Effen

I have seen it done both ways, HOWEVER, whatever you come up with needs to pass 401(a)(4). You would need to general test the ultimate allocation based on total compensation.

I don't see why not. Just be careful that the benefit he actually receives doesn't exceed the 415 limit. Also, make sure the language in the plan allows for the reallocation of the excess assets and not an employer reversion. Oh, and if there were other participants at one time, you might want to consider if this could be considered discriminatory in practice, or if you are amending the plan to allow for the reallocation, if that amendment could be considered discriminatory due to the timing.

Stupid question, but when you are putting the 5500 packages together, are you putting the "SB" after the the "R" and before the "SSA" or are you still putting it in the old "B" slot? From my accounting 101 class I was always told to organize schedules in alpha order, but the schedule checklist section of the 5500 still lists just "Schedule B" and doesn't say "SB" or "MB". However, the directions list the schedules in alpha order with the "SB" after the "R". I know, stupid question, but is everyone else putting the "SB" after the "R"?

I always find that honesty is the best policy. I don't really see any choice but to explain it to the agent and see what happens.

Maybe I am misunderstanding what you mean, but where have you ever seen it said that you only need to credit interest annually? Are you talking about distributions? Certainly prior to PPA this would have violated 417(e) and/or 411(d)(6). I'm not sure about post PPA, but it certainly doesn't seem reasonble to me. Lets say I have a cash balance account balance of $10,000 on 1/1/09 and it produces a monthly annuity of $115 at NRD. If I terminate in October and you only pay me $10,000, it would only be worth $110 as a monthly annuity at NRD. Since 110 is less than 115, I think I have a 411(d)(6) violation. Or, if you say my annuity is still $115, then the present value in October has to be more than it was in January. (All this assumes CY plan.) I'm am ok with 411(d)(6) type problems when you go from one plan year to the next because they are caused by changes in the market related interest rates, but I think you need to credit interest to the day (or maybe at least monthly) to the cash balance accounts for a distribution. BYW, I feel the same way about lump sums in traditional db plans as well.

How are people completing Line 23 of the 2008 SB if they are using 417(e) mortality as required under 1.430(d)-1(f)(4)(iii)? For most plans that pay lump sums, 1.430 requires you to use the appliciable 417(e) mortality table to determine the funding target. This option doens't fit with any available options under line 23. Our thought is to check the "prescribed" box, but add a footnote that we are using the table prescribed under 1.430(d)-1(f)(4)(iii). Anyone have a different opinion?

Assuming this isn't a PBGC covered plan, and without trying to sound redundant... what does the plan say? Chances are it contains the standard 4044 priority categories language. If so, follow the categories and pay everyone out. I think typically the owner waives benefits and takes what is left, but I am seeing more plans just simply following the plan provisions so that everyone gets a little hair cut. Regarding 436 restrictions, I don't really know what you would do, however there is a school of thought that would say 436 does not apply to terminated plans. I believe it says somewhere that 436 applies whenever 412 applies. 412 does not apply once the plan has been terminated, therefore, 436 wouldn't apply to a terminated plan. Just a thought.

Sorry, but could you be clearer. You said "owner and a child", which implies 2 individuals, but then you say "owner only wants the plan for themselves", which implies more than one owner. Then you say "it is only owners/family" which implies multiple owners and multiple children. Also, how old is the child? If they are under 21, you may be ok Other than that, I think "2" means "2".

Its a document issue. If the def. of comp in the doc is W-2, and the "back pay" shows up on the W-2, it would be difficult to argue that it shouldn't be counted.

I agree that it does not apply to db plans, but if the client wants to interpret it differently, that is their choice. Make sure you put your position to them in writing and maybe cc their ERISA counsel. That way, if/when they get caught, it won't come back on you.

I assume you are talking about a multiemployer plan. I agree with AndyH. Generally anyone who has a benefit (vested or non-vested) would be a participant. This would include beneficiaries and alternate payees.

Just another example where the few dollars they saved using a prototype will be more than offset by the cost to provide a benefit they didn't have to or to pay someone else to fix it. Anyway, just because it is a prototype, doesn't mean you still can't amend it to do what you want. However, it probably means you might need to hire an ERISA attorney to make sure you amend it properly, and it will lose its prototype status. Then again, I would follow Blinkys advice first, and read the document very carefully to make sure the option isn't there somewhere. Maybe even call the prototype provider, explain what you would like to accomplish, and ask them how the plan can be amended to accomplish it.

The corporation (or family trust) can amend the plan to cease the actuarial rollup and all future benefit accruals and provided that they give James (and all other impacted participants) the proper 204h notice, it is frozen. No need to get James' spousal consent - he's just another participant in the plan.

Yes, but you need to comply with the equally onerous regulations involving participant choice. If you give choice, the required notices and explainations involve are a bit extreme. Much simplier to just convert and not give choice. There were some proposed regs released around February 2004.

By "bluff" I meant that the IRS has no authority to issue such an opinion. I agree that it is intended to be a guide for the agents, but the problem is the agents often treat it like it is law because they know you can't afford to challenge them in court. We currently have a plan with a 2% minimum cash balance accrual where they raised the question. We have used this design for years without any questions, but they raised in the last go-round. I will let you know how successful we are arguing that 2% is "benefiting", which since TH is 3% in a DC, shouldn't be too difficult, right???

Keep in mind that the .5% minimum is neither a statutory or regulatory minimum. There is nothing in the law or regs requiring that you provide it. It is simply an IRS bluff that you won't take them to court because it will cost you more to fight them than it is worth. In other words, I wouldn't fix a non-existent problem. If you pass a(26) by counting the guy with .41% as benefiting, then I would leave it at that. If the IRS raises the issue, fix it then. (This assumes that the .5% minimum isn't written into your document.)

Good point Andy. Most documents I have seen don't allow for a vested deferred to defer past NRD. Often times the attorney's take the position that a retro annuity must be paid, but just as often they allow for the rollup. I don't try to tell the client which interpretation is correct; I'm just an old country actuary. I don't know noth'n bout all that legal stuff... I just do the ciphering.

The two main questions are: 1) What does the document say 2) If the document permits, did you properly notify the participant with a Suspension of Benefit Notice. If you didn't properly notify the participant, my opinion is that you must provide the actuarial rollup regardless of the language in the document.

What kind of information are you looking for? The plan document should define the benefit. It could be some sort of "bump" due to layoff or early termination. Sometimes HR/Treasury people use jargon to describe a benefit that isn't really accurate. Get a copy of the document or SPD. The only sub-pay plans I am familiar with are used by multi-employers and they are funded with employer money. I doubt they could be funded with "pension distributions", assuming you mean money that has been paid to a participant. What would be the point of that?

c) Wasn't aware of any PPA related changes.

Not that I am aware of.

I'm not a lawyer, but in my experience any benefit that the plan sponsor thinks they can offer or not offer at their discretion is a discrimination law suit waiting to happen. From what you provided, it looks like the document provides for the escrow agreement and probably should offer it. I would not read the "may" as a "may or may not", but rather "would be permitted to" That said, ask the participant if they are willing to pay the extra admin and legal fees to draft the agreement.

I believe all we know for sure is the TNC should reflect the cost of the death benefit. This is most likley not equal to the premium. If you search, you should find some relatively recent threads about this.

Could you be more specific? Are you talking about plans where benefit restrictions are in effect? If so, I don't think you have any choice - you must offer them. The question seems to be whether or not you can have a form of payment that allows the participant to begin an annuity payment of 50% of the benefit that can be converted to a lump sum at a later date if restrictions are lifted. Ultimately it is a document issue. We are recommending to our clients that they amend their documents so that if they commence an annuity, they can NOT convert it to a lump sum at a later date. This is mostly for administrative ease. My understanding is that no additional guidance is expected any time soon.

Has anyone thought about how to complete line 23 of the Schedule SB if you are funding for a lump sum? Line 23 allows you to choose "Prescribed-combined", "Prescribed-seperate", or "subsitute" and "substitue mortality tables must be applied in accordance with the terms of the IRS ruling letter." The instructions for line 23 state that "Mortality tables described in Code Section 430(h)(3), ERISA section 303(h)(3), and section 1.430(h)(3) ... must be used to determine the funding target..." However, 430(h)(4) or 1.430(d)-1(f)(4)(iii)(B) state that if you are funding for a single sum, "the current applicable mortality table under 417(e)(3) ...is substituted for the mortality table under section 430(h)(3)" So, if I am funding for a lump sum, and using the 417(e) mortality it doesn't seem that I have any possible options since the 417(e) mortality is not one of the prescribed tables under 430(h) or 1.430(h)(3). Any ideas?