Effen

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.

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.