Can an employer repeal 415(e) for a MPP plan frozen in 1995 (employer has DB plan in its past).

Repeal would be for purposes of GUST amendment for terminating MPP plan.

A participant of one of our client's plans recently got married in Peru by proxy. The participant is trying to bring his "wife" to the US, although they are not sure if this will ever happen. The plan sponsor is wondering if he needs to assign his "wife" as his primary beneficiary. He currently has his two children from a previous marriage listed as beneficiaries. Does anybody have any ideas on this?

One of my co-workers attended Corbel's advanced penson conference in Chicago last month and asked one of the presenters "Who is responsible for maintaining a plan document after a client leaves?" (i.e., we no longer do the record- keeping). She may have misinterprepted the answer, but here it is anyway. If a client leaves and has tpa X do the recordkeeping, we are responsible for maintaining the plan doc (assuming they don't adopt another sponsor's doc)!! He went on to add that this responbibility goes on for several years (3 or 5, I forget which).

Now here's how I think this works, someone please give me a sanity check.

- Once a client leaves, he's on his own re: the document. BTW, I have been telling departing clients this in writing.

- If a plan terminates, we would make sure the doc has been amended for recent law changes, i.g., GUST, and that's it.

Thanks fellow soldiers in the great ERISA war.

Maverick

I recently took over an underfunded plan that is in the process of terminating. The plan is slightly underfunded based on the lump sums based on the accrued benefit payable at NRD.

The problem is that the plan also contains an unreduced early retirement benefit payble at 55, which the previous actuary was ignoring. This provision makes the plan to be significantly underfunded, if each participant elects it.

My thinking is that each participant will be given the right to take a lump sum (based on annuity at 65) or an annuity commencing at AA or 55 if later, equal to 100% of their accrued benefit. This annuity would be purchased from an insurance company. The current plan provisions do not allow in-service distributions so in order for the participant to collect the annuity, they must terminate employement.

The owner understands that if anyone takes the annuity, he will most likely get very little from the plan.

If the plan is amended to allow in-service distributions prior to termination, is there any problem in letting the participant collect the benefit at early retirement age and continue to work?

My feeling is that if they have to buy the annuities, the insurance company is going to charge them for the full subsidy anyway. If the Plan is forced to buy it, why not let the participant get it?

Any thoughts?

I have a client who sponsors a Simple 401(k) plan for his employees and provides the 3% match, but the only two employees who participate are the owners. If the Plan is subject to 410(B), then wouldn't he have to use the 2% nonelective contribution?

Is the Roth split and does it remain a Roth for them?

Thank you

I am a financial Advisor in S. California and a TPA I use for Administration and the movement of money may be going out of business. Does some Govt Agency come in and support the operations staff to transfer the monies and data transfer once the company can no longer meet payroll. The TPA is also the custodian of all the assets and obviously the legal owner. I have several large cases and simply do not have the time to move them in time to avoid the posibility. Has anyone gone through this or heard of this situation and what happens.

Thanks

A plan requires ee contributions. At termination they allow for lump sums.

It would appear that the lump sum would have to be at least as much as the present value of the benefit. Whether the plan bases it on the immediate or deferred benefit.

Can a plan actually compute the lump sum to be the accumulated contributions plus the present value of the Er derived benefit, even if less than method stated above?

I don't know that it would make sense that way.

Anyone know of any cites to support thisone way or the other?

Say a plan is amended as of 1/1/87. It is clear that all benefits accrued up to that time must be protected, thus cannot be reduced. It is also clear that the assumptions and methodology for computing a lump sum must bemaintained for the accd benefit. i.e. if the lump sum were based on 1/1 pbgc rates and an immediate annuity, I presume this must be preserved, but you could use say 1/199 pbgc rates if for eg. ee recd dist in 1999.

Question is can the Plan actually preserve the specific interest rate as of the date of amendment .i.e. the 1/1/87 rate in this case? In other words can they require that this rate be used, so then if the person terminates in 1999 and the rates go down, the lower rate is not required as opposed to using the lower current rate?

Can someone age 75 make a contribution to an IRA account or do contributions cease at age 70 1/2 (min Dist).

Thanks

I've seen discussion of this here but don't recall any definitive answers. Can an active participant's accrued benefit go down legitimately? For example, if:

1. Average comp decreases (e.g. comp history is less than the averaging period and comp goes down in year 4 or 5) and an additional year of benefit service isn't credited for some reason.

2. Average comp decreases on account of a high 5 in last 10 definition where the highest years would be prior to the most recent 10 and additional service credit isn't enough to offset decrease in average comp.

3. An increase in covered compensation on account of indexing in a year of termination prior to accruing an additional year of service.

Thanks for any clarification of this.

Can anyone tell me if Section 125 plans need to be amended to incorporate GUST changes effective 1-1-02? Thanks!

A client asked if it were common for many companies to be terminating their pensions and just keeping their 401(k) plans.

My feeling is that the large companies are probably maintaining both plans, or at least convert DB to cash balance plan. And that this may be more common in mid sized companies. I also would say that it is more common than the reverse. i.e. companies terminating their 401(k) and just keeping their db plans.

Any comments on these points.

Also would you say that companies may eliminate early ret windows or significant subsidies in the years ahead because of the need to maintain good employees due to the fact that the baby boomers are approaching ret age and there may be a shortage in the labor force due to the demographics.

We are merging a money purchase plan into a 401(k) plan. The 401(k) allows in-service distributions at age 59 1/2. We want to allow this for a participant's entire account balance after the merger (which will include the assets transferred from the money purchase plan). Generally, in-service distributions are not allowed in a pension plan (though there is authority for allowing an in-service distribution at NRA or age 65 in a pension plan). It seems to me that this restriction is technically tied to the type of plan and not to the source of the money, such that we should be able to allow in-service distributions in the 401(k)plan, even if it contains old money purchase money. See 1.401-1(B)(1)(i). Any thoughts would be appreciated.

A client asked if the allowance or requirement to include overtime and/or bonuses in the definition of pension compensation was just based on the terms of the Plan or if it was a legal requirement.

I said that it depends on the terms of the Plan, but that it is common if not advised to use a definition that meets the statutory requirements for plan testing purposes. My understanding is that (under 414(s)) for testing such as 415, top heavy, etc. you are not allowed to include bonuses and overtime, but for plan purposes you can include overtime and bonuses.

Any thoughts?

Not really a cafeteria plan question, but....

For purposes of the nondiscrimination in eligibility test under 105(h), employees in a collective bargaining unit may be disregarded. However, the regulations don't say that these employees may be disregarded for purposes of the nondiscrimination in benefits test.

Does this mean that a 105(h) plan for union employees needs to be concerned about benefits discrimination? My client has a union plan that contributes unused sick leave to reimbursement accounts for retirees. Since the dollar amount available for reimbursement would be higher for higher-paid employees, this program could be discriminatory if union employees are not disregarded.

Client currenlty operates both its business and its PS Plan on a 11/01-10/31 tax year/plan year. Wants to change plan year to calendar year effective 01/01/02 and add 401(k) provisios to take advantage of (1) new increased PS deduction and (2) non-inclusion of 40(k) contributions in the deduction limit.

Will obviously involve a short plan year 11/01/01-12/31/01.

The businsess is to remain on its original 11/01-10/31 fiscal tax year.

I am confused as to what contributions for what plan years will be deductible for which business tax years.

I would appreciate any comments, suggestions, recommendations, cautions, etc. from our more knowledgeable and experienced readers regarding this situation.

Thanks for any and all responses!

We are trying to determine what withholding rules apply to MRDs. We are having a debate as to whether the withholding rules for non-periodic distributions (10% optional) applies , or if the annuity and periodic payments withholding rules (married with 3 dependents) applies.

Any help would be greatly appreciated.

It's that time of year again, and we have to remember the MRD requirements all over again.

Here is the question. If a plan adopted the SBJPA rules and allowed participants who had not yet commenced to defer until retirement, can a participant who is now age 72 decide to commence MRDs even while actively employed? The plan has no in-service withdrawal provision so we cannot use that to allow a distribution from the Plan. Does anyone know?

If so, we would appreciate the help.

Thanks

I know this may sound stupid, but I cannot find anything on the IRS site that provides a clear cut answer to my question.

The IRS site says: Although interest earned from your IRA is generally not taxed in the year earned (using generally is what concerns me because generally says there are cases where interest earned is taxable).

My question: Are all sales of securities held solely in a Roth IRA account tax free as long as a withdraw is not made?

Thank you,