Effen

You said he made this election 3 years after his disability benefit started. If this 2nd election did not occur within 90 days (or maybe 180 depending on the document) before the commencement of the "retirement" benefits, you may be able to argue that it wasn't a valid election. I know it is confusing, but there is a difference between "disability" benefit and "retirement" benefits. Knowing which your husband was receiving, may be very important. Can you provide approximate dates? When did he make his first election, when was the benefit converted to a disability benefit, when did he make his second election, when did the disability benefit stop and the retirement benefit start. Also, did you consent to the 10cc election? When was that benefit scheduled to start?

You mentioned that your husband was disabled and that his his original benefit was converted to a disability benefit. The disability provisions are critical to this discussion and will impact the outcome. It is possible that the disability benefit was a larger benefit, and therefore, once he qualified for the disability benefit, the benefit was converted, however this may not have changed his earlier election of a 50% survivor annuity as the "retirement" benefit. For many plans the disability benefits are "ancillary", that is, in addition to the retirement benefits. If he elected an early retirement benefit, in the form of a 50% survivor annuity, these "retirement" benefits may have been suspended while the disability benefits were being paid. Assuming they were higher, this would have been to his advantage. Disability benefits are generally payable until the earlier of death, or Normal Retirement Age (typically 65). Upon your husband's death, payments would be converted back to "retirement" payments the the 50% survivor election becomes relevant again. I don't know why there would have been a subsequent election - that part of your story doesn't really make sense. Generally, you cannot change you election once it has been made. But, although you may want the higher 10CC payment, keep in mind they will stop at the end of the 10 year period. The 50% of the survivor annuity is a lifetime annuity to you. Since your husband has died, the lifetime annuity to you is likely much more valuable because it will continue for your lifetime. This is all just a guess on my part. The actual facts could create a completely different scenario.

It should be specified in the plan document. The plan document must contain specific provisions allowing the retroactive starting date and should contain clear direction on how to calculate it. if it isn't in the document, you can't do it. That said, since they are electing a specific form of payment, that is starting at some prior date, I think the only choice is to use the form of payment they elected. Also, make sure the spousal consent also specifically consents to the retroactive nature of the elected payment.

Thanks Mike - can you provide any more details about this? Are you saying this is kosher or just that people are doing it.

I have a number of clients who are getting very close to being able to terminate, but they are reluctant to do so because they don't want to recognize the large unrecognized loss as a Settlement Charge. These are typically banks where they have always been more concerned about "expense" and less concerned about actual cash. Is there any way to recognize the unrecognized loss sooner than the 10% corridor would permit? In other words, is there any way to avoid recognizing the Settlement Charge all in one year?

Again, no such thing as "forfeiture account" in a cash balance plan, regardless of the vesting schedule, which BTW, must be at least 100% by year 3. You need to get them away from the concept that it is real money allocated to real accounts. If they have money allocated to a "forfeiture account", do you include it in the assets when you determine the MRC and AFTAP? Let me say this a different way: They are permitted to pay certain expenses from the fund regardless of whether they are over-funded or underfunded. The existence of an erroneous "forfeiture account" is not relevant in that decision.

Sorry, no such thing as a "cash balance forfeiture account". The plan is either over funded, or underfunded. All accounts are hypothetical. No money is actually allocated to anyone's "account". But yes, the plan can pay expenses for required services. This generally includes actuarial fees to prepare the valuation and 5500, benefit calcs, audit fees. The following is a link to the DOL site discussing what fees can be paid from the trust. https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/advisory-opinions/guidance-on-settlor-v-plan-expenses

The following was the response of Treasury as conveyed to Intersector Group: The IRS / Treasury representatives indicated that criteria enabling plan sponsors to opt out of the new mortality tables for 2018 are not intended to be a challenging standard. There is no process for approval or review of a plan sponsor determination that the new table would result in a non-de minimis adverse business impact, nor is a plan sponsor required to provide a written notice to the actuary (the paperwork reduction rules can slow issuance of guidance down when written notices are required). It was anticipated that a note in the Schedule SB attachments would provide sufficient documentation of an opt-out election. One concern was raised from the regulators that it might be difficult to justify the delay for a plan that is significantly overfunded on all measurements (e.g., plan termination liabilities, PBGC variable-rate premium liabilities, funding target). It is unclear whether losing future funding flexibility (e.g., due to the creation of less prefunding balance) should be considered an adverse business impact. However, at the same time, it was reemphasized that the standard in the regulations is not intended to represent a difficult burden to meet. The group discussed the fact that actuaries are unlikely to be in a position to make a determination of the business impact of the new mortality table, and that their role might be limited to providing information regarding the incremental cost. This incremental cost could consider both minimum funding requirements and PBGC premiums, as well as potential benefit restrictions. The other prong of the opt-out provision is if the application of the new mortality tables is administratively impracticable, which could be relevant to the benefit restrictions. However, this may be a difficult position to take, since plans must always be in a position to implement the restrictions if necessary. The IRS / Treasury representatives asked if the implementation of the new mortality tables for the purpose of section 417(e) will pose significant challenges. The Intersector Group responded that in some circumstances it may be challenging. Different third-party administrators have reported widely disparate estimates of the time and effort necessary to program and test the new tables. Give that benefit packages for January 2018 commencements are already being prepared and distributed, some sponsors may face administrative difficulties. The IRS / Treasury representatives also asked about the volume of plans that may apply for substitute mortality tables. The Intersector Group responded that the opt-out provision for 2018 may substantially reduce the number of 2018 applicants. Additionally, given the tight time frames involved, it is likely that the majority of the 2018 applications will be prepared as quickly as possible and be submitted earlier than the deadline. It is also likely that the 2019 volume will be significantly higher than 2018.

Who says there is? If it is a non-PBGC plan, and you are not asking for IRS approval (or even if you are), you just need to wait until after the termination date to distribute. Sometimes we do the election forms in advance and make distributions a few days after the termination date. You need to give participants at least 30 days after they have received their forms to make an election, but there is no requirement to wait 6 months.

Is he otherwise eligible for a benefit payment at this time? Are you discriminating in favor of HCEs by offering him his benefit before anyone else? What is the basis of the early distribution and why wouldn't the others also be eligible?

Just curious, but what type of situations would you test the cash balance on a contributions basis? Are there any advantages or special situations where it is common?

Is this a multiemployer fund? What do you mean by "reached age such that benefits should have resumed at 75% rate"? Either way, I would say this is a job for the lawyers to handle.

Can't speak for others, but this is what we do: (CB account / immediate QJSA factor (plan AE) * immediate QJSA (standard factor 8.5/up84) * (1.085) ^ (RA-aa) ) / LO@RA standard factor 8.5/up84 - this would be your AB for testing. We test everything at Expected RA, so we wouldn't discount back to AA. Actually, I don't know why you would be discounting back to attained age - that doesn't feel right to me, but I know there are a lot of ways to do the test.

No. When you are allocating excess asset in connection with a plan termination, that is essentially what you are doing. The termination amendment often contains provisions about how the excess assets are to be allocated. There is no problem with this. In fact, it would be a bigger problem if you couldn't do it since it might not be possible to allocate excess assets in a non-discriminatory way without amending the plan.

So there you go....one opinion saying almost everything would satisfy the criteria and another saying hardly anything would satisfy the criteria. Aren't we all glad the IRS gave us such clear direction....

I don't think anyone really knows for sure, but based on the chatter on other message boards, many people seem to think that any increase in required contribution would satisfy the criteria. In other words, if your MRC is $0, then you probably need to adopt it, but if you have a required contribution, then you can probably delay it one year.

My opinion would be that you can still change your election upon plan termination, or change of employment status. We have terminated several plans post 15-49, offering lump sums to retirees, and didn't have any problems with the IRS or PBGC. (Yes, some of those were audited by the PBGC post termination.) It does need to be in your document, and you should always work through ERISA counsel.

Either year is acceptable.

If you have access to the ACOPA board, there is a current thread discussing this exact topic, that you might also find very helpful. It is titled "412(d)(2) Amendment?"

Sounds like a plan. Not a very good plan, but a plan. Again, RMD is not relevant. Even the RMD wasn't being paid, and the sole participant died, the plan's death benefit would be paid. If that didn't absorb all of the assets, they would revert to the sponsor - with a healthy excise tax. They may then flow back to the estate. In your questions, if the participant elected a J&100 and both were killed at same time, there would likely be a large reversion and large excise tax. Why not allow the primary to take a lump sum, then he could roll that to an IRA and let the IRA handle the MRDs? He might be stuck if you already started the J&100, but he could change his election when the plan is terminated - assuming the plan document allowed for the change. If you are trying to preserve the benefit for the next generation, electing a J&100 doesn't make much sense.

favorite answer...what does the plan say? If he truly elected a J&100, then the spouse gets the life annuity for her lifetime. Can she convert that to a lump sum? Does the plan give her this option? Most plans don't, but some do. You could also amend it to provide the option, if so desired. However, did he really make an election at RMD, or did the plan pay him a J&100 by default? If it was a default election, does the plan allow him, or his beneficiary, to make an actual election upon actual retirement or death? You are mixing a lot of concepts in your statements in the 2nd paragraph. What "waiver had previously been executed" that would impact her ability to get a lump sum? Also, I don't think the spouses option has anything do with it being an RMD or not (unless you are arguing it was a default option). If he actually elected a J&100, I would say she just continues to receive the annuity, unless the plan specifically allows for a beneficiary to elect a lump sum, which in my experience is a rare provision - but it could be added. So, like many proper answers...what does the plan say?

I agree with Belgarath - best you can do it 3-yr cliff due to Top Heavy.

I agree with David. No issues in deleting someone who was never reported, and if they weren't reported in the past, that isn't your problem - or just report them again if you feel the need. I never knew you could get SSA from FreeERISA. I would have thought privacy concerns would have stopped that.

Why do you care?

No, that does not violate the 133% rule. That is completely fine. The accrual in year 1 was 10% and the accrual in year 2 was 10% - therefore, your accrual rate did not change. The 133% rule is looking for backloading - that is accrual rates that increase as you get closer to retirement age. It is testing the change of the rate of accrual, not the actual $.