Effen

Anything interesting come out of the meetings that anyone wants to share?

Just to be clear Andy, I was questioning "07-29". I assumed you were ranting about 07-28, but I wasn't exactly sure.

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The sponsor needs to follow the plan's provisions. If there are no provisions in the plan allowing restricted employees to receive a lump sum w/ strings, then there is no requirement to add them. However, if the provisions are already there, they need to follow them. Most plans, including many prototypes, contain provisions permitting the distribution. The answer will be in the document (or not).

Honestly, your first post read like the SPAM I delete from my email every day, right next to the Nigerian who wants me to help him transfer $10,000,000 and the poor women from Idaho who was bitten by a small spider while eating her fries at Wendy's and suddenly exploded in the booth. We don't know you, you don't know us. Those who have posted have tried to help the best they can, but we aren't looking at the letter, we don't know the specifics of the situation, and your story doesn't exactly add up. Non-qualified Excess Plans are generally only for high paid executives, yet your telling us your sister is just a regular employee off on medical leave. It sounds to me that there has either been a screw-up somewhere or someone is trying to scam your sister out of $10K. I suggest you contact the company and have them explain it. Then, take it to a tax attorney and have them verify it. Good Luck. And yes, "45" is considered "younger" to most pension people.

Why are they considering it? How many participants are in the plan? How well funded are they based on RPA Current Liability? Lump sums tend to be a very expensive option. Most larger plans don't offer them. Most small plans do because the owner wants a lump sum.

What does? 36% or 40%

I believe Actuarial Standards will also require you to inform the client and the IRS that the Schedule B is erroneous. You should also contact the ABCD. I have spoken to them a number of times and found them to be very helpful. Interesting though, there isn't really anything the Joint Board can do, because the person who signed it wasn't an actuary and therefore not governed by their authority. You may also want to consider criminal charges against the person and firm who did it. I would also contact an attorney who understands ERISA matters.

I'm not a lawyer either but if the attorney has a letter from the PA agreeing to a revised DRO, this would seem like a fairly easy claim on your wife's part. If nothing else, it would prove that the plan at least knew a DRO existed prior to 2006.

The DRO could not have been a QDRO unless the Plan Administrator said it was "qualified". Do you have anything that states the DRO is actually a QDRO? It sounds like you have copies of the DRO and you are trying to prove it is a QDRO. Is that correct?

What if you get a new spousal consent? Would that work or do you think you still have a problem due to the fairly technical annuity starting date issue? I have seen this reasoning also applied to restricted distributions. Once the restricted person commences benefits based on the annuity form, they can not change there election to a lump sum when the plan becomes better funded and the annuity is no longer restricted. I'm not saying I necessarily agree with this logic, but I concede it has merit. There are some good old “mgb” discussions about this.

good answer!

Andy, although I never like to disagree with you because I have learned you are usually right, but what would stop a plan from being amended to give the participants a second bite at the apple? Just because the plan offered a lump sum when they retired and they elected an annuity shouldn't preclude the plan from offering a lump sum again at the time of plan termination. I agree they are not required to offer it, and the participant can't be forced to accept it, but why would simply making the offer be a problem?

This may be a stupid question, but why doesn't your wife or her attorney have a copy of the approved QDRO? If neither of them do, is it possible the although the DRO was discussed, it was never "qualified" by the Plan Administrator? Typically the DRO is signed by both attornies and the judge, then forwarded to the PA for approval. The PA generally sends a letter to both attornies either stating that the DRO is "qualified" or stating that it is not and provides the reasoning. Is it possible that the DRO was sent to the PA, but the PA never responded? Was her ex husband receiving a benefit when he died? Was he receiving benefits at the time of their divorce? Did she ever request her payments to commence under the terms of the QDRO she thought was in effect?

No, it will eventually fail either 410(b) or 401(a)(26) or both.

I think you have some real issues because you are trying to do this with a cash balance type formula in a DB plan. SoCal is right that paying someone out after being gone for 3 months in the multiemployer situation creates in-service distribution issues when the guy goes back to work 1 month later. I have a client that has a "subpay" plan to handle short term layoffs. They also have a DC plan that allows for hardships if the person is in real financial straights. They also changed their DC distribution rule to "no hours in the last 3 months" when things got real bad, but it only applied to the DC plan. Although they didn't like doing it, it was useful in allowing some of the men to keep their house.

http://benefitslink.com/boards/index.php?showtopic=34656

Is this a DB, DC plan or "Subpay" plan? If DB, how do you determine the value of the "cash benefit account"? Is the amount of the monthly annuity adjusted depending on if/when they take it or is it like the participant has a cash balance plan on the side?

Although I know you all know this.... the discount rate should be based on the yield curve for your particular plan's demographics. Therefore, if the auditor's "push you" on your discount rate, you need to be prepared to say something other than "that’s what they said on Benefitslink". If you are concerned, do a quick yield curve analysis and see where it comes out. If you want a simplified approach, and if your auditors buy into it, the Moody's AA rate on January 1, 2007 is 31 bpt higher than is was on January 1, 2006, therefore moving your discount rate up 25-31 bts should be acceptable. However, keep in mind, FASB is very clear that simply looking at the Moody's rate is not sufficient.

I doubt it. The 3 cents per hour is probably just the way it determines the accrued benefit. For example, if you worked 1000 hours, you accrue a benefit of $30 per month. This is not uncommon in the multiemployer world. All that said, the plan document will tell you the answer.

I'm not sure about the "tremendous boon" but it may be useful for a company who has a lot of cash and wants to drop it into the plan. Keep in mind, they didn't change the onerous excise tax on reversions. Once the plan is deposited into the plan, it is in the plan and can not be removed without paying a heavy tax. So if the company is going to purposely overfund its plan, it needs to do it with eyes open that the money can not be recovered. There are also special rules related to HCEs if you are dealing with a small plan. As far as a summary, just Google PPA 06 or go to benefitslink.com and search recent articles for PPA 06 Summary.

"some speculation"? There is no speculation... the maximum was increased effective in 2006. Read any summary of the Act and it will explain how it is determined.

You might want to consider having the IRS disqualify the plan. Since he never made a contribution, I assume he never took a deduction, so the impact of disqualification would be minimal. IRA rollover is most likely improper so he will need to pay tax on that, but he might be able to wiggle his way out of some of that as well. Definitely... hire a good ERISA attorney.

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Interesting... where and with who (whom?) are these plans popular? What unions/trades are using them and in what part of the country?