Effen

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.

What provision of PPA do you think requires this? Are you thinking about the provisions that relate to underfunded multiemployer plans?

SoCal, I recently ran across 1.411(d)-4 Q/A 3 which seems to imply that a transfer may be possible. I'm not changing my original opinion, but I'm struggling with this Regulation and how it fits into the argument. Q/A 3 seems to say that a transfer would be possible, as long as the benefits are preserved, but how can you guarantee they will be preserved in a DC plan?

Define "transfer". You can terminate the cash balance and allow the participants to rollover their distribution to the 401(k) (or take the cash), but I don't believe you can just transfer the balances without a distributable event.

Sorry to say, but the plan document is the only place that you will find an answer. Basically, if it isn't in the plan document, you can't do it. I doubt the plan document is silent regarding forfeitures, however I don't doubt that you might not like the answer. You may be able to change/clarify the language with an amendment, but it could only be effective prospectively.

Especially now there are lots of closed db plans out there. Plans freeze participation as a transition away from the db plans all the time. I agree with ipod & Binkly. It is ok to limit participation to people hired prior to a certain date, assuming you can pass all the applicable tests.

Is this a DB or DC plan? The implications could be different if it is a DB.

I don't think you can ignore your plan's language. If you wrote the plan to avoid a whipsaw problem, seems to me you would need to amend that language out before you can ignore the whipsaw. Therefore, I don't see how the law change impacts current distributions. FWIW, I think most people on this board probably used the 417(e) rate as a crediting rate and therefore designed the plan around the whipsaw issue. Therefore, for right now, if it aint broke, don't fix it. I think this topic will heat up once people start thinking about plan design/amendment issues. Personally, I just haven't had time to think about it.

I've been wondering how long it will be before some otherwise exempt group asks to be covered by the PBGC. Does anyone know if it is possible?

I don't really see this as debatable. The quarterly is clearly late because the credit balance didn't exist on 7/15. There is no grace period for interest penalties, only for notice requirements. I agree with the other responses and see this is pretty clear. If you shop is split, I would argue you all haven't read the notice.