Effen

Can someone point me to the regulations applicable to the merger of two multi-employer plans. Specifically, what happens to the credit balances and amortization bases of the plans? If plan A mergers into plan B, does plan A's credit balance just go away, or do we need to adjust the credit balance in plan B to consider it?

"if Effen is willing to fight that battle, I'd gladly watch" - I hear there are people on Craigslist who will actually pay for that.

I wouldn't get too bunch up about it. If you are giving 4% of compensation I can't see how the IRS could argue that isn't "meaningful", regardless of the .5% stuff. (Assuming you aren't using a document with the .5% hardwired into the formula.) The DC top heavy minimum is only 3% so it would be interesting to hear them say 4% isn't meaningful.

we have terminated plans post 2015-49 and offered lump sums to retirees. The IRS asked a few questions, but issued a determination letter without much trouble. Be careful about paying out too many of your retirees, especially if you will need to purchase deferred annuities. It can be very difficult to place deferred annuities and if you don't have a lot of immediates to go with them, it can be almost impossible.

What you just said makes more sense. This is a beneficiary receiving the remaining payments, not a retiree. In this case, I think Lou S. has the best suggestion.

I agree, are you sure it is not a 10 year certain and life annuity? You should check the election form he signed and review the benefit calculation to make sure you are correct on the form of payment. On the other hand, are you sure he is a retiree and not a beneficiary?

I know of several funds who ran into a significant amount of problems (law suits/audits) by paying early retirement benefits to people who weren't actually retiring. People who "retired" from covered employment on Friday were being rehired by the same employer on Monday to do a slightly different job that was not covered employment under the union contract. They had lots of rules and procedures, but it still blew up on them. Your "90 day rule" is only a plan rule, it isn't in the law or regs, so tread very carefully - especially on early retirements. Obviously, this is a fund counsel issue. It will ultimately be the lawyers who have to defend it one way or the other.

Tru dat

This sounds like a multiemployer situation? Either way, regardless of what the plan says the IRS/DOL will ask, "did the person intend to retire when he left employement, or did he always intend to return on the 91st day.". If he intended to return, and the plan knew he was intending to return, then the plan could have a significant problem with paying in-service distributions. Since there was no separation from service, there should have been no benefit payment. The "90 days" used by the plan is probably intended to protect it from this situation, but I don't think any bright line test exists in the regulations. If the plan didn't know he intended to return, then there is no problem paying the retirement benefit, but if it doesn't allow in-service distributions, they should suspend the benefit payments in accordance with their suspension of benefits rules. Usually this involves working more than 40 hours in a month or 7 days in a month in the same geographical area . Therefore, he would retire and collect his benefit, then get re-hired and his benefit would be suspended. Major administrative pain! If this person is over age 62, and if the sponsor is ok with the practice, the easiest thing would be to amend the plan to allow in-service distributions at age 62, regardless of employment status. Then, if they are over age 62, you don't have to play these silly reindeer games.

If it is a non-PBGC plan as you say, then, no, the PBGC rules do not apply. You may want to submit to the IRS for approval, but it is not required. Assuming the one-participant is the owner, just amend the plan to terminate it, and prepare the distribution election forms. Is the plan over or under funded? Be careful the distribution doesn't exceed any 415 limits.

I think that would be ok. The deduction limit and the 415 limit are two different things. As long as he doesn't exceed either, I think you are ok. He could allocate $53 of the 100K transferred and take no deduction, or he could put in and deduct 25K and also allocate 28K, or probably anything in between as long as the transferred money is allocated within 7 years.

Sorry, maybe a jumped to a conclusion. Lets parse this out. "If a plan does not offer RASDs, how is the benefit calculated when a terminated participant who has attained normal retirement age does not receive the QJSA explanation prior to his annuity starting date? " I don't see how this can happen? The annuity starting date is the date they receive their annuity payment. How did they make an election of the form of payment? Or, are you saying, their election form was faulty and did not contain the proper QJSA options and explanations? Or, are you saying you just commenced a benefit without any election? "Is it calculated on the basis of the prospective annuity starting date, with no makeup payments for the time period between the original annuity starting date and the actual annuity starting date?" What is the "original" date and what is the "actual" date? Why do you have two dates? Maybe a real life example would be helpful?

I think you may be confusing the QJSA notice with the Suspension of Benefits Notice. Anyway, you really should discuss this with legal counsel as different attorneys have different opinions. Since 411(d)(6) states you cannot reduce an accrued benefit, you either need to provide an actuarial adjustment, or a retroactive payment. Also, since the person is not employed, the suspension of benefits notice is not valid since you are only permitted to suspend benefits for active participants. Some attorneys I work with take the approach that since you are not permitted to suspend a terminated participant's benefit, you must provide retroactive payments, even if the language isn't currently in the document. They would probably say to amend the plan to permit it. I think the more common approach is to give an actuarial increase to account for the missed payments. The benefit should be actuarially increased from NRD to the actual benefit commencement using factors stated in the plan document.

I know of many multiemployer plans that pay lump sums. I can't think of anything that would prohibit a window,assuming the plan was green.

Our experience is there will be no penalty. Just file it as soon as you can.

Suppose the plan has a good ERISA attorney who can parse through the document and find a reason why you don't really owe 12 years of back payments..... I didn't look, but do the 436 restrictions apply to retro-active payments? For some reason I was thinking they didn't apply. Do they apply to disability payments? Are there any other provisions in the plan that would eliminate the need for back payments? Is there any language requiring the participant to request a payment, or anything limiting the disability payments to some maximum period of retro payments? Some plans have language that says payments will only commence after the participant makes a formal request. Just grasping at straws...

The IRS is currently very underfunded and short staffed. They are basically only doing the things that people are screaming for. Unfortunately, there isn't a lot of demand for church plan regulations, nor is there any potential revenue issues since churches don't pay taxes. No revenue implications + no significant demand = no movement I wouldn't expect anything, any time soon....or really any time at all.

If the lump sum value is <$5,000 - no immediate, or deferred annuity is offered. You need to make sure the plan allows for a forced IRA rollover and transfer any non-responders with LS <$5,000 straight to an IRA. If LS < $1,000, just send them a check and w/hold the 20%. For those with LS values > $5,000, one other thing to consider, if the lump sum is not currently an optional form of payment, only add it in relation to the plan termination. In other words, make it so that it is only being offered because the plan is terminating and don't make it a permanent option of the plan. Annuity providers don't like paying lump sums, so you want to avoid the option if you actually need to purchase deferred annuities. One question I had, when you purchase a deferred annuity for an active participant, do they generally need to separate from service in order to collect their retirement benefits from the annuity provider? I think yes, but I wasn't sure if others agree. In other words, assume I have a active participant who has attained early retirement age. In the process of the plan termination, I offer her an immediate annuity. She declines, so now I need to purchase a deferred annuity. If it wasn't for the plan's termination, she would not have been eligible for the immediate annuity because she didn't separate from service. Does the annuity they purchase need to once again require a separation from service to collect the annuity?

I agree with 2 cents and the facts and circumstances need to be considered. From what you described, these sound like they were independent decisions. Also, terminating the traditional db, then starting a cash balance, would seem to bolster your argument. Also, it isn't unheard of for a professional corporation to terminate their existing db, then immediately start a new one as a was of minimizing market risk. Once a doctor group gets a few million in the plan, and they realize a 10% market drop could cost them a few hundred thousand dollars, they will terminate the plan to avoid that potential, then start another one. I am not saying it is a perfect strategy, but I know it is fairly common in some circles.

We have talked to all of them. They either don't know where their spouse is, or their spouse refuses to sign, or they are happy with the deferred annuity. We even had one who forged his spousal consent and found a notary willing to commit fraud.

Everyone's whereabouts are known. Some just chose not to respond. We may need to go to the brokers if we can't find any bidders, but the client was hoping to avoid that if they could.

Circling back on this, we are terminating a cash balance plan and we need to buy some annuities for a few non-responders and a few who chose to defer. Does anyone have know of any insurance companies willing to write these contracts? So far, we only have one company willing to bid on the cash balance piece.

I have always just said "no" to annuity contracts, but then again, I say "no" to most insured products. I know some people use them, but when the insurance company asks the actuary to sign-off on the investment, my alarm bells go off. I can only assume they are expecting to be sued at some point and are looking for people to share the blame.

Not sure I understand the question. Why wouldn't you include prior year receivable contributions in the AVA?

I would also vote #2, but maybe #3. I think I would determine the lump sum as the PV of the existing annuity payment using 417(e) rates, however, I would probably use plan AE to determine the other optional forms of payment.