Effen

The election is irrevocable for the participant, but there are certain events when you are permitted to change. Plan termination and death are two of those events. If the plan was amended to permit the beneficiary to elect a lump sum, I am pretty sure that would be ok. However, since he died 3 years ago, that might be problematic. Also, it would need to apply to everyone. If the widow is now running the business, does she also have a benefit in the plan? It still doesn't make sense to me why she doesn't terminate the plan. Why is she retaining the risk/cost of maintaining the plan when the sole proprietor is dead?

If you feel it is unreasonable, you should inform the ABCD. (Not sure if you need to be an actuary, but I don't think so.) However, just because the official valuation and Schedule MB show 8.5%, doesn't mean the actuary isn't providing a more reasonable valuation for internal purposes. The Trustees may be fully aware of their obligations, even if government reporting is based on a more rosy outlook. This is one area where I think ARPA may have a hole in its budget estimates. A plan may decide now is a good time to change from 8.50% to 6.0% and push itself into a critical and declining situation. No real advantage to that pre ARPA, but now the the government will pay benefits until 2051, it might make a lot of sense.

Why have they not terminated the plan? If the sole proprietor died, who is the plan sponsor? Either way, assuming she is now in control of the sponsor, she can amend the plan to allow the distribution. There may be some fact and circumstances that need to be resolved depending on how it could impact other participants, but best alternative would be to just terminate the plan and allow retirees to take a lump sum. This would apply to any other retirees as well. Keep in mind RMDs cannot be rolled over and 415 limits still apply to her lump sum.

ASOPs and ABCD.

They won't lower them because the need the revenue. Even though PBGC premiums go to the PBGC, they count as revenue under the Congressional scoring rules. It was interesting to hear the representatives from ABC on the CCA webcast yesterday. Someone asked them if they considered the long term sustainability of the single employer funding changes and they replied, all they really cared about was getting the multi-employer relief passes and they needed the additional revenue created by the reduction in the single employer contribution requirements to pay for it. No consideration of overall retirement security, just focus on the tax revenue it will create. Interesting when you find out how the sausage gets made.

Probably case by case analysis. If we know the MRC is important to them, we will reach out. If they are overfunded or contributing more than the MRC, they will probably just get the newsletter explaining what will happen. Personally, I think PBGC premiums will be a much bigger driver of employer contribution decisions in the future.

How can a mandatory freeze cause an a(26) failure? What would the correction be?

I highly doubt it, but you should ask the fund's attorney. Seems to me the fund administrator should pay it.

No. No.

They are apples and oranges. The collective bargaining agreement is what makes it a multi-employer plan. A multiple-employer plan (MEP) is a group of unrelated employers. The first question I would have is why would they want to change it? Yes, there are DC plans for multi-employers. They are normally PS plans where the bargaining contract defines the contribution. Very few have 401(k) options.

Interesting. So you are saying other optional forms are available after separation from service, however, the only optional form available for an "in-service" distribution is a lump sum. I am not sure if that is kosher. Is this a volume submitter document? 1.417(e)-1(b) ... . A QJSA is an annuity that commences immediately. Thus, for example, a plan may not offer a participant separating from service at age 45 a choice only between a single sum distribution at separation of service and a joint and survivor annuity that satisfies all the requirements of a QJSA except that it commences at normal retirement age rather than immediately. To satisfy this section, the plan must also offer a QJSA (i.e., an annuity that satisfies all the requirements for a QJSA including the requirement that it commences immediately). I see this says "at separation of service", so maybe there is an exemption for "in-service". Possible, but not logical.

First - what BG said Second - generally, your marital portion is based on the value of the benefit earned during the time of marriage. Third - If he already commenced payments, your only option will probably be a shared interest QDRO, however, you said "which appear to end when either of us dies". Are you saying he elected a joint and survivor annuity with you as beneficiary? Shared interest - you are paid a portion of the benefit he is receiving, which is based on his lifetime. You are simply receiving a portion of the benefit that is payable to him. If he dies, you may or may not receive death benefits depending on what option he selected. When you die, generally the piece you were receiving reverts to him. Separate interest - the portion of his benefit that is payable to you is converted to a benefit payable over your lifetime. If he dies, no change in your benefit. If you die, not change to his benefit.

All prior responses are good. Yes, contact the academy assistance group, yes speak to a financial advisor. The fact that she is well over 70.5 means a significant portion of that distribution would NOT be eligible for rollover due to the Minimum Required Distribution rules. She might be ok because she was still "active" due to worker's comp, but i don't know. If she was not exempt from the rule, she could be facing a significant tax penalty, which you would be within your rights to ask the plan administrator to cover - assuming your mother hasn't been hard to locate, or ignoring past correspondence. This is where you need a financial advisor, and you need to see the plan document, and you might need a lawyer. The Academy advocate may be able to help as well. The Plan Sponsor might get more responsive if you ask if your mother is subject to any tax penalties, or ask if their are any issues with the Minimum Required Distribution rules. Or, just sign the form, give your mom the money, report the distribution on the 1040, and move on. Even if you could roll some of it into an IRA, at her age, she would just need to pull it out fairly quickly due to the MRDs, so there isn't a lot of tax savings. There may be other ways to spread out the tax hit, I think you are allowed to spread it over 5 years, but that is where the FA will help.

There is much here that I don't understand without actually seeing the benefit election form. (NO I don't really want to see it). My point is, you should address these questions to the plan administrator. If you are the plan administrator, they should be addressed to the actuary who put the election package together. Are you sure she isn't entitled to both the retroactive payments and the lump sum? That would make more sense as the lump sum represents the present value of the future payments, and the retroactive amount would be the value of the past payments she did not receive. How old is she currently? What is the plan's Normal Retirement Age? When you say "CB" plan, I assume you mean "cash balance"? For David and CuseFan - Maybe what happened is she was entitled to retirement payments and the actuarial increase was greater than the 415 benefit, so they are retroactively paying the the 415 max since they can't legally give the rollup? However, JD said she was "active". So, the plan would also need an in-service distribution provision as well as a retroactive provision. This definitely feels like some sort of corrective action.

No. Receiving a lump sum equal to 100% of the maximum benefit uses up the maximum benefit. There is nothing left in the maximum to be paid as an annuity.

I don't think so. It really relates to how the bonus is determined. In the Examples in the IRS memo, the final phrase is, "However, if the plan terms do not afford the employer any discretion to allocate a participant’s compensation between salary and bonus, the plan benefit formula would be definitely determinable." Therefore, the key is clearly defining who has discretion and keeping that discretion outside of the plan document.

I hadn't really thought of that, but I think I would argue the only comp I am considering for benefit purposes is the bonus. Therefore the actual total comp is only relevant for Non-discrim testing.

Yes. I did go back and look at one of the documents to refresh my memory and they way it is done is that the cash balance credit is a multiple of a bonus. The board pays the bonus, which then drives the cash balance allocation. You need to make sure the BOD is specifying the amount of the bonus through an annual resolution. I was very leery of this design for many years, but an attorney walked me through the arguments and showed me the correspondence with the IRS. We then implemented the plan for one of our clients and the IRS issued the determination letter.

My understanding is the IRS has backed off the argument that annual changes are a "cash or deferred arrangement". They have been allowing sponsors to use very creative allocation methods that produce the same result and have backed off. For example, you can have a plan that has a variable contribution formula set by an annual BOD resolution. As long is is a BOD decision, and not a participant decision, it is ok. Yes, the BOD can be the participant, but they need to have their BOD hat on when they decide to make the contribution. If the BOD can pay different bonuses to different individuals, and that bonus impacts the cash balance allocation, then the BOD is directly impacting the allocation. Obviously you need to do what you are comfortable recommending, and not all attorneys agree, but there are lots of plans out there with recent IRS approval letters that allow complete annual discretionary benefits, as long as it is a Board decision and not a participant decision.

I would say NRD since the participant wasn't entitled to any retirement benefits as of their MRD.

If you were married, I find it hard to believe you don't have her SSN somewhere. Did you file joint tax returns?

I agree with both prior comments - "special termination program benefits" can be significant, or as David said - they might be nothing, but you should not simply give them away without knowing more.

The prior EA exams are available on the Joint Board website. They also provide answers, but not solutions. Best option would be to download the last few exams and see how you do. That would be the best determine on how to study for the next one. You mentioned Actuarial Outpost - Is that site back up? I was down for months for some unknown reason.

It looks like it is only an IRA thing, 408(d)(8) (B)Qualified charitable distribution: For purposes of this paragraph, the term “qualified charitable distribution” means any distribution from an individual retirement plan (other than a plan described in subsection (k) or (p))—

Thanks Dave - I made the correction. P.S. Hope the PC Police don't attack you over that emoji. I have my own Chief Wahoo jacket that I will need to move to the back of my closet. I just hope at some point the English don't start protesting or I will need to move my Pirates jacket there as well.