I posted this on the DB board and after a couple of days I didn't get a bite so I'll try it here.

I have been working on defined benefit plans since the early 1980's but up until now I have never had the pleasure of preparing a Schedule MP and the related MP schedules for submitting a missing participant's money to the PBGC. The participant in question has a lump sum greater than $5,000 and therefore cannot be forced into taking a lump sum. Unless I am totally misunderstanding the procedure this appears to be far more involved than I expected. According to what I have gleaned from the instructions and regs, his plan lump sum has to be compared with a lump sum using the PBGC interest and mortality basis stated in the regs. Unfortunately the PBGC mortality is not simply just some standard table. It starts out with a standard table but the regs require that each years mortality factor gets projected based on their projection table. The projection is for the number of years from 1994 to the year containing the distribution date plus 10 years. Therefore the mortality table is going to have to be projected for each individual since it changes for each individual based on the year of distribution.

If anyone that has been through this process can tell me if I'm on the right track I would appreciate it.

Situation:

Physician's Group (A) has 25 owners.

Hospital (B) has 16 owners. All 16 owners of the hospital are also owners of the Physician's Group. Is this currently a controlled group or an affiliated service group?

In April 6 owners are leaving the Physician's Group, leaving 19 owners. 16 of the 19 still own 100% of the hospital. Is this currently a controlled group or an affiliated service group?

Up until now, these two groups have been treated as separate entities regarding their retirement plans.

Group A has a 401k PS with a 50% match of the first 4% and a 7% PS contribution.

Group B has a 401k PS with a 100% match of the first 3%. They are given cash bonuses instead of PS contributions.

If the groups are found out to be controlled or affiliated, what are the possible repercussions on self-reported basis?

Thanks in advance!

My opinion is that they are currently an ASG and that they will become a controlled group in April. As for repercussions, the plans will have to be made equal retroactively....

In December of 2007, federal tax was withheld in error. It was the participant's intention to roll their entire distribution to an IRA and the mistake was not theirs. Now with the consolidated 945 coming due at the end of the month, we're trying to figure out if there is a way to recover the 2007 withholding. The custodian is stating there is not. The IRS has moderated their position on some items and I'm wondering if this is among them? Any ideas?

From today's BenefitsLink Retirement Plans Newsletter:

----------------------------------------------------------

[Official Guidance] Text of LaRue Unanimous Supreme Court

Opinion Upholding Damages Claim Against ERISA Fiduciaries

for Participant's Investment Losses (PDF)

http://benefitslink.com/cases/larue-06-856.pdf

18 pages; decided February 20, 2008. Excerpt (from the

opinion's syllabus): "Held: Although §502(a)(2) does not

provide a remedy for individual injuries distinct from

plan injuries, it does authorize recovery for fiduciary

breaches that impair the value of plan assets in a

participant's individual account. . . . For defined

contribution plans . . . fiduciary misconduct need not

threaten the entire plan's solvency to reduce benefits

below the amount that participants would otherwise

receive. Whether a fiduciary breach diminishes plan

assets payable to all participants or only to particular

individuals, it creates the kind of harms that concerned

§409's draftsmen. Thus, [the references in Massachusetts

Mutual Life Ins. Co. v. Russell to] 'entire plan' . . .

which accurately reflect §409's operation in the

defined benefit context, are beside the point in the

defined contribution context." (United States Supreme

Court)

DB and DC plan are both terminated 12/31/2007. DB plan may have some excess assets. PS plan will have an employer contribution for 2007. If the excess is transferred to the PS plan (a qualified replacement plan), there is the requirement from 4980 below that the DB plan allocate the excess assets in the plan year the transfer occurs. (Obviously, there is can't be a suspense account with the PS plan terminated, so that option is out.)

© Allocation Requirements. --

(i) In General. -- In the case of any defined contribution plan, the portion of the amount transferred to the replacement plan under subparagraph (B)(i) is --

(I) allocated under the plan to the accounts of participants in the plan year in which the transfer occurs, or

So does anyone see a problem with using the excess to reduce the 2007 contribution deposit assuming the excess is transferred to the PS plan within 30 days of the due date of the tax return so it counts as a 2007 annual addition?

At a recent multiemployer plan meeting, a Trustee asked whether the plan's normal retirement age could be increased from age 65 to Social Security Normal Retirement Age. My initial reaction was that IRC Section 411(a)(8) would not allow allow this as normal retirement age cannot be later than age 65 or the 5th anniversary of a particpant's participation in the plan. However, the plan's consultant stated that he has seen plans that define normal retirement age as Social Security Normal Retirement Age. Is there any support for this? Any help would be appreciated.

Last Friday Judge Kravitz ruled in the ten year long cash balance conversion case that Cigna had violated ERISA by not supplying a proper 204H Notice of benefit reductions when it’s traditional qualified benefit plan was converted (1/1/1998) to Cash balance. The ruling concluded there was no age discrimination in the plan after the change but a reduction in benefits had occurred due to the wear away in the ‘Greater of A or B’ benefit conversion. A is the before conversion benefit and B is the new cash balance benefit based on starting with an account balance equivalent to the present value of the A benefit. Complicating this issue is the fact that Cigna’s calculation of the present value did not include the prospect of mortality and early retirement. The 122 page ruling is very interesting reading.

Left to further proceedings is what to do for the plan members now. In an earlier action, some older Cigna employees were grandfathered under the old plan formula. The court has requested briefs from both sides for their proposed remedies. Here are several choices:

1: The Plan should be forced to go back to the old traditional final average salary type benefit. (They can start the conversion process over with proper notification.)

2: The proper notification and information of the conversion effect may have been complete enough by the end of 1999, the plan must use the old formula through December 31, 1999

3. The wear away effect caused by the ‘Greater of A or B” must be eliminated by substituting the ‘A Plus B’ conversion benefit calculation. Proper calculation of present value of A is required by addressing mortality and early retirement subsidy.

4. Those employees harmed beyond a de minis amount, must be grandfathered under the old plan formula. (this would require calculations for all employees under both formulas.)

5. Those employees most harmed are older employees with longer periods of service. Employees over the age of 40 on January 1, 1998 with 5 years of service must be grandfathered under the old formula.

Do any of these seem appropriate? Any other suggestions?

Perhaps another member knows how to set this up as a poll. I thought it would be interesting to hear opinions from the knowledgeable people at this site.

A municipality is considering establishing a VEBA to fund future (10 - 20 years out) postretirement benefits. What factors should be considered in determining whether a VEBA or IRC Sect 115 Trust would be best for a municipality? Is the only significant difference between the two the 'reversion to employer' aspect of the Sect 115?

Any expert input is very much appreciated. Thanks in advance.

Has anyone done a FAS 158 report for the second year?? Is the (Accrued)/Prepaid Pension Cost still needed and/or reported?? Thanks.

A 401(k) client is starting a NQDC Plan with both deferral and employer money, and wants me to administer it. Their attorney will be preparing the "documents". They want me to give them an estimate on fees. What work will be involved besides an annual valuation on the assets held in the Rabbi trust?

Consider a $25 annual individual deductible feature of a travel accident policy applicable only to medical claims arising from accidents incurred by covered employees and their immediate family while traveling abroad on business. Does the limited nature of the medical benefits exempt this program from the no co-existing "high deductible health plan" test that HSA holders must pass in order to make salary reduction contributions?

We have a U.S. citizen employee working on long-term assignment in the UK. He is covered by the National Health Service. He is also covered by our HDHP. Can he have an HSA?

Employer has received a DRO relating to a 1996 divorce action. The DRO divides the benefit as of the date of the divorce. This is a DB plan that was later converted to a cash balance plan. The DRO requests payment in the form of a lump sum. A lump sum would be permitted under the terms of the plan today, but would not have been permitted under the terms of the plan in 1996. What is the administrator to do?

I am a Benefits Consultant for an insurance company in Massachusetts. I am looking for any benefits surveys with information on other Massachusetts insurance companies.

Thanks,

We (bank trustee/custodian) have recently been asked to certify that our statements comply with FAS 157 or that we intend to comply with FAS 157. Are any other bank trustees or custodians out there getting similar requests?

I have been working on defined benefit plans since the early 1980's but up until now I have never had the pleasure of preparing a Schedule MP and the related MP schedules for submitting a missing participant's money to the PBGC. The participant in question has a lump sum greater than $5,000 and therefore cannot be forced into taking a lump sum. Unless I am totally misunderstanding the procedure this appears to be far more involved than I expected. According to what I have gleaned from the instructions and regs, his plan lump sum has to be compared with a lump sum using the PBGC interest and mortality basis stated in the regs. Unfortunately the PBGC mortality is not simply just some standard table. It starts out with a standard table but the regs require that each years mortality factor gets projected based on their projection table. The projection is for the number of years from 1994 to the year containing the distribution date plus 10 years. Therefore the mortality table is going to have to be projected for each individual since it changes for each individual based on the year of distribution.

If anyone that has been through this process can tell me if I'm on the right track I would appreciate it.

so, under PPA, the participant statement for non-self directed account is to include "The value of each investment to which assets have been allocated"

what meets that requirement?

is it sufficient to say

equities 82.00%

Fixed income 13.00%

money market 5.00%

or do you have to list the $ amount, or do you have to provide an even more detailed breakdown?

I have a QDRO where the alternate payee is getting 50% of the account balance as of December 1, 2007 (DRO valuation date). The plan provides for a profit sharing contribution to all eligible employees who either worked over 500 hours during the plan year or who are employed on the last day of the plan year. The participant has accrued a right to the 2007 profit sharing contribution, but it will be made to the plan until March of 2008.

Do I split the account as of 12/1/2007 only or does the alternate payee also get 50% of the 2007 profit sharing allocation made in 2008?

Thanks.

Do the parital plan termination rules apply to multiemployer plans? We work with a multiemployer plan that is loosing actives members at a fairly good pace, mostly due to withdrawing employers. These withdrawing employers are triggering withdrawal payments, but the question came up about a potential partial plan termination.

Assume the decline would meet any reasonble criteria for a partial termination if the Plan was a single employer.

I did find this that seemed to imply that they were not deemed 100% vested because they were unfunded at the time of the withdrawal. Is that they way most look at this or do we need to dig deeper?

Sammy Joe Freeman v. The Central States, Southeast and Southwest Areas Pension Fund, United States Court of Appeals, Fourth Circuit, Nos. 93-2559 and 94-1150, August 10, 1994.

[Relevant Law Sections: Code Sec. 411(d)(3)]

Participants' accrued multiemployer pension benefits were not vested when an employer withdrew from the plan because the benefits were not fully funded at the time of the withdrawal. The plan's assets were $1.74 billion short of the current value of vested benefits, and, if terminated, the plan would not have enough funds to pay vested benefits. Thus the participants were not entitled to benefits.

A one-participant plan was established a few years ago and granted past service so that the benefit multiplier (60%) is maxed out. The participant, though not retirement age, has also maxed his FS3 compensation. Consequently, all benefits are fully accrued and no new benefits are accruing; thus, there is no unit credit normal cost. Plan Participant is age 63 and may continue plan for about 5 more years.

Plan sponsor continues to contribute in the 115K neighborhood which will exceed the 7 year amortization of the funding target by about two fold

2007 AFTAP is 55% and if we burn credit balance, 2007 AFTAP is 72%.

Since it is a one-participant plan, no benefits will be distributed until plan is terminated.

Only issue I see are that quarterly contributions should be made since won't be able to use credit balance. We would simply opt for interest penalities which would still make total nut less than what's being contributed.

Question: What happens if we make no AFTAP certifications whatsoever? Any potential risks sensed if the facts remain unchanged?