Effen

Thank you for the feedback and I agree with all of it. Maybe the cheap qdro calculation company was just a legend, like Keyser Soze, but I swear I heard it really exists. Then again, maybe they went under since they weren't charging enough.

Often when I talk to attorneys about QDROs and present value calculations they talk about someplace that they can get the value of an annuity calculated for around $100. After I explain that they generally get what they pay for, they opt for the cheap calc. So now I am wondering, is there realy a company who specilizes in present value calculations for defined benefit QDRO situations and will do them for around $100? If so, what is their name?

Is the plan covered by the PBGC? If so, it is probably a reportable event.

No, she is not a participant in the plan, other than the fact she is the beneficiary.

Why don't you just ask the actuary for a copy of the non-discrimination test?

I would agree that on the surface it doesn't look promising. Do they possibly have a profit sharing plan as well?

Plan documents not withstanding, can a beneficiary roll a distribution into a participant's 401(k) plan? For example: An employer maintains a db and a dc plan. Joe is a participant in both plans. Joe dies and Alice is the sole beneficiary of both plans. Can Alice roll Joe's db benefit into Joe's dc plan?

There is nothing "improper" about front loading. It is only back loading they don't like. Besides, this isn't front loading since the benefit is accruing evenly over 10 years. The IRS shouldn't have a problem with the plan term.

Cash balance or traditional, the result is the same if you are funding the 415 max. After 10 years the primary person is fully accrued and hopefully funded so there is no reason to continue the plan. This is one place where it pays to have a good consultant who will see this approaching so the plan can be terminated at the correct time.

Definitely form over substance but definitely necessary to amend the formula for year 2. I've been down the road with the IRS and fought it all the way to Mr. Holland's Opus to no avail. Just waste an extra sheet of paper and all will be fine. If you do it on one piece of paper it is a violation, but two pieces of paper and it’s not. Also, just like the Wizard from Oz, pay no attention to the example in the Reg that appears to permit what you propose. Apparenlty the IRS doesn't agree with the wording anymore. :angry:

Individual A earns $200K each year from a C-Corp he owns from 2000-2005. He converts the C-Corp to an S-Corp and takes $20,000 as W-2 income from 2006-2010. Can I establish a plan in 2010, based on the $200K/year comp he earned from 2000-2005 for 415 and benefit purposes? My initial thought was yes, but I wonder if the change of corporate structure impacts anything. (neither corp ever maintained a db plan.) Also, the S-Corp makes a lot of money without requiring many hours worked. He is currently age 71. I know I can avoid the MRDs at least until he is vested, but what if we use a 1000 hour rule for vesting service and he can document he never works 1000 hours after the effective date of the plan. I'm thinking about using 1 hour of service for accruals, but 1000 hours for vesting. If we use a 5 YOP rule for NRA, wouldn't that allow me to avoid MRD's until his NRA, or do you think that might be considered some sort of avoidance and therefore be frowned upon by the boys in DC? I think it is ok to ignore past service for vesting, even though I am considering past comp for 415 limits and benefit accruals. Any problems with my thinking?

I agree with QDROphile that the payment form should not be adjusted into a seperate interest. Since the current form is a J&100, can the QDRO call for a 50/50 split until the first death, then 100% to the survivor? That way it isn't a gain or loss to the plan, but it might created some unwanted incentive for someone to do bad things.

Does the business have any other employees?

FWIW, they released some multiemployer guidance a few weeks ago, so I would expect the single employer guidance is in the pipeline. I have no idea on the expected timing.

You might be right. The SOA still has him with Milliman, but that could be because he hasn't updated his info. I just looked on the Milliman site and he was not listed, so he must be with the IRS now. It all makes sense now. Interesting when people change sides.

Does anyone else find it interesting that Adrien LaBonbarde was the priciple author of Notice 2010-83? Isn't Adrien with Milliman in Texas? Was Adrien working for the IRS when he wrote this? I don't ever recall seeing this before where a non IRS employee writes the Notice. Kinda smells funny doesn't it?

The current lump sum can definitely be lower than it was in the past. Even with interest rate changes, I would be surprised if the amount was significantly lower than it was two years ago. Can you be more specific about what rates were being used in 2008 and what rates are being used today? Also, what is the person’s age? Is 415 an issue?

Keep in mind that the .5% was the result of a memo written by Paul Schultz. There is nothing in the Code or Regulations that requires a plan to provide a .5% accrual in order to be considered benefiting. The IRS was creating a minimum benefit small enough that would provide some benefit, but wouldn't cost the employers so much that it would be worth a law suit. If you provide some other reasonable minimum benefit I don't think you will have a problem. Use a simple cash balance minimum of 1% or 2% of pay and just ignore the .5% accrual and see what happens when you submit it. We very rarely put the .5% into our formulas and haven't really had any trouble with the IRS challenging us on (a)(26) issues.

IRC Section 432(a)(1)(A) states that a plan sponsor cannot accept any bargaining agreement that provides for the reduction in the level of contributions or the suspension of contributions for any participants in the Endangered Plan. Since this is the case, is an employer ever able to voluntary withdraw from a plan once it has been certified Endangered? Assuming the employers bargaining unit wants to withdraw, would the fact the plan is Endangered preclude that option? Is there a way to withdraw short of union decertification?

Are you saying this is true for at-risk as well? I agree the numbers could be the same for the not-at-risk funding target (that is significantly lower than the current actual value of the benefit in the present interest rate environment), but I didn't think that was true for the at-risk liability. Are you saying the at-risk liability for a traditional db plan the guarantees a lump sum that is more valuable than the 417(e) rates would be the current lump sum value? (ignoring all 415 issues)

Yes, I understand the difference in determining the liability for cash balance plans vs. traditional db plan. I was just pointing out the lunacy of PPA once again. Two plans one cash balance, one traditional. Under both plans the participants are entitled to $10,000 payment if they terminate one because it is the current cash balance value and the other because it is the lump sum value of his deferred annuity. Yet simply because one is a cash balance plan the other is not, the at-risk (and not-at-risk funding targets) are significantly different. Just one more thing that makes no sense. Ok, I think we are all on the same page. FAPinJax's post stated the "calculation is the same for a regular DB plan with respect to the at-risk piece". I just wanted to clarify that the result would be significantly different because of the issue you mentioned. And yes, the benefit needs to be vested, but it isn't as simple as just taking the current vested benefit. If the person is currently non-vested, they still have an at-risk liability.

Are you suggesting that the PVAB based on current 417(e) rates can be used as the 404 at risk liability to determine the maximum deductible contribution in a traditional db plan that pays lump sums based soley on 417(e) rates? That was really my point. That for a cash balance plan you can use the current lump sum value of the benefit for the 404 calculation, but I don't beleive the same is true for a traditional db plan. Do you agree?

What really doesn't make sense to me is that apparently you can only use that logic on cash balance plans. It seems to me that you should be able to use that logic on ANY db plan that pays immediate lump sums upon termination. Apparently the IRS views the lump sums paid out of a cash balance plan to be different from lump sums paid out of a traditional plan.

I believe the theory is that if the benefit isn't vested, it can't be paid. Since for the determination of the at-risk liability you look at the value of the benefit payable at its earliest eligibility, the participant isn't really eligible for a benefit until they are vested.

That vesting needs to be considered when determining the at-risk liability.