I need to calculate a PVAB for a fireman for an impending divorce. The plan doesn't offer lump sums, so I am curious if anyone has knowledge of a mortality table that exists for such a group. I understand their life expectancy to be much shorter than the general population, both because of the job risks, but also because of the impact of the job post-retirement.

Asset method is 5-year phase-in of gains and losses on market value described in Rev. Proc. 2000-40 Section 3, Approval 15.

Question is: what is the correct treatment of receivable contributions for the prior year (made during the year) for calculating the expected value of the assets at year-end:

1) Give them a full year's interest

2) Weight the interest depending on the timing

Ex.

1/1/03 MV = 100

2002 contribution made 7/1/03 = 10

Interest is 8%

What is the expected value of assets when we go to determine the gain/loss to smooth in to calculate our 1/1/04 AVA?

1) 110 * 1.08

2) 100*1.08 + 10*1.04

If the cafeteria plan document allows for termination of the plan, is there anything that would prohibit and employer from terminating the plan effective 8/31 and establishing a new cafeteria plan effective 9/1? The current plan year is a calendar year.

If the plan can be terminated, could the new plan also have a calendar year (short from 9/1 - 12/31)?

Can anyone briefly explain the purpose of the "deemed IRA"? When these were first introduced, I recall hearing the experts indicate that they didn't really see much use for them. But now I see a lot of guidance that I honestly haven't taken the time to read. Any thoughts?

If a 403(b) plan which is not subject to ERISA has a hardship provision, can a person who terminates service take a hardship distribution?

Employer has 3 percent safe-harbor plan with 401(k) deferrals. Employer wants to contribute an additional employer contribution 9 percent to doctors and 3 percent to staff. In cross testing each HCE doesn't meet the ratio percentage test. So the average benefits test is done, bringing in the salary deferral contributions. To the extent that the plan passes the average benefits test, does it matter what the ratio percentage of each HCE is?

Is anyone tracking a lawsuit challenging California Senate Bill 2 on the grounds of ERISA preemption? The Bill requires employers of 20 or more employees to provide group health coverage for employees, or pay into a state system that will subsidize employee health care.

Its my understanding that there is both an ERISA challenge, and state level litigation on the basis that the bill was not enacted with the 2/3 majority vote needed for measures that impose taxes or fees on Californians.

There is also a voter initiative on the Nov. '04 ballot to repeal the bill, but I am primarily interested in the ERISA preemption challenge.

An "insurance guy" has sold a client a DB plan and funded it with individual variable life policies. (No need to go into the wisdom of this decision.)

There is one HCE owner and 9 NHCE's. There are 10 policies in the plan all designed to provide 100 times death benefit.

The policies are all the same type and with the same carrier and have the same provisions for everyone. However, what is of note it that the policies for the NHCE's are only funded at the minimum levels necessary to keep them from lapsing. Therefore, extremely low cash values (if any) are building in the NHCE's policies. The owner's policy is being funded as much as possible, but just below the level that would cause the policies to become a MECs (modified endowment contract). Is there an issue with benefits right and feature here?

As a further thought on this issue, when benefits right and features are measured for discrimination purposes, how is this testing done? Do we assume that a person either has the benefit right or feature or they don't?

In some cases, it is possible to put a value of the benefit right and/or feature. Consider a case where the plan buys whole life policies on the owner and a couple of NHCE's. For the rest of the NHCE's however, the plan provides term insurance that is not renewable after age 65. The feature provided by the whole life insurance that is not included with the term is the ability to distribute and continue the policy beyond age 65. The value of being able to continue the policy beyond 65 can be measure the same way a guaranteed insurability rider is priced.

It seems to me that we can go through the testing process by valuing the feature and testing on the magnitude of that value.

Does anyone have any thoughts or knowledge regarding these issues?

I am working on a 01/01/2003 valuation of a DB plan for one participant. The plan was frozen and terminated effective 05/01/2003. For minimum funding purposes, I am simply running it as if the plan did not terminate, prorating the NC, and crediting interest for the entire year. For maximum funding purposes, I am completely disregarding the plan termination. How should the FFL calculations be handled? Should the current liability and entry age NC be prorated as well for the minimum? Should the FFL itself be prorated?

Can someone confirm that an employer with union employees covered under a union-sponsored health plan doesn't have to file a 5500 for that plan? I assume it would be the responsibility of the Union since they are the plan administrator.

Is this correct?

I have come across what appears to be an unusual situation (however, maybe I am just not doing the calculations correctly).

Client has an end of the year valuation (let's assume 12/31/2003) and has prepaid contributions during the 2003 calendar year. These contributions receive an interest credit for purposes of the FSA.

Let's assume the following at 12/31/2003:

Assets 100,000

Prepaid contribution 20,000 (designated for the 12/31/2003 plan year)

Interest on prepaid 500 (5% interest rate and made mid-year)

Funding method Entry age normal

EAN accrued liability 250,000

Expected UAL 125,000

What is the gain/loss base for the current year??

My initial reaction was {250,000 - (100,000 - 20,000)} - 125,000 = 45,000

However, IF I follow my initial reaction, then in 2004 assuming that all assumptions are met, a gain/loss is created equal to 525 (the interest on the prepaid contribution plus a years interest). Given that I exactly met my assumptions this answer does not appear intuitive.

OK. So I modify the gain/loss in 2003 by subtracting the interest on prepaid as well. This gives me a gain/loss of 45,500 and then in 2004 a zero gain/loss which is what I expected.

The latter calculation does not seem right for 404 purposes (not recognizing the prepaid interest because it is NOT real).

Comments???

A new client has been referred to us that used Paychex as their payroll processor and who adopted the "Safe Harbor" provisions of the Paychex 401(k) plan. They are leaving Paychex and will be adopting their own 401(k) plan. They want to continue with the safe harbor provisions. Would this be considered a "new" plan or a "successor" plan? Would this be considered an amendment and restatement of an existing plan for the purposes of completing the UBS Financial Adoption Agreement? Can we have the safe harbor provisions effective August 1, 2004 or do we need to wait until January 1, 2005?

I have a plan that is asking me to pay for an amendment from its forfeiture account. The document allows for expenses to be paid from there, but is a plan amendment an acceptable expense to be paid from the plan?

I seem to have come across something that said it wasn't. I'm thinking it might be in DOL Av. Op. 01-01A, but all the links on the 'net I see lead me to sites that just reference it. When I searched the DOL site for "Advisory Opinion 01-01A" all I got were opinions from '92 and '93.

Any thoughts would be appreciated.

1. What is the effective date of the Final 1.401(a)(9)-6 regulations?

Q&A 17 appears to imply that the regs are effective for 2006 - as it allows MRDs for years thru 2005 based on a good faith interpretation of Section 401(a)(9).

2. Calling ASPA summer conference attendees:

In the Q&As sessions, I recall hearing that the Account Balance method of determining RMD from a DB plan is OK for 2004 (but not for 2005).

The question is: Is the Account Balance method Ok for 2004 and 2005 or just 2004?

Employer is considering setting up a premium only plan providing for e/ee's to pay a portion of the health insurance premium. I assume that the Sec. 125 nondiscrimination rules apply. Employer has 14 HCE's and 34 NHCE's. Is there any way to assess the potential of failing the nondiscrimination req's prior to actually adopting the premium only plan? How feasible would it be to survey the e/ee's to see who would stay in and who would opt out in order to get a handle on the potential nondiscrimination issue? Thanks for your help.

We recently received a communication from our company announcing:

"On June 2, 2004, Fidelity announced the closure of the Fidelity Low-Priced Stock Fund to new investors through employer-sponsored retirement plans like the XXXXX Plan. As a result of this fund closure, no new investments will be accepted into the Fidelity Low-Priced Stock Fund through the Plan..."

If you already have a balance, you can keep it but you can make no additional investments in the fund. If you don't elect a new investment option, your future contributions that would have gone into the Fidelity fund will go into a CCT that is managed by our recordkeeper (who is not Fidelity). I can't seem to find anything on this announcement - can someone provide me with a link? Is Fidelity doing this closure different than previous ones? For example, the Magellan fund has been closed for years but you can still invest in it through a 401(k) plan (even if you didn't have a balance when the fund was closed)?

PAL

Background:

Large plan, acquires new division with it's own plan through an asset purchase.

Acquired plan has 6 NHCEs with loans, but will me terminated by way of the merger.

Acquiring plan does not permit loans, never has and does not intend to.

Questions:

Can it accept the rollover of the loans and let the 6 people pay them off within the original loan terms but grant no further loans???

Or, must the loans be paid off or distributed with penalties b/c the acquiring plan does not permit loans???

The company will be changing insurance companies August 1. Due to this change employees will have to pay an additional deductible of $500 for the time period of august through december. Can employees change their section amounts to reflect this new deductible?

Under a Master Trust filing, are self-directed brokerage assets reported as part of the master trust or the individual plan? There seems to be one argument that these should be treated like loans and reported under the separate plans; while the other side argues they should be under the master trust 5500. Would it depend on the structure? In some cases, the brokerage assets for a single participant could be made up of assets from two or more plans within the master trust, and be very difficult to segregate by individual plan.

DB plan fiduciary serves on the board of a trust company that provides services to the plan. Receives no compensation for services. Fiduciary wants to set it up such that s/he is compensated for services, but the money is used to offset the plan's fees for services w/ trust company (i.e. s/he never touches the money).

Anyone seen something like this? ERISA 406 issues?