Effen

I'm not so sure it won't happen, but it definately has not happened yet. The Senate tacked it onto a highway bill as a way to pay for it (lower contributions, lower deductions, higher taxes). The House stripped it out, and the bill is still sitting. Congress is getting lots of pressure from various groups for relief and has been willing to listen. So, I wouldn't bet the house it isn't going to happen, just probably not anytime soon...think after November 6th.

I guess I don't see where there was a violation of the MRD. The MRD is the MRD and is independent of his "retirement" election. If he was taking out enough to satisfy the MRD, where is the failure? Seems like this is more of a plan problem than an MRD problem. The plan failed to provide him with a timely election and therefore has a problem. If he really wants the J&S and is "persuaded" to take a life annuity you could be looking at a bigger problem down the road if he dies and his spouse argues that she only gave her consent because of a plan problem. You could let him elect the J&S, the ask for the money back, but not work too hard to collect it. You could also reduce his future payments by some amount until the amount has been recovered. Not a good solution because he didn't really do anything to cause the problem. This isn't probably the "right" answer, but I may say "no harm, no foul", let him take the J&S prospectively and leave past sins in the past.

Bill, I took this to mean one of the bargaining units negotiated out of the plan. Therefore, I think they would meet the second criterea "An employer permanently ceases to have an obligation to contribute under the Plan with respect to work performed at one or more but fewer than all of its facilities, but continues to perform work at the facility of the type for which obligation to contribute ceased." Assuming that is true, wouldn't that have created a partial withdrawal liability? Gordon - can you be more specific about what triggered the partial.

Seems to me that the fact the fund assessed a partial withdrawal liability means that the employer did not meet the construction trade exemption. The rules for partial and total withdrawal are the same, so if fund assessed a partial, they will most likely asses a total. Or are you saying they incurred a partial for some other reason (for example, one unit bargained out of the plan) and now they are closing their operation?

I agree that for this particular question using mortality might be inappropriate, however I read your "Nobody increases with interest and mortality after normal retirement age" as a more universal statement. I think there are times when interest and mortality my be appropriate, however not with this particular fact pattern.

I think more details are needed. I know this isn't your question, but you can't just transfer the DB assets into a MP plan. The DB plans must go through a formal termination and participants must be given whatever options are available (lump sum, annuity, rollover, etc...). The Trustees can't just move the money to a MP plan. Is the DB covered by the PBGC? If so, you need to file with them before terminating. If not, you may want to file with the IRS, or not, but you can't just move the money. What are they trying to accomplish?

Really? Why do you say that Mike? I actually think it is pretty common to increase w/ mort post NRD using Nx(12). Wouldn’t a J&50 death benefit be deemed forfeiture upon death?

Good catch. They are only exempt from variable premium. They are still required to file and pay the base premium.

From Page 8 of the instructions: Plans exempt from variable-rate premiums. Three types of plans are exempt from paying a variable-rate premium: ♦♦Plans with no vested participants; ♦♦Insurance contract plans described in section 412(e)(3) of the Internal Revenue Code; ♦♦Plans that have issued a Notice of Intent to Terminate (NOIT) in a standard termination (see Chapter V. Plan Terminations) where ...

Plans that were once called 412(i) plans, are now properly called 412(e)(3) plans, and are exempt from PBGC coverage.

And just how do you think the other 99.99% of 412(i) sponsors would react to the PBGC required premium to insure a fully insured product?

Very well put Mike - much better than calling the idea "asinine" or "nefarious".

Ok, maybe "asinine" was too strong of a word, but really, what does your client want protection from? He is in complete control of his situation and the plan investments. He can be as conservative as he wants and stay in all cash. If he is ultra conservative and spreads his money around to various financial institutions, the chances of the plan failing due to bank or insurance company failure is pretty small. Granted, they can fail, but if they all fail at the same time, why does he think the government would fare any better? He worries that the entire financial system will fail, yet believes in the government will be around to bail him out? There are no guarantees in this world, and Walking Dead is only fiction.

Just to make sure I have this straight, a sponsor of a 412(i) plan (that is a plan that is fully insured and back up by the reserves of an insurance company), would also like to be covered by the PBGC who would double guarantee a portion of the benefit? You already have an insurance company guarantee that some may argue is stronger than a governmental guarantee, and on top of that, your client also wants a governmental guarantee? Are they concerned the insurance company will go out of business? If so, why did they purchase the contract? They are already most likely funding the plan at extremely conservative rates, putting in much more than is really necessary (my opinion) and they want to give even more money to the government for a 2nd guarantee? Maybe Ned is convincing them of the advantages of even more deductions? Even if the PBGC guarantee was available, it would only cover a relatively small portion of the benefit. Benefit caps and phase-in provisions are designed to limit the guarantee for owners of the company. Also, just because you sent the PBGC a payment doesn't mean they will honor the guarantee. Lots of history where the PBGC determined plans were not covered after years of premiums being paid. Typically the PBGC will just refund the premium and wish you luck. If the PBGC covered one life plans, what incentive would sponsors have to adaquately fund and invest prudently? If the PBGC will just pick up the tab, why would I bother to fund it? This thread is so asinine; I can't believe I just wasted time posting a response.

Thanks Dave - and thank you to all who post. Congrats on 17 years!

I would agree. However, make sure the original calculation was not just an estimate. It is possible the fund estimated they would not have a liability, however when the actual calcuation was done, it turned out they did. In general, once the number is determined, it shouldn't change unless there is a mass w/drawal.

my understanding is they are exclusive "problems".

Ha ha, You funny man!

Is it a plan year which he worked less than 500 hours? If yes, then yes.

Only assuming the sponsor wants them to be allocated in a way they can demonstrate to be nondiscriminatory and in a way that complies with their plan document.

I say years, months, and days for both calculations. Never understood people who argue 417(e) calcs. should not be done to the day, but their calcs are not my issue. Although I suppose as long as you round everything up, you are ok.

Nothing prohibiting it, but you need to offset the benefit in the new plan by what he received from the old plan for 415 purposes. Since he is the same employer, his prior distribution counts against the 415 limit in the new plan. So if "no more deductible contributions could be made" under the old plan, the only thing he could fund would be the COLA increase in the 415 limit, which most likely is not worth the pain at this point.

Also, look at Q/A 39 from the 2009 Gray Book. Here is a link to previous discussion that contains the Q/A. prior discussion

Yes, unless your plan automaticly provides for an actuarial increase, however it is still probably good practice. Maybe, it depends on what the document says. You are permitted to give the greater of an actuarial increase or the age/service. In the past it was assumed that you could do this as standard practice, however the IRS has been saber rattling lately that you must have explicit language in your document for this, and lacking explicit language, you must provide both the rollup and the age/service benefit. Either way, you should make sure you are following the document, or amending the document to clarify. You must give at least the actuarial increase.Obviously, these are legal issues and your fund counsel needs to make the call. I have seen a wide variety of interpretations, so make sure the attorney is presenting the solutions.

Ouch! I am feeling a lot of negative waves about db plans on the db board. We don't come on the 401(k) boards and talk about how bad 401(k) plans are for society. Just like any other types of plans, dbs are not for everyone, but where they fit, and where they are understood, they offer a great benefit. Obviously different markets and different types of plans, but in the micro market vesting is generally 3-yr cliff, or 6 year graded - just like the dc world. And I would point out that most money flowing into 401(k) is deferred comp, not employer money. Micro db plans are generally designed as tax shelters for selected individuals, just like micro dc plans. We can debate pro/cons and all the social implications you want. Both types of plans have advantages and disadvantages, both types are often "sold" to people who don't understand what they are buying, both types have problem situations. Bad consultants produce bad plans. Where they fit, they can offer power tax advantages, however if sponsors can’t fund them, you end up with a bad situation.