Effen

My understanding is that it is first come, first served. You look at each transaction independently. Your starting point for the 2nd payout, should be the ending point after the first.

Some of our clients have had success using this firm. I think they will also give you a one free search, and sometimes one is all you need. http://www.berwyngroup.com/

The IRS has been very clear that an election to forgo benefits cannot be recognized for funding purposes. This stand is based on the fact that 411(d)(6) states that you can never reduce accrued benefits, therefore why would they allow you to recognize an illegal reduction for funding purposes? The only exception is after the plan's termination when you are allocating assets. In fact, if the assets are short, you really don't need a waiver if you are going to allocate the remaining assets using the priority categories. Waivers are used if/when the owner agrees to accept less and pays everyone else what they are entitled to. Also, sometimes the PBGC requires waivers, but they are used so an underfunded plan can terminate under a standard termination. Either way, they do not impact the funding requirements. The EA in your example 2 was definitely wrong.

Double post -see Retirement Plans General for the open topic.

The plan ends at the termination date (6/30). I vote for prorated amort payment, but there is little/no guidance post PPA. It is never reasonable to reduce accrued benefits, in fact it is generally illegal. Benefits can never be reduced to avoid funding deficiencies. They can only be reduced at the instant of distribution if the assets are not sufficient. They can never be reduced to impact any funding related numbers.

Also, apparently Citigroup changed their methodology. The new methodology seems to be producing discount rates that are slightly lower than the old methodology. I'm seeing the method changes could result in decreases of 5 - 10 bps. I other words, using the old methodology I might end up with a rate of 5.45% and 5.40% on the new method. I tend to use the Citigroup curve and I'm seeing discount rates close to 5.50% for plans that don't pay lump sums. For plans where the expected payout is a lump sum, I'm getting something around 5.0% or less.

I would make sure that it is not discriminatory, otherwise I don't really see a problem. However, why would you want to do that? If the plan has excess assets, just follow the current plan language and allocate them in a non-discriminatory manner (assuming the plan calls for this). You will need to check the final distribution against the 415 limit at each participants age anyway. So, if you are amending the early retirement age as a way to push more of the excess to an HCE, its most likely going to be a discriminatory amendment and therefore not allowed.

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.