Since multiple annuity regulation is under construction, below are 3 versions of 415 calculations. The goal is to maximize the 3rd lump sum payout. Any comments, suggestions, corrections, your own versions, known IRS objections, etc. are highly appreciated.

Current age – 67

Prior Lump Sum 1 at 51 – 366,413 - (prior DB plan)

Prior Lump Sum 2 at 66 – 1,269,653 - (current DB plan, in service distribution)

What is a maximum 415 lump sum that could be paid at 67?

Version 1:

Using 5.5% and GAR with no pre-67 mortality

Offset1 = 366,413 * 1.055^(67-51) / 10.7588 = 80,213

Offset2 = 1,269,653 * 1.055 / 10.7588 = 124,501

Additional Annuity at 67 = 214,955–80,213-124,501 = 10,241

Additional Lump Sum at 67 = 10,241 * 10.7588 = 110,181

Version 2:

Using 5.5% and GAR for converting to immediate annuity.

Using 5%, GAR and no mortality from payout to 67 to adjust for timing

415 Annuity Equivalent 1 at 51 = 366,413 / 14.6490 = 25,013

415 Annuity Equivalent 1 at 67 = 25,013 * 15.4995 * 1.05^(67-51) / 11.1910 = 75,621

415 Annuity Equivalent 2 at 66 = 1,269,653 / 11.0372 = 115,034

415 Annuity Equivalent 2 at 67 = 115,034 * 11.4934 * 1.05 / 11.1910 = 124,050

Additional Annuity at 67 = 214,955–75,621-124,050 = 15,284

Additional Lump Sum at 67 = 15,284 * 10.7588 = 164,438

Version 3 (Modification of Version 2):

415 Maximum Annuity payable at 51 – 88,488

415 Maximum Annuity payable at 66 – 199,331

415 Maximum Annuity payable at 67 – 214,955

415 Annuity Equivalent 1 at 67 = 25,013 * 214,955 / 88,488 = 60,762

415 Annuity Equivalent 2 at 67 = 115,034 * 214,955 / 199,331 = 124,050

Additional Annuity at 67 = 214,955–60,762-124,050 = 30,143

Additional Lump Sum at 67 = 30,143 * 10.7588 = 324,303

A plan sponsor is shutting its doors and all employees covered under the DB Plan will be terminated. The Plan offers life only, J&50, J&100, 10C&L, 20C&L, and lump sum. Actuarial equivalence for determining monthly forms is 71GA and 6.50%. Any problems with saying in the election package that monthly forms are actuarially equivalent and same value and then illustrating lump sum relative to life only form. Because of low lump sum interest rates, the lump sum will be about 150% relative to the life only. Of course, anyone who both reads and understands this will be led to elect a lump sum. Clearly, the results look vastly different if for example, we were to use the lump sum basis for determining relative values. The disclosure does make the statement that using a different determination basis would produce different relative values.

We fund our retiree life through a VEBA.

We exclude key employees from this

How is a key employee defined for VEBA purposes?

thanks

Plan document allows for participants to change their deferral percentage on a quarterly basis. Owner however, was changing his percentage more frequently than that. sometimes monthly, sometimes bi-monthly. What type of violation is this and is this fixable via VCP? How is a penalty determined?

Thanks

Company withholds 401k money from everyones paycheck, but does not deposit the large 401k amount for the owner ($3,000). This amount stays in the company's business account, and is later used to pay off a company debt. This is discovered a year later.

We have a late deposit problem. But is there also a problem with that $3,000 being used to pay off a non-plan expense?

YES: Its a prohibited transaction, using plan money to pay non-plan expense.

NO: The money never left the company account. Therefore, it was not a plan asset and so it doesn't matter what it was used for. The late deposit penalty is all that is imposed.

Any thoughts/opinions?

Thanks

We are an employer with 17 fulltime employees and 5 part-time employees. Only fulltime employees are eligible for our plan and 16 of them participate in our health plan with a major health insurer. One of the fulltime employees just turned 65, which, under our premium rate structure, would raise the cost of the premium for her insurance by about $400 per month (employer pays 75%, employee 25%) if Medicare not implicated. The insurer does provide a Medicare rate that is about one fifth the cost of the age and gender based premium. I asked our broker who in turn asked the insurer whether we could pay the Medicare rate for this employee.

Broker responded that insurer "looks at whether or not you have 20+ employees that are benefit eligible. If you do, then Medicare would be secondary and this individual would be charged the appropriate rate for their age. If you have less than 20+ benefit eligible employees, then Medicare would be primary. with insurer secondary. And then insurer would apply the Medicare primary rates as long as the form was submitted that shows the individual being enrolled in both Parts A & B."

My understanding from a few other posts was that the federal rules as to whether Medicare is primary or secondary are based upon how many employees the employer has regardless of whether they are fulltime or part time and not based upon number of "benefit eligible" employees (part-timers not eligible under our plan). But I would think that this major insurer would know the rules.

Is the insurer wrong? And, if insurer is wrong but is willing to charge us only Medicare premium rate for this employer after we've discosed the above facts, any problems for employer down the road if Medicare finds itself to be only secondary? Or did I miss something?

Thanks for your help.

How are the proceeds of group term life insurance taxed if an employee pays for them through a cafeteria plan? Any help would be appreciated.

Does anyone have any thoughts on this? A client is considering an "exit incentive" for certain management-level employees over age 60. The incentive would be that if you are between 60-65 (i.e., not yet entitled to medicare), you can continue participating in the employer's self-funded health plan. If you are 65 or older, you will just get a lump sum severance payment. The employer is considering offering the option of the lump sum payment to the employees between 60-65. That type of option would have to be run through a cafeteria plan, obviously. My question is this: Is there a deferral of compensation there that would run afoul of the new proposed regulations? In other words, if a 60 year old employee pays $50 each month for their share of premiums, which the employer "contributes" for the employee on a pre-tax basis pursuant to the cafeteria plan election for the next five years, wasn't the inital choice between that benefit and the lump sum a deferral of compensation? The employee could have received a lump sum today, but instead you are essentially spreading it out over the next 5 years. Or is it not a problem since the employee may choose the health benefits this year, but may not choose them the next year? Or could the problem be avoided if you run the initial choice between the benefits and the lump sum through a cafeteria plan the first year, but then require the employees to pay premiums on an after-tax basis in subsequent years?

I have a client that is replacing its 403(b) Plan with a 401(k) Plan. The 403(b) Plan has many “lost” participants with significant account balances. (We have used the usual services to try to find these folks but to no avail).

It would very helpful to the “pricing” for the replacement 401(k) plan if there was a way to move the 403(b) Plan “lost participant” account balances into the new 401(k) plan. However, the regulations are clear that plan sponsors who freeze or terminate a 403(b) plan cannot merge or transfer the 403(b) plan assets into the new 401(k) plan. Any ideas?

We have a

busy 4 man shop.

1 billing person/admin assist/exec secretary

myself and 1 very key person and a 2nd pension administrator.

What is reasonable to expect from that key person in terms of hrs

we have 16 vacation/sick days

person does not work any ot or saturdays.

Is it reasonable to expect some ot and sat work in office this size?

Does answer really lie in compensation?

ie

if hrs worked over the course of the year are substantially more than the normal 37.5 for 50 weeks should it be reflected in a christmas bonus?

Suppose you have a top heavy DB and 401(k) plan that are general tested (15 participants in each plan). Also, suppose one participant was full time but dropped to part time (under 1,000 hrs). The Top heavy minimum is provided in the 401(k) plan. Since he is employed on the last day of the year he gets the 5% top heavy minimum. Does he then get bumped up to the 7.5% gateway because of the DB/DC plans? Assume HCEs have high enough allocation rates such that 7.5% is required.

He would not otherwise be entitled to a benefit accrual or top heavy minimum in the DB (if the TH minimum were provided there) because he works less than 1,000 hrs.

Now suppose he only ever became eligible for the salary deferral part of the 401(k) plan but was never eligible for non-elective, match or entry to the DB plan. Would he receive a 5% TH minimum in the 401(k) plan or a 3% TH minimum.

An employer only permits one vendor to receive contributions under the employer's deferral-only 403(b) plan, but otherwise is completely hands-off in plan administration and would appear to satisfy the requirements to be a non-ERISA plan. Does the fact that the employer has only allowed one vendor negate the other factors that seem to indicate non-ERISA status?

I have not seen DOL rulings on this and am wondering if there is a consensus view that this would be an ERISA plan regardless of any other facts.

Thanks

Can an HSA compatible medical plan member who has an HSA account use their FSA funds to get reimbursed for chiropractic services or do they have to use funds in their HSA for these types of services. In this case the medical plan does not cover chiropractic services at all. Seems like as long as they aren't using HSA funds to pay for chiro and then submitting receipts for reimbursements from their FSA they should be o.k. b/c chiro is an FSA qualified medical expense. If the medical plan covered chiro I could see why it wouldn't work either b/c employees would be getting credit towards their deductible for the chiropractic care they receive.

Does anyone know why the spouse of a married participant is automatically the primary beneficiary of 100% of the participants benefit under a plan not subject to QJSA?

I assume this is because the normal form of benefit is a lump sum.

Can a union establish a prototype 401(k) plan? It is not clear to me how the union can be the "employer." Or is this treated as such under Code Section 413(b)? Would it have to be jointly administered as a Taft-Hartley plan? Thanks.

Client wants to use the Carryover Balance (CB) as of 1/1/08 to cover all 2008 quarterlies - let's say the CB is $200,000 and each quarterly is $10,000 - if the employer makes no contributions in 2008 is the CB as of 1/1/09 just ($200,000 - A)*(1+i) where A is the sum of each quarterly amount discounted back to 1/1/08 at the effective rate i for 2008 ?

Tom,

In your session at the annual ASPPA conference, you had a few slides about this, and on one of them, I see the comment,

Are you saying that if the plan uses this, suppose it's entirely based on service only, 1 year intervals, and the requirements are met: (regular intervals, starts at 1%, decreasing ratios, no ratio over 2.0, no jumping by more than 5%) must the plan also run a general test regarding the allocations?

Is that what they mean in 1.401(a)(4)-8(b)(1)(viii), Example 1 part (iv), Example 2 part (v), Example 3 part (iv) when they say "if it satisfies paragraph (b)(1)(i)(A)"?

Link here: http://www.irs.ustreas.gov/pub/irs-drop/a-08-44.pdf

Gov't 457(b) participant retirees with an outstanding 457 loan. Does anyone know if there is a 10% penalty due to the outstanding loan?

Thanks.

I have been reading this all night and am confused. Can someone please clear this up for me.

My question is with regards to a Section 105 Health Plan. Can a participant submit for reimbursement health insurance premiums paid by their spouse under the spouse's employer's plan? The premiums were paid on an after-tax basis.

Is the same answer true for Sec 125 plans?

Thank you so much, this is much appreciated.