In today's BenefitsLink Retirement Plans Newsletter, there is an article on the assertions being made by the Verizon retirees who have been fighting against the de-risking transaction under which annuities were purchased for their benefits from a large, secure insurance company, to reduce the size of the Verizon plan. If I understand it correctly, there were two areas in which the assertion of harm is being made:

1. The annuities are not considered as secure as continued coverage by the PBGC.

2. The annuities, no longer being paid from an ERISA plan, do not provide the same degree of protection from creditors in the event of personal bankruptcy.

In thinking that both are entirely wrong, am I missing something? I just don't understand why the lawsuit is not considered frivolous. As I understand it, the plaintiffs are the people for whom annuities were purchased, not those left behind.

1. Considering especially the self-declared tenuousness of the PBGC's finances, wouldn't proper fiduciary care have resulted in the selection of an unquestionably strong insurer at least as capable of standing behind the benefit promise as the PBGC, and even if things were to turn sour in the future for that insurer, wouldn't the state guaranty associations substantially reduce the risk to the retirees (or are we contemplating some sort of asteroid-strike-sized economic calamity, in which case would the PBGC survive)?

2. I am not a lawyer, but surely any annuity purchased to settle benefit rights under an ERISA pension plan would have to provide the same iron-clad protection against creditors as would arise were the benefit obligation still under the pension plan, wouldn't it? Despite the assertions in the article, wouldn't the purchased annuities still be covered by ERISA?

If the plan sponsor decided to terminate the plan outright (an act by the sponsor which presumably cannot be legitimately challenged by the participants if not covered as a result of collective bargaining), when considering just those for whom annuities were purchased in the de-risking transaction, when the termination was completed and annuities were purchased for the retirees, how would they be any better off than they are under the de-risking transaction? Certainly, if annuities are to be purchased for retirees in pay status as part of a full plan termination, the retirees have no right to demand a lump sum payment instead! In nearly every plan termination of a defined benefit plan, the current retirees are given no choices. An insurer is selected and those in pay status are taken care of by an annuity purchased from that insurer.

Client established a new plan effective for 2014 with deferrals effective 10/1/2014. All paperwork provided by client indicated that the company name was XYZ, LLC.

We generated the Adoption Agreement with that name.

Now, client sends us the w-2 for 2014 to reconcile compensation and company name listed on w-2 is NOT XYZ, LLC but rather ABC, LLC.

Tax ID given by client at setup matches the tax ID on the w-2, just not the company name.

Is this a problem?

A company in Denmark owns an American corporation and pays them commissions for sales in the US. If they have a 401-k Plan for US employees does the name and address of the US company have to be the plan administrator? Can the trustee be the controller in the Denmark company or would it have to be someone in the US as well? Any guidance is appreciated.

Imagine a business that's big enough to be exposed to the excise taxes for a failure to offer sufficient health coverage but small enough that it chooses not to self-insure its group health plan.

This employer wants to know that, assuming the employer's plan provides sufficient eligibility and makes every employee's contribution low enough that all offers are affordable, the group health insurance contract it might buy would meet all other conditions so that the employer is not exposed to play-or-pay excise tax.

How will this employer know whether a group health insurance contract provides "minimum essential coverage" and "minimum value"?

Does the contract itself state that it meets those conditions?

If not, will an insurer furnish some other written assurance that the contract offered meets the conditions?

If an insurer offers a group health insurance contract that does not meet "minimum essential coverage" or "minimum value", does some Federal or State law require an insurer to furnish an affirmative warning of that fact?

403(b) allows rollovers. The participant is over the age of 701/2 and still employed, so she is not taking RMDs from the 403(b) Plan. However, she does take RMDs from her IRA.

Is there any restriction preventing the participant from transferring the IRA to the 403(b). Going forward (2016) the participant would not be required to take any RMD from the Plan as long as she is employed. Thereby eliminating the IRA RMD.

Thoughts

QACA Safe Harbor plan is switching eligibility, from 1 year of service, to 90 days of service, with quarterly entry dates.

The company has 15-20 student interns who may work one semester, take off the next, then return later in the year. How would you go about counting the 90 days for employees who work sporadically?

If an employee works 75 days during the course of the 2015 plan year but isn't employed on 12/31, do those days of service that were worked in 2015 roll over to 2016 or do we begin the count again, since the person termed prior to the plan year end without meeting the requirements?

Assume:

1. There are multiple non-spousal beneficiaries entitled to a portion of a qualified 401(k) account.
2. The qualified account is still whole and has not been segregated into individual accounts for each beneficiary.
3. Each of the beneficiaries will be either rolling over to an Inherited IRA or taking a cash distribution of their portion.
4. A RMD is required of the account for the year in which the beneficiaries will be requesting a distribution.

Does the RMD amount have to split between each of the beneficiaries equally?

--Or--

If one of the beneficiaries takes a cash distribution of their portion of the account (and that amount satisfies the entire RMD due) do the other beneficiaries still have to receive a portion of the RMD as a cash distribution regardless or is the RMD considered exhausted by the one beneficiary electing a cash distribution?

I have a 401(k) Plan with 3 partners below the 260,000 comp limit for 2014. I calculated their self employment earnings for the plan and ran the adp test. The adp test is failing, and they are going to put in a QNEC to pass the test.

Do I have to recalculate their earnings after the QNEC? And then rerun the ADP test with the adjusted compensation, which may not pass with the adjusted comp and then require an additional QNEC. seems like this would be a never ending process. Or maybe I'm just not thinking straight?

Assume a non 5% shareholder has started to receive MRD payments from a Plan and is nonger an active employee of Company A.

Participant decides to go back to work for company B and has made deferrals.to the Plan but an MRD is not required.

If this person rolls over his account from Plan A after receiving his MRD for the current year, will this allow a suspension of his MRD's from his old account in future years while still employed?

Are you able to roll money out of a qualified 457 plan into an IRA , even if the 457 plan is not related to a goverment but to a non-profit?

I found some language that rollovers are only permitted for 457 plans under a state or local govemnment but not a non-profit.

Can a retired public safety officer asking for a direct payment to an insurer satisfy his RMD?

The qualified distribution (up to $3,000) must be directly paid to the insurer and reported on Form 1099-R as taxable in box 2A. It will be up to the retired public safety officer to take the deduction on their personal income tax return.

If the participant requested $3,000 to be directly paid to the insurer and his RMD is $1,000, he will only be able to deduct $2,000 as the RMD must be taken into income.

Any thoughts?

This seems like a basic question but there seem to be different opinions.

For an active employee in an active plan, do additional benefit accruals after age 70 1/2 need to be actuarially increased to the start date? Example: participant age 75. Benefit accrued each year is $100 starting at age 70 1/2 (plus a benefit previously accrued which clearly must be actuarially increased to 75). Must these additional benefit accruals be actuarially increased to age 75?

Jim Holland's articles (linked below) seem to say yes.

Relevant IRS regulations seem to say yes.

Gray Book 2007-17 seems to say no.

http://benefitslink.com/boards/index.php?/topic/56689-actuarial-increases-for-deferred-vested-participants/#entry248292

QUESTION 17

Minimum Distribution Rules: Required Actuarial Increases

Question #34 from the 2000 Gray Book provided an example of a late retirement increase,

essentially comparing the accrued benefit based on all service and the actuarially increased

accrued benefits from each earlier April 1 in a plan with an April 1 anniversary date. The

subsequently released Question 8 from regulation §1.401(a)(9)-6 says the benefit payable must be the actuarial equivalent of the benefit from the April 1 following the calendar year in which the employee attains age 70 ½ “

plus the actuarial equivalent of any additional benefits accrued after

that date…” [emphasis added]. Does this mean the regulation requires an additional calculation beyond what was illustrated in the prior Gray Book (i.e., a calculation including actuarial increases on top of additional service accruals)?

RESPONSE

No. The phrase “any additional benefits accrued after that date” are those required under the

rules of IRC §411(b)(1)(H), which provide that an accrual for additional service during a year

may be offset by an actuarial increase for delayed retirement. The year-by-year calculation in

the 2000 Gray Book produces this result

A small law firm plan allows deferrals and match. Plan is top heavy, only non-Keys receive. No other employer contributions. Match formula is 100% up to 3% for NHCEs and 100% up to 1.5% for HCEs, with a last day of the year requirement. 3 non-keys retired. 2 at Normal Retirement Age and 1 at Early Retirement Age. 2 NRA retirees deferred. One terminated on 12/31 and will receive match but not the full 3%. Since all 3 are terminated before the end of the year, are they required to receive the minimum top-heavy under the NRA/ERA provisions or do top-heavy rules supersede, meaning they do not receiving top-heavy as they are terminated? Document is unclear on the matter. Thanks for your input.

Employer A changes insurance providers mid-year and transfers ALL enrollees to a new plan. Old health plan is a multi-provider standard HMO, new health plan is a closed panel HMO HDHP. They do not offer a special enrollment window for their employees to make an election change. If we had made a similar change, we would have allowed an open enrollment window based on a significant change in coverage.

My employee's spouse works for Employer A, and would like to make an election change to add his wife to his plan. His cost of adding her to his non-HDHP HMO coverage with the same carrier would be much less than the upcoming Dr. visit and maintenance prescriptions costs she will incur under her new HDHP.

Has a "loss of other employer's coverage" occurred which would constitute a Qualifying Event as respects our plan? While the spouse had an involuntary change of health plans, she did not actually lose employer sponsored coverage, it just changed dramatically.

Your thought appreciated.

Any good, FREE material available for the EA-2F exam? I'm planning on getting either the ACTEX or ASM manual, but I wouldn't mind some additional, supplemental material.

I couple of years ago we took over a plan that had the plan funding to an annuity. The plan now pays lump sums so we want to change it to fund to a lump sum.

I'm assuming this change would be a change in the actuarial cost method and not a change in actuarial assumptions, correct? Also, does this change require IRS approval? If so, could someone point me in the right direction. I can't get me hands on where this was discussed.

Thanks

An RMD was done before a participant required beginning date. The plan does not allow for in-service withdrawals, and only allows for lump sum distributions. Can we still call this an RMD? Participant was still employed, over 70.5, but not a 5% owner.

For the specific case of a spouse who is the sole beneficiary,
if the participant died prior to the participant's RBD,
for beneficiary distributions from a qualified plan,

does the spouse beneficiary ever have the option to use the longer of the life expectancies of the beneficiary and participant?

If you have a cite or reference in response, please post it here:

http://benefitslink.com/boards/index.php?/topic/56829-rmd-for-spouse-sole-beneficiary/#.VNKJFOl0xaQ

Thanks.

I am working on a plan that failed the ADP test for 2014. 2 HCEs need refunds. They terminated in October and took their assets out in December 2014. Both rolled their assets over to IRAs.

So what do we do to "correct" the test failure? let these former participants know that they need to take $x out of their IRA as an ADP refund?

Are multiemployer retirement plans subject to non-discrimination testing and if so who does it and don't they need census data from contributing employers?

My client is contributing to a union plan on behalf of an HCE and has never been asked for census data and they're wondering if they should have any concerns.

Thanks