Effen

Are you saying the IRS is assessing a fine for a missed notice, or are you concerned you might get fined for a missed notice?

There is a whole lot of consulting in that post. Every situation is different and you should ask your attorney or accountant friends to recommend an actuary who works with cash balance plans. I am willing to help off-line, as I am sure many others on this board would as well. To answer some of your questions - yes, a cash balance plan may fit. It isn't simply an add on to your existing PS, but it is a separate defined benefit plan that is usually combined with the profit sharing/401(k) for non-discrimination testing. With a plan of your size, you are also talking about PBGC oversight - which generally isn't bad until you are ready to terminate the plan. Many different theories and opinions about "reasonable" cash balance plan designs. Some are very vanilla, others push hard against the regulations. Generally, cash balance plans often look like cross tested profit sharing plans. Defined groups getting different allocations as long as they comply with the rules. You generally need to cover 40% of the workforce, but some "floor offset" designs get around that with creativity. You need to provide minimum benefits, you may have additional deduction caps, PBGC premiums can be a significant added expense, plans are more expensive to administer. But, annual benefits for older individuals can easily exceed $150K and staff costs generally settle in around 5%-10% - assuming 3%-6% Profit Sharing allocation. You would need census data to see how it could really work in your situation, but if they are maximizing the profit sharing allocations and still want more, cash balance is the next logical step - assuming they are willing to share a little with the employees.

First and foremost, I agree with Luke. That said, if your ex was a government employee and a member of a government pension plan, they are generally exempt from the spousal consent rules. Many plans include the language, but my understanding is they are not legally obligated to do it. In other words, the plan may not have required him to obtain a spousal consent in order for him to receive a lump sum distribution. If it did, typically it would have required a notarized signature, therefore, in order to forge it, he would have also needed an accomplice who was a notary. Therefore, it seems more likely that your consent wasn't required. (You can blame the plan sponsor and the state legislators, but you can't really blame your ex for that one.) That said, I have seen a situation where the ex forged a spouse's signature and had it witnessed by a notary, who happened to be sleeping with the ex at the time, so it is possible, but not probable. There is also poor administrative procedures where the sponsor doesn't know a consent it required. Lots of possibilities. He definitely needed to sign something in order to request and receive a distribution, but you would need more information to know if he forged your signature. Either way, we know he is a liar, embezzler, and a cheat, so it isn't like he afraid to break a few rules.

Can a DB plan use plan assets to cover a QDRO application for an alternate payee - Yes Can the plan {charge] the alternate payee to cover the costs? - No

I am not aware of any such exemption for defined benefit plans.

I assume this is a DB question since you posted on the DB board - in which case I believe the answer it "no". This is just like any other benefit calculation or plan related service. You cannot charge DB participants directly for services related to the determination of their benefit. All of the assets support all of the liabilities. The Plan can pay the expense, but they can't charge the participant directly. I am also glad to hear the Plan Sponsor is "ok" with following the terms of the plan and the court order.

Ask the ERISA attorney who drafted the document. This is definitely a legal question that should be handled by the attorney. Also, without seeing the plan document, no one on this board could give you a valid response.

Seems to me they are only talking about refunding quarterly contributions that are deemed non-deductible. Was the contribution the sponsor made deductible? Was it made contingent upon it being deductible? Looks like Holland wrote the Rev Proc. Maybe post the question in the ACOPPA board and see if he responds.

One big advantage might be fees. Individuals pay a significantly higher fee for investments inside an IRA. If they are happy with the asset allocation in the DB plan it would give them access to professional management for a fraction of the cost. Plus, more assets in the trust means lower fees for everyone (as a % of total assets).

What does the plan document say? There should be provisions in the document that address what happens when restrictions are lifted. The document should say if they are given the option to elect a lump sum on the previously restricted piece, or not. This was part of a required amendment a few years ago. If the document doesn't give them the right to change the election once restrictions are lifted, I think it would be a problem to let them arbitrarily make a change. Take a look at 1.401(a)(9)-6. All that said, I think it is poor consulting to blindly purchase annuities after every election. That action likely cost the sponsor a significant amount of extra money over the years, so I would hope they were the ones driving that boat.

I think the question is, what is the projected benefit in a cash balance plan, especially if you are using a variable crediting rate. How do you handle fluctuations in the amount of insurance. Some years you might have 100X, the next year, the interest rate changes and you now have 120X, or 80X. And, yes, BRFs are certainly another concern for the same reason. There are some good discussions on this board, and also the ACOPA board if you are a member. In general, I made a decision long ago that insurance inside a cash balance plan was more trouble than it is worth, but then again, that is my general rule for all db plans. In my experience, the only reason someone wants insurance inside the plan, is because someone wants to sell some insurance.

Incidental benefit rules?

First, doesn't matter if they are HCEs or NHCEs - all TVs should receive a rollup. If you have a SSN, you should be able to locate them via many inexpensive search companies - Berwyn Group & Penchex to name a few. You can't pay the RMD unless you know where they are. See attached conversation

IMHO, and many may argue with me, these are my comments: 1) it isn't the "prior record-keeper" fault. I know we like the blame the prior service provider, but most DB service providers don't have authority to commence payments. The PA is responsible for making sure people get paid. 2) Not commencing annuities at NRA is a "no harm, no foul" problem. Many good ERISA attorney's feel if the participant doesn't request payment, the plan isn't required to pay them until MRD. (Plan provisions can impact this.) 3) Obviously you can't pay someone you can't find. If you have a SSN, there is really no excuse for not finding someone. 4) If the participant is non-responsive, not much you can do until MRD. 5) At MRD still not much you can do if they are not responsive, but you need to be able to demonstrate that you tried. Some attorneys I work with favor mailing checks to the known address. Quick internet search can give you spouses age, do the best you can to calc the QPSA, send them a check, not your problem if they don't cash it. That said, in my experience, typically a non-responsive participant just doesn't get paid. The excise tax for failing to take MRDs is on the participant. As long as PA demonstrates they tried, it should not lead to any additional problems. However, things can get worse if they die and leave a spouse, because now you still owe the QPSA to the survivor. 6) Lots of big plans have lots of old missing TVs in them. Do you best to clean them up, but sometimes you can't do anything. DOL has been active in this area checking administrative procedures, so make sure the client is actively trying to get them paid. 7) Check plan provisions. Does the plan call for retro active payments, or are actuarial increases acceptable? Work with ERISA attorney for guidance. Don't make a legal call for your client. 😎 The Plan Sponsor needs to drive the boat on this. You can give them your recommendations, but they need to make the decisions. 9) If the amounts are less than $5,000, consider forced IRA rollovers.

Really Chip, what are you trying to say? Just because you don't have to file doesn't mean they don't need an actuary. You still must have a signed SB on file.

It is possible that you have a valid argument, but I agree with Mike & David on this, there is only so much we can do without seeing the actual paperwork and plan documents. You should request a copy of the plan document and Summary Plan Description from the plan sponsor because whoever you retain to help you will need them. I would start by contacting the people on the link that Mike provided. Good luck. Let us know if they are not helpful.

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.