Participant age 54 has average three year comp of $50,000 and there is no intention to increase this compensation. Plans NRA is age 55 and provides for in-service withdrawal. Person will have accrued $50K benefit by 1/1/2009. Person is not retiring and there are other participants so closing down plan is not attractive. Plan NRA will be increase to 62 in 2009 when participant reaches 55. The Plan will actuarially increase accrual rates in accordance with regulations.

Person will necessarily suffer a forfeiture because can't take an in-service distribution at 55 so will forego receiving payments from 55 to 62 and benefit at 62 will still be $50,000, so actuarial increase won't keep the person whole.

Have I read this situation correctly or is there some out I am missing?

Can severance payments payable due to a voluntary severance comply with 409A or does the fact that the employee can acess the payment at any time by quitting result in an impermissible acceleration or deferral of the payment date?

Owner employee has a qualified plan (there are no other employees), and wants to use rollover money from previous employer's plan to purchase company stock so that he can use it to invest in the company. The plan is regular DC plan (not an ESOP).

We would be amending the plan so that it allows for the purchase of company stock.

Where would I find sites to read on this to find out if this is possible, and the pitfalls of this arrangement. It seems too good to be true to me.

I would think that it would be a PT since it's basically a tax free way of using retirement plan assets to fund a business. Right?

Any help on this issue would be appreciated.

thanks

Is the AFTAP notice requirement for under funded (less than 80%) also required for the following year's presumptive result (10% reduction) when/if that result is less than 80% and 2009 Val/AFTAP is still not done yet ?

For example, say your 2008 AFTAP is 83% but the "presumptive requirement" for the following year as of 4/1/09 is that if the Val/AFTAP is not done yet it drops 10% to 73%. Is the notice required at that time (4/1/09) or does the notice ONLY apply to final current year AFTAPs below 80% and NOT the presumptive result as of 4/1/09 ?

If it's required then I suppose it's the 30 days after 4/1/09 ?

Want to test my understanding:

A non-contributory DB plan has been frozen for couple of years and as a result there are participants with benefits and employees who have met the eligibility requirement to enter the plan but have zero benefit because they became eligible after the plan was frozen.

Under the law, are the eligible employees with zero benefit considered "participants" for Form 5500 participant count? Per 5500's instructions:

Active participants include any individuals who are currently in employment covered by a plan and who are earning or retaining credited service under a plan.

I believe they are participants because they have service/participation credits even though they don't accrue any benefit.

Also, per the instructions to PBGC Form 1 filing, these employees are participants for 5500 but not for PBGC Form 1.

This has become an issue because the plan would not be a small plan if the active employees who have met the eligibility requirement to enter the plan but have zero benefits are considered "Participants".

A DB Plan was submitted for an EGTRRA determination letter on 1/31/08. Favorable determination letter was received. Are there any plan amendments required to bring the plan up to date with current law if the plan is terminating 12/31/08? If so, what are they?

A new plan is beginning 1/1/2008. The sole participant is 72 years old and is anticipated to retire at 77. The 415 $ limit is roughly 500,000 at 77. He has 10 years of service already and has compensation of 400,000.

I realize that the 415 compensation limit is now based on the 401(a)(17) limited compensation which effectively limits his pension (unlike the good ol' days <G>).

However, what benefit can he accrue during 2008??

a) 1/10 of the 415 $ limit (50,000)

b) the compensation limit (230,000 - using the 10 years of service and anticipating 5 years of participation at retirement)

c) something else

My personal preference is for a)

If plan A provides early retirement and is merged into plan B, which does not provide early retirement, is there anything that would prohibit separating the benefits earned under A and B for annuity starting dates?

Am I correct in thinking we must preserve the timing features of A's benefits even if they are more liberal than those allowed by B? It seems strange to allow commencement of benefits from a portion of an accrued benefit.

We get quite a few takeover plans whose existing documents call for immediate distribution vs. having to wait until after the close of the plan year after they terminate to take a distribution. When we go to put the takeover plan on our VS document, can we modify this provision to where the participant cannot take an immediate distribution, but rather, they have to wait until after the close of the plan year after they terminate in order to take a distribution? Or is this a protected benefit?

Any thoughts would be greatly appreciated. Thanks!

We are filing several years of 5500's for a client who failed to file. We are filing under dfvcp. The question is, what about the SAR's that were never provided. Should they be provided now? Or just provide the current year to existing participants?

This is a completely new animal to me so I'm not sure where to post my inquiries. (Puns were mainly intentional!) There is an association of jockeys that works (mainly) for a specific casino/race track. The race track pays a set amount to the association for the purpose of providing benefits for the jockeys of that track. The amount is set "per the agreement that governs all race track / casinos". The association (which is non-profit) would set up a plan that credited each eligible jockey (see below) with $ 15,000 annually that they could spend on any or all of the following: medical insurance, disability insurance, life insurance, dental insurance or pension.

Eligible jockeys would ride in at least 200 races (annually) and more then 50% of their total races would have to be at this specific facility / track for the year.

This is all I know and the first proposal of it's kind that I have run across. Can anyone give me any pointers on whether this works, is legal and what sort of testing it may be subject to? Is the pension plan a regular qualified plan and, if so, what do I use as compensation? I'm thinking it must be non-qualified as each jockey is self-employed.

Any information would be appreciated.

Sheila

Hello -

My coworkers and I are currently going through benefit renewal discussions and the topic of smoker rates vs. nonsmoker rates has come up. We are wondering if anyone out there has experience with implementing this type of rate and how effective it has been. We have previously offered smoking cessation classes with little response.

Any help would be appreciated!

If, after the applicable time period, the plan sponsor implements the default schedule under the rehabilitation plan, does that mean the employer is bound by the default plan? Stated differently: if we are unable to reach an agreement regarding the rehabilitation plan, can we continue paying the 10% surcharge until the end of the rehabilitation period?

We have received a notice of critical status from a plan, but we have not yet received the rehabilitation plan. I'm trying to sort out the rules. I understand the rehabilitation plan will contain some design options. Do all bargaining parties have to agree on the same set of options, or can we bargain for and agree to some options while other employers agree to different options?

Would appreciate thoughts on the following. Suppose employer has old deferred comp plan that has not yet been amended for 409A. (Company has not gotten around to it yet but plans to amend before year-end.)

One of the provisions that presents compliance issues is provision which provides for certain pro-rata portion of participants' deferred comp account in the event they die while employed by company and have not attained age 65. Plan provides for death benefit to be paid to designated beneficiary but does not provide for specific time for payment. If participant died (say now) and was entitled to get benefit, could the amount just be paid out (say within 90 days) and be considered compliant with 409A? Alternatively, could the agreement possibly be expressly amended by the participant's estate or possibly the participant's designated beneficiary to provide for payment within specified period that complies with 409A (say within 30 days of death) without violating 409A?

There is no problem here with the company paying out amounts within reasonable timeframe or with estate / beneficiary agreeing to whatever provisions might be required to avoid excise taxes; however, due to the death, there is obviously no way that the company and the original participant can actually amend the original agreement to comply with 409A.

(I'm sure this has been discussed previously. I did a quick scan of this forum, but couldn't find anything "on point". If someone could provide a link to a previous discussion of this (or similar) subject, I'd be most appreciative.)

PS Plan is being amended to allow participant direction of investments.

One participant would like to have her son (a broker) handle her account. I have a faint recollection that such a relationship might be a PT. I am assuming this would be where the participant's account is maintained with the son's brokerage firm and where son receives commissions on trades.

What if the participant maintained an account with a discount broker and son merely provided Mom with investment advice, on a non-compensated basis?

Thanks for any and all comments.

A multiemployer plan that is significantly overfunded is considering paying a "13th check" to current retirees at the end of this year. The labor trustees suggested that to save some money the 13th check should be paid only to retirees who are active members in the union. Apparently, some multiemployer funds have done this, but I see significant issues with making the 13th check contingent upon union membership. This could violate ERISA's exclusive benefit rule and the NLRA as well. Does anyone have any authority on why this should not be done? Any help would be appreciated.

A plan sponsor wants to continue benefit accruals for participants within 10 years of normal ( i.e. 65) and freeze benefits for all other participants - (1) is this doable ? and (2) if so, what specific non-discrimination tests, if any, would be required ?

Hello,

Client wants to place employer contribution in participant accounts on a mothly basis. The employer contribution is subject to a 6 year graded vesting schedule within the plan.

Client wants to impose an annual 1000 hour requirement. If the participant at year end does not meet the accrual requirement, client wants to remove the money from the participant's account.

This seems counter-intuitive since it always seems that the vesting schedule is the only thing that governs the removal of money (other than operational errors and such).

So the client will have someone who is already 100% vested for example, when they look at their account balance while employed, will see that they are 100% vested but when they take a distribution, they will "forfeit" money that was placed in their account that year, due to them not working 1000 hours.

I cannot find anything specific that prohibits this, but wondered if other run into this situation and how they may address this.

Thank you.

IRC Sec. 432 says that the actuary's projections shall be based on reasonable assumptions and methods and be his best estimate. However, Sec. 432 goes on to say that the projected value of liabilities shall be determined based on the most recent actuarial valuation. What if the actuary's best estimate has changed between the time the actuarial valuation was completed (let's use a 2008 calendar year to make it specific) and the deadline for the 2009 certification (March 31, 2009)? Can an assumption used for the 2008 valuation be changed for the 2009 certification?