Effen

Since no one else has responded I will throw in my 2 cents.... This type of tracking mechanism is fairly common, although I usually see it referred to as an "hours" bank, not a "dollars" bank. I would imagine that no actually money is being segregated, but the fund is just using the technique to determine who is eligible for benefits in the quarter. Most health funds are funded like defined benefit plans. All of the money supports all of the benefits. Although the contribution amounts are based on so many $/hr worked, the money doesn't get credited directly to any specific participant. The hours bank or dollars bank is just a way to help the fund keep track of who is actually working and who should receive health benefits.

I agree, they are "SOL"

I agree 100% vesting is required for a partial termination, but I don't agree that freezing of benefit accruals automatically results in a partial termination. However, my answer was too specific and ignored that important consideration. Thanks for the clarification. dmb: You need to look at the specifics of your situation. I assume you have CCH or RIA or whatever and you should research this as it applies to your client.

Freezing benefits never requires full vesting.

I have a client that recently had an "awakening" with regards to their insurance broker. The guy had lots of whole life insurance policies inside and outside the db plan. There was also some large stock re-purchasing contracts outside the plan. Is there anyway the policy holder can find out exactly how much the agent has received in commissions? The "commissions paid" was generally left blank on the previous Schedule As. Does the policy holder have a right to know this information? If so, will the insurance company provide it if they are contacted directly?

I don't agree. Although the funding rate is a very common assumption for w/drawal purposes, it is not absolute, in fact Segal generally uses a PBGC based set of rates for most of their clients. Do you have any basis for your statement?

Funding is based on long term assumptions since the plan will continue into the future, but the w/drawal liab. is based on immediate assumptions, recognizing the fact that you the employer are w/drawing and you need to cover your share based on today's rates. Just like in the corporate world (pre PPA) where you funded the plan based on longer term rates, but you still had to do calc the Current Liability to see if you needed to put in some extra based on current rates.

This question probably belongs on the multi-employer board. That said, it is very common to use one set of assumptions for w/drawal calculations and another for funding. Two different purposes, two different assumptions. What you describe is a very common method for determining w/drawal liability. For example, most of Segal's plans use a PBGC rate based set of assumptions for w/drawal calcs.

What am I missing? This seems to agree with my position that the lump sum should not be paid at all, unless the plan document permits AP's to receive one. You said before that you treat the QDRO like a plan amendment. Did you mean you treat it like a plan amendment that only applies to one person or would it apply to all future APs? What if that one person was an HCE and the DRO awarded the AP 100% of the participant's benefit to be paid as a lump sum. Seems like a nice way to get a lump sum out of a plan that otherwise can't pay one. May be worth the cost of getting a sham divorce.

Since it appears you are comfortable allowing the plan to pay the lump sum even though it wasn't an optional form of payment prior to the QDRO, who pays for the difference in value between the annuity and the lump sum? Does it come out of the participant's share, the AP's share or does the Plan absorb it? I'm not arguing; I would like to learn how this type of payment is handled.

Wouldn't the requirement to pay any lump sum would almost definitely require the plan to pay out more than it otherwise would have. This seems like a clear reason to reject the DRO, unless you take the extra liability the spouse received from the participants' benefit. Lump sums are generally worth significantly more than an annuity, therefore the plan will suffer a loss when the lump sum is paid, which the DRO should not require. If the plan doesn't currently provide for lump sums, why wouldn't you reject any DRO that permitted a lump sum distribution?

This seems very strange that the previous actuary would be using 8% on a one life plan where maximizing deductions was the game. I may be heading over to PAX's wagon.

Sorry to be a stickler, but you keep saying the "accd ben of 60K". The accd ben is NOT 60K because you can not accrue a benefit > 415 limit. Maybe her formula benefit is 60K, but it can not be "accrued".

It may be helpful, but probably not very helpful with the amounts you were talking about. Often in small plans the RPA rate is higher than the funding rate so the RPA liability could actually be less than funding liability. Either way, prior to 2006 it is unliking that the unfunded RPA will solve their deduction problems.

I'm confused... you can't "accrue" a benefit greater than the 415 limit. If her 415 limit is $30,000, then her accrued benefit is $30,000. If it hasn't already been terminated, maybe you could un-freeze it so that she can be credited with another year of two of participantion and terminate it after the accrued benefit has increased enough to use up the excess assets. This may take a few years, but it would save them about $100K in excise taxes. Also, look to see if she had additional service that you didn't know about. Many times they are working in the business long before they incorporate and this prior service can sometimes be counted.

If the Plan says you re-allocate, then you re-allocate. Why are you questioning it? The only exception would be if everyone in the plan was at the 415 limit, but I doubt that is the case.

You said "contributions are a percentage based on wages earned", this is normal. What are the benefits based on. Specifically, what is the benefit formula?

Money purchase and targets? I can't believe you still have some. Do you also work on Keoghs?

Also be careful that the Top Heavy rules don't force earlier vesting, but if he is working < 1000, you should be ok. He could have a problem if he really was working more than 1000 hours, but just telling you he wasn't. But that would be his problem, not yours. Make sure you have it in writing.

Yes, it only applies to the vested benefit, but be careful that the doc doesn't grant full vesting at age 65 (or some other age) regardless of YOS.

You may want to search the board for old discussions about this. I think there are some fairly lengthy threads. Keep in mind your document must contain the proper language no matter what you do.

This question probably needs a lawyer’s response, and although I'm not a lawyer I did stay at a Holiday Inn Express last night.... My understanding is that typically the Employer Trustees are appointed by a contractors association or like organization and the Union Trustees are appointed by the union. They need to be able to operate in the best interest of the plan and its participants, and should be independent of outside influenences. Sometimes they need to make difficult choices (benefit cuts) and they need to be free to do so. The fact that they are personally liable and can go to jail usually provides sufficient checks and balances.

Assuming this is a multiemployer plan, and generally speaking... the Plan Trustees control the benefit formula and the collective bargainig process controls the contributions. The Trustees look at the amount of money coming into the plan and set the benefit level accordingly. The two don't necessarily need to be related. It is rare that a multiemployer plan bases the benefit on compensation. Typically the benefit is a function of service or contributions. Do salaried employees participate in the plan? Does the plan benefit any non-bargained employees? Is it a multi-employer (more than one contributing employer) or is there only one contributing employer? What union is it?

Did you continue to put money into your 401(k) after the date of seperation? Did the employer make any contributions (matching or profit sharing) after the date of seperation?

It is never the actuaries decision. It is the Plan Administrators decision and is stated in the plan document. The only provision that I know of that remotely resembles your question relates to underfunded multemployer plans. If a multiemployer plan is significantly underfunded, the Trustees may remove any subsidized optional form, including the normal form.