Effen

Thanks. That should be sufficient information to generate a few responses from people in that area. Unfortunately, it would exclude us.

What type of entity (police, fire, municipal, library, school, etc) and what state is it in? Each state has their own rules, so a little more information would be helpful. Also, what type of work are they looking for?

I don't think there are any restrictions related to starting a new plan, however I would want to know what they are trying to accomplish. What "problem" are they trying to solve by doing this? Have you given them your fee quote to terminate the plan and establish a new one? That usually goes a long way to cooling things down. Then again, if they proceed - work is work.

If the value of the lump sum is $5,000 or less, you can pay 100% of it, even if benefit restrictions apply. If the lump sum is > $5,000, benefit restrictions would apply.

Jim Holland wrote a nice article about this in the most recent ASPPA quarterly. Basically Jim agrees with everything posted, but it might be helpful to read the article. I agree that you can't suspend a terminated participant because they are working in "suspendable service". If your plan does not provide for an actuarial rollup, or a retro-active payment, you may need to prepare a VCP filing to correct the problem.

During the 9/27/12 IRS teleconference on MAP-21, Mike Spaid said that absent regulations you should "do something reasonable" and he went on to say that if using the Funding Target is reasonable, and MAP-21 impacted the Funding Target, it might also be reasonable to use the MAP-21 Funding Target. ATA posted this here post

IMHO I think you should always use the exact age a the date of distribution. The only Reg. I will cite is 411(d)(6). However in your example, the APR declines with age, so depending upon the date of the accrued benefit you are using, you could be overpaying if you use the age 70 factor. I suggest you discuss this with the plan's actuary.

I agree with SoCal, that the "TPA's assumptions" are most likely not supportable, however the important thing to note is that the assumptions belong to the actuary, not the TPA. Have I seen this kind of thing before - sure, there is a lot of crappy work out there. If you are the signing actuary, and you let other people prepare your valuation reports, you shouldn't complain about the "TPA's assumptions", because the assumptions are yours. Just ask them to change it to something you are comfortable with and re-run it.

I agree, but what is the point? Why would they spam that?

Wow, I hear an echo.

Seems to me you just show him 411(d)(6) and the arguement goes away. If you don't pay the person the value of their benefit at the time of payment, you have improperly reduced their accrued benefit.

What does the plan say? If the lump sum always existed, then it seems to me that the annuity you purchase for them must always contain that option - as well as other immediate options in the future. Because the plan is terminating they have the option to receive an immediate lump sum or an immediate annuity. If they decline the lump sum and immediate annuity, they are just deferring their election to some point in the future. They are NOT electing a J&100 or J&50 to commence at some point in the future. When they decide to actually make their election to commence their benefits, the annuity contract purchased for them must preserve all of the plan's optional forms of payment. Therefore, if the lump sum always existed, it must continue to be an option. You do raise an interesting question regarding separation from service, but it seems that since the lump sum was payable due to the plan's termination, that it should continue to be available. However, if the lump sum was never an option, or was only added as a one-time option due to the plan's termination, then I think the annuity purchased could/should require separation from service in order to receive a payment. I am not a lawyer and these are legal issues.

I have long said that interest on a cash balance, or any lump sum payment, should be calculated through the date of payment. I don't understand how anyone can argue for anything less.

That sounds more like theft than a mistake. Did the plan notify the authorities? Obviously you can't get blood out of a turnip but it I would think the courts would require him to restore the money. If he is bankrupt, there isn't much the plan can do except absorb the loss? Obviously fund's attorney should make the final call.

I think it would depend upon who made the mistake, how much it was worth, and when it occurred. If the custodian made the error, I would ask them to pay for it. If the plan administrator made the error, then maybe they should pay. It is also possible that if the Trustees made a good faith effort to recover the money, but could not, then the fund just absorbs the loss. I think there are lots of facts and circumstances that would be relevant. If you are unsure of your solution, you can always go in with a VCP filing and ask for approval.

I think the government effectively killed this "business". I agree it seems like a win/win, but the IRS didn't like it - loss of tax revenue on reversions. They published a few notices that you can dig up, but basically the companies need to have a legitimate business reason for the merger and that is often hard to justify with a shell company that only contains a pension plan. It isn't impossible, but my experience is that it is very difficult for all the attorneys to get comfortable. Take a look at:Rev. Rule 2008-45, Rev. Rul. 68-242, Rev. Rul. 73-534.

I don't think there is any guidance on that. I generally let the client decide. Obviously safe answer is to notify, however most of my clients choose not to.

Just curious, but if he is "missing", where are you going to send his 1099 reporting the tax he doesn't owe on the income he didn't receive? I am not saying it is or is not required, but it does seem a bit silly when you think about it.

I will agree with Andy on this one. Based on my discussions with the IRS, they don't like the annuity substitution rule, but they acknowledge that it is the rule and therefore you don't really have any choice until they change the rule. It is very possible the rule may change, but with elections looming, don't hold your breath before sometime late 2012 or early 2013 depending upon who wins. Then again, this is getting a lot of discussion, so they could rush out some informal guidance much sooner. That said, I would still caution clients of the disconnect between the two rate structures and make sure they know they may not be adaquately funding their plan if they only contribute the minimum using MAP-21 rates.

I do not think Section 436 applies to multi-employer plans. They don't calculate Funding Targets or AFTAPs, or even use segmented interest rates. Single employer collectively bargained - yes. Multi-employer - no.

FYI, the Academy sent this letter today. http://actuary.org/files/MAP21_letter_8_2_12.pdf

Apparently there is "debate" inside the IRS related to how they should produce a 25 year average when the underlying bonds didn't exist 25 years ago. They are gathering opinions about how best to extrapolate the rates. I have heard they are informally targeting August 31st, but I also know they have been getting considerable pressure to come up with something sooner. I am telling clients I should know something before the October quarterlies are due.

Good to see the blinking fish again! I was wondering if you were still swimming around out there somewhere.

You're welcome

What is the harm in notifying the insurance company? Seems like this is a case of better safe than sorry. If there is a claim, why give them any room to argue. Pick up the phone and notify the carrier the plan is having a DOL audit. It will probably be a 2 minute phone call that protects your client.