of a QJSA that is and was solely paid out of non-marital assets. My husband and I got married just before I retired from State of AK in March of 2019, in order to allow me to add him to my state benefits (free Health insurance, Long-Term Care Insurance and a 50% Joint Survivor Pension Option in the case of my death). I then retired 4 months later in August of 2019 and we now live in Minnesota, an Equitable Distribution State. He retired a few months after I did and has done contract work for his former employer off-and-on since.

I have taken a deduction from my pension annuity for both his LTC Insurance and the QJSA of which he is the beneficiary for the past almost-7 years of my retirement. The QJSA option I elected prior to my retirement is completely irrevocable, as I sadly found out recently - my pension annuity will be reduced because of this election for the rest of my life, even after we are divorced, and even if my husband dies before I do and no one ever receives the benefit of the QJSA. It is not transferrable to a new spouse, and nothing can be changed, even through a QDRO. So that election resulted in a lifetime pension reduction for me. What angers me is that we had a (verbal) agreement at the time of marriage that he would obtain a life insurance policy on himself with me as the beneficiary as compensation for that LTC insurance and QJSA, and he did get that life insurance policy, but then he let it lapse a year or two after the marriage ("fool me once"...) 

I had a prenup prior to the marriage that ensures that my soon-to-be-ex and I each maintain our own pensions.  I have not worked at all since the marriage, so all my assets are my own pre-marital money. We kept our finances separate throughout the marriage. My husband had three pensions that were earned before the marriage that are solely his own pre-marital assets, which he is now collecting on. However, he did work some during the marriage too, so some of his recently-earned assets are legally half mine (he has greater income than I do). He was also married previously, and his ex-wife is the beneficiary of his QJSA, so that doesn't factor in. The only assets being split in our divorce are a home, vehicles, and perhaps a small amount of his recent joint marital income. It does not seem fair to me that I will need to take a reduction in my pension for the next 30 years when I was only married to him for 4 months before I retired. When I looked into it, it sounds as if court cases in several states have considered the the QJSA to be a "valued asset" of the receiving spouse; one that can be offset by other assets in the divorce settlement, although I don't see any case law relevant to that in my own state. I'm pretty sure I can't get compensation for the value of the past (already-provided) LTC and QJSA benefits that I've paid for during the marriage, even though he reneged on the life insurance agreement. But I'd at least like to get compensation for my future losses over the next 30 years for the non-reciprocal QJSA that my ex-husband will benefit from.

So finally, if you're still with me....

My Question: For settlement purposes, how do I calculate the value of my future annuity reductions due to the irrevocable QJSA? My pension annuity has already been reduced by approximately $7,000 for the LTC Insurance and approximately $12,000 for the QJSA option over the past 7 years. The LTC Insurance is revocable, so there will be no further deductions for that. However, over the next 30 years (my approx. estimated lifespan), I will incur a loss of approximately $96,000 in pension reductions for the QJSA. The annuity deduction will increase with inflation each year. I'm certainly no accountant, but I have been trying to find a calculation that could give me a reasonable estimate for a settlement offer. My best Google-guestimate (found on an A.I. search) as to how to calculate this would be:

S_n = A x (1-rⁿ) / 1-r  where A= first year’s total payment ($2028) and r = annual growth rate (1.03) and n= number of years (30), so S₃₀ = 2028 x 47.5754 = $96,583.

I then attempted to calculate the present value in 2026 dollars at a 3 percent average annual inflation rate (?) (where PV = FV / (1 + r)ⁿ  and PV = $96,483 / (1 + 0.03)³⁰ = ($96,483 / 2.427262) = $39,750.

I have no idea whether my calculations or assumptions are correct, and I know I need to find an actuary to help me, but I'm wondering if anyone here can give me advice, as this is a somewhat unusual situation. Am I getting warm, or am I totally off-base here?

Thanks for any advice you could provide!

just because there might be new people to Benefits Link who didn't have to suffer through this one yet...

 

 

An employer is insisting that they filed Forms 1095 for 2023 and 2024 (when electronic filing was required) without filing a 1094 for each year. Is that even possible on the AIR system?

for Centers for Medicare & Medicaid Services [CMS] (GA / MD / TX / WA / Hybrid)

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for NPPG (Remote / Shrewsbury NJ)

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Is anyone aware of guidance regarding exactly how the distribution (and in some cases, return) of overpayments should be handled for 1099-R purposes, under the new rules of 414(aa) and 402(c)(12) (as added by Section 301 of SECURE 2.0) and Notice 2024-77?

I can see several permutations that might affect reporting, including not only whether repayment is sought, but also whether the amounts were originally taken in cash or rolled over, whether repayment is sought in the same or a subsequent taxable year, and whether any repayment occurs in the same or a subsequent taxable year.  The 1099-R instructions don't appear to address these issues.

Hi 

Thank you, as usual, for all the insights.

A traditional DB plan is being audited by the IRS.

1. It appears from the questions being asked on the IDR, that the one asking the questions is not well versed in traditional DB plans or in DB plans in general. 

As they ask ...that the FT shown in the val report on the maximum contribution page is 1,846,234 is different  than the FT shown on the SB of $1,345,367. 

The answer is that the SB shows the FT for the minimum funding requirements, while the FT on the val report in the  maximum contribution section of the val report is based on the 404(0) rates for the maximum allowable contribution.

There is indeed, a section in the val report that shows the FT for the minimum funding and it properly matches the FT shown in the SB.

 

2. They ask to provide a demonstration  of how the plan provides meaningful benefits required by 401(a)(26).

In a memo for EP determinations  on 7/17/2007 (and Paul Shultz?) The IRS confirms that a benefit accrual of 0.5% per year of participation or service is meaningful...thus...a traditional DB plan that has a benefit formula of 0.5% of average compensation times credited service has a “meaningful benefit”. 

This plan under audit has a benefit a formula of 3% of avg. comp per year of year of service limited to 10 years. 

Question: Since the formula is 3% per year of service  shouldn't this mean that the plan provides meaningful benefits?

3. They ask how the plan satisfies the nondiscrimination in amount requirements of 401(a)(4).

A DB plan that uses a safe harbor formula satisfies 401(a)(4).

This pla uses a SH formula...

As it is the same formula for all employees, calculated based on the same number of service, and does not exceed 100% of comp.

It uses a uniform accrual formula..benefits accrued at a consistent rate for all.. ...3%per year of service.

Question: Therefore based on this, doesn't this plan meet the 401(a)(4) non discrimination in amount by design, and does not need annual testing?

Thank you very much for any insights on this.

Hi All,

A DB Plan sponsored by a corporation has the following provisions:

 

1. No in service distributions allowed, even if attained NRA.  

2. However, if working less than 40 hours a month, then if attained NRA, allowed to start taking benefits.

What if the corp has two owners (50/50). One of the owners wants to cut back on his work schedule and salary etc and work less than 40 hours monthly. 

Can this owner, who has reached, NRA, start to take monthly benefits from the plan, since he works less than 40 hours monthly or does this 40 hour rulr not apply to owners?

 

Thank you

Perhaps I was derelict in not researching this further or fully understanding it, but I had thought I could self-report ERPA CE credits to the IRS. During renewal, they ask you to enter credits per year (separated by ethics). When I added all the classes I had taken, I received an email from the IRS stating that I was one credit short based on what they had been reported to them directly, and that I needed to contact my CE vendors if there was an error (there wasn't).

Furthermore, many of the classes I took did not appear to be eligible for ERPA and, therefore, were not reported. I was one credit short. And, of course, I didn’t learn about this until after the cycle was over, when it was too late to make it up. That’s on me for not fully understanding the rules.

In any event, I replied to the IRS explaining that I had over 100 hours of ASPPA credit (albeit not ERPA) and asked if there is any possible flexibility. I’m waiting to hear back.

A few questions:

1. Has anyone experienced this before? What did you do, and what was the outcome?
2. Besides John Hancock and ERISApedia, who else offers free ERPA CE credits?
3. Is there a web-based platform where I can take multiple classes (paid is fine) to quickly accumulate credits?
4. I know ASPPA and NIPA offer certificates, credentials, conferences, and other paid options. For example, ASPPA charges about $72 for a 1-credit on-demand webcast. Are there more efficient options?

Thank you in advance for any insight.

A theoretical (but coming up) question as I never had to deal with it before.

Client has a straight PS plan, no other provisions.

Initial set up was pooled account. A few years later, they wanted to have a participant directed account (because they heard it was better thru the grapevine).

Thay asked my opinion and knowing this client, I told them it will complicate their lives but I cannot provide any recommendations on switching.

Lo behold, they switched 2 years ago and now they may want to switch to pooled account because too complicated for them to deal with. Hmmm (not saying I told you so).

They want to close up the participant directions and transfer all to pooled account.

One way to do is leave the participant directed account as is and put in all future contributions into a pooled account but they will prefer dealing with a pooled account only.

What issues are they facing, if any? Any BRF issues? Anything else?

Thanks

 

Plan states that if a participant's vested balance is >$1,000 but <$5,000 and the term'd participant has not attained the later of age 55 or the NRA under the plan on the termination date, then the balance is cashed out and rolled to an IRA absent a contrary election. Mandatory cash-out doesn't apply to anyone else regardless of vested balance.

The plan utilizes a pre-approved plan document. Nothing in the adoption agreement or BPD (relius doc) speaks to applying an age criteria other than age 62 or NRA in the plan.  

Besides being an operational failure (failure to operate the plan according to its terms), are there NDT issues here?  Any other flies in the ointment you can see?

Any feedback is greatly appreciated.  

A married couple were divorced and had agreed that the participant's spouse would share in a portion of benefits otherwise payable to the employee. A QDRO was drafted but was intensely litigated. In the interim, the employee retired and began receiving the agreed upon portion of pension benefits in the form of a straight life annuity. Ten years later, a draft QDRO which appears to be acceptable to both parties to the former marriage was submitted to the plan. If the plan determines that the proposed order is qualified, can payments to the ex-spouse be made retroactively to the annuity starting date? Please note: that there is no issue of a reannuitization here based on the DOL Regulations at 29 CFR Section 2530.206 because it is being paid as an annuity for the life of the employee only. Therefore, when the employee dies, all payments (even to the former spouse who survives the employee) cease.

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for Employee Benefits Security Administration [EBSA] (Atlanta GA / Covington KY / Pasadena CA / Philadelphia PA / Silver Spring MD / Boston MA / Dallas TX / Fort Lauderdale FL / San Francisco CA / Chicago IL / Kansas City MO / New York NY / Seattle WA / Hybrid)

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for Western & Southern Financial Group (Cincinnati OH)

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I have a question I could not find a clear answer to.

We have a Single Employer Cash Balance Plan paired with a Profit Sharing Plan (effective 2025) as they now have eligible employees to help pass testing. The employer now is looking to join an Open MEP as a Safe Harbor Matching 401K Plan to allow 401k contributions for the HCEs and employees, the MEP provider pairs with their benefits makes all contributions, provides fiduciary services etc. So they are looking to ease their admin burden for regular contributions.

My question is can we do any or either of the below scenarios:

- Cross test the clients portion of the MEP with the Cash Balance plan just as we did for 2025. Then just provide what is needed to pass any requisite  testing.

- Keep the 2 plans active as we did for 2025, and allow the employer to also enter the MEP as a 3rd plan under their control. Pass the testing of the PSP and CB plan together and allow the 3rd Safe Harbor Match 401k Plan to operate in the MEP separately. Are there additional considerations with this outside of the added cost to the employer and ABPT?

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Employees hire on 05/21/2022 and terminated on 10/25/2022 and has hours of 550 and rehire on 3/17/2024 and 2024 hours is 1023. Plan eligibility condition is 6 month of service with 500 hours consecutive or else, one year of service. Entry Cycle is monthly. Additionally, Rule of parity is not applies. 

What is the entry date for this employee? Whether we have calculated 6 mos from rehire date and entry date as 10/01/2024 or else need to consider his prior service and determine the shift to plan year and entry date as 01/01/2025. Can you provide explanation if possible. Also, is there any documents which explains this to refer.