Effen

I will jump in on the side that the $15,000 does not need to be adjusted. At the time it was paid, it represented a lifetime annuity of $15,000 per month. The fact that interest rates have changed and mortality tables have changed, and the individual lived another 15 years, doesn't change that. Then again, I stayed at a Hilton last night.

I assume you meant 285K as the 1st comp in your average as it produces $24,444.44. Part of the problem with your example, is the $ limit is not $30,000K/month, which would make it higher than the comp limit, so not a reasonable "what if". You are also talking about a person who is well over 65, so you are permitted to Actuarially Increase the $ limit, but not beyond the comp limit, so 24,444 becomes a hard max regardless of age. Therefore, "1" is definitely at least the start of your answer, although the question you aren't asking is what is the value of the offset. Is it just $15,000, or do you need to actuarially adjust that? These may be the things CB was referring to. Many actuaries believe no adjustment is necessary for 415 purposes and therefore Item #1 is correct as stated, but others would argue some adjustment is required. IRS has never said, so do something reasonable.

Lessons learned on this one. FWIW, we very rarely send the 5500 before the invoice is paid. Once they have the 5500, they have no real incentive to pay you. You can warn the new TPA to that they didn't pay you, and definitely don't provide any data to them without pre-payment. If you have been providing 5500s before being paid for a long time, and this is the first time you were unpaid, consider yourself blessed.

Are you asking if it is ok for the fund office to give the union office a mailing list of all of the pension participants so they can send them a non-pension related mailing? Those participants would be all union members, right? I guess there could be non-union people in the plan, but wouldn't the union have access to this information anyway? I don't know if this is common practice or not, but most funds I work with keep the union business separated from the fund business.

Did the sale already happen? If not, they might consider structuring the agreement as a 4204 sale in order to avoid the withdrawal. In a 4204 sale the buyer essentially accepts the seller's history. The Seller is still partially on the hook for 5 years if the buyer withdraws during that period. The fund would also need to accept it.

Everything you are saying is correct, but "good / bad" is all in the sponsors perspective. Larger plans see rising interest rates as "good" and are taking advantage of them by offering lump sum windows and buying annuities in an effort to de-risk the plans and shed liability. Annuity purchases and lump sum windows were at all time highs during 2022 and are still trending up in 2023. Smaller plans may see rising rates as bad for the reasons you suggest, but as David pointed out, the sponsor are not required to use 417(e) rates for lump sums and many small plans only use them for a floor. Part of the problem may be caused by the way the benefit has been explained to them. If they have been shown their 417(e) based PVAB every year, it needs to come with an explanation of how that can fluctuate. We typically never show the PVAB on benefit statements for just this reason. It is also the reason why cash balance plans have become so popular because they are insulated from this issue. This is one of those good "consulting opportunities". Sponsors should understand how their plans work, and if they don't like it, they generally have the opportunity to change it.

A few quick Google searches will provide a significant amount of information about 401(h) accounts. Also, whoever is going to administer the plan for you should be able to provide this information. I don't think there are very many people on this board who work closely with 401(h) accounts. There are some believers out there, but I think most practitioners are treading carefully. Sorry I couldn't be more helpful. Good luck.

To further expound on Truphao's comments - yes, the plan can pay the PBGC premiums, HOWEVER, they just get added back into the next year's Target Normal Cost, so there really isn't any advantage - other than sliding cash due from one year to the next. In other words, if you are in a cash crunch, you can use plan assets, but its "pay me now or pay me later". Many plans doing lump sum windows and annuity purchase as a way to reduce PBGC premiums - especially if you are at the cap. Cost to process lump sums is far less than the cost of the premium, so ignoring the impact to funded status - it is an effective way to reduce premiums.

Some plan documents do not contain the proper language regarding how to determine the immediate annuity or what forms of payment are offered, and therefore, if you are amending the plan to offer lump sums upon termination, you will also need to address how to determine the immediate annuity. Many times early retirement factors only go to the earliest retirement age (typically age 55). If you are paying a LS to someone younger than the earliest retirement age, your amendment should also address how that annuity benefit will be determined, and what optional forms of payment will be offered. You at least need to provide the QJSA and QOSA.

You just need to be able to demonstrate that it is non-discriminatory. What you described doesn't seem like it would be a problem, but might require multiple NDT to prove it. If you were requiring NHCEs to work more hours, then I think that would be a problem. Regarding document - you can pound your round peg into a square hole, or just hire an ERISA attorney to write it for you. Personal experience - you get what you pay for with prototypes. ERISA attorneys are often reasonably priced and can easily handle what you describe.

You would still need earned income to base the allocation of excess assets. I would be hesitant if the only survivors of the initial company were HCEs, and you then allocated the excess assets only to them. But again, they would need to generate earned income or you wouldn't be able to allocate the excess. From what you described, I don't think a QRP is a viable option. If it is only $50k-$100K, just allocate the XS to the existing participants. You can use any non-discriminatory method you choose, so you can be creative.

I don't believe so because it is not an election. There are no choices or options. I have worked with attorneys who suggest the plan just pays it directly to the executor, but I would confirm with the at attorney first.

Read the plan document. It should describe what should happen in this situation. Refer it to ERISA counsel. Typically the document says the benefit will be paid "per stirpes", then to the estate.

Our firm has a specialty niche in this area. We have over 50 variable plan clients in various market segments. I sent you a PM if you would like more information.

You don't need to accept it, but I strongly recommend that you work through your attorney.

I assume the closed db plan passes 401(a)(26)?

It would need to be a 2023 plan termination, but not sure how you would do the 2023 valuation unless he puts the assets back, so that might not work. But, maybe he has a board resolution or something from 2022 where he terminated the plan and just forgot to tell you. Sometimes clients find things in their drawer. I think it would be ok to amend the plan in 2023, assuming he can demonstrate action in 2022. The amendment is just codification of the action. This is where an ERISA attorney might be more helpful. I am curious about the 1099. Was the distribution reported?

You could ask him to return the money to the trust. Since it was always held in a qualified account, he could just put it back. No, not perfect, but would be easiest solution. Maybe treat is as an party-in-interest loan, or just an improper transfer. Did anyone issue a 1099? How did they classify the distribution? Surprised the IRA custodian took the money as a rollover without proper distribution paperwork? You could also inform the IRA custodian that the distribution was not qualified. That usually perks them up. Don't know why you don't want to get an ERISA attorney involved - don't make your client's problems your problems. Recommend he hires an attorney if he want to clean it up. There may be creative ways to handle this. Terminating the plan and getting proper consents now isn't a horrible idea, just be clear with him that it is not a "solution". He still may be in trouble for taking an improper distribution, and the IRA could be disqualified. If he doesn't care to clean it up, then just walk away. Send him a letter laying out the issues and remind him that the IRS will likely come knocking once the 5500 is due.

Sorry, I was misunderstanding what you meant, I agree that the ratio of the (immediate factor at NRA) / (Deferred factor from NRA to AA) is the same as an Nx(nra)/Nx(aa). I was thinking you were saying the( Immediate at AA)/(deferred from NRA to AA) - which reduces to Dx/Dx which is not correct when adjusting monthly annuities. Thanks for pushing back. Just wanted to make sure it was clear for future readers.

Sorry, but I am old, and I want to clarify something related to the statement that you are "using the ratio of immediate to deferred factors" to determine the rolled up amount. The ratio of the immediate to deferred factors only gives you the change in value of the annuity. It is not the same ratio as the change the the amount of the annuity. I assume what you are doing is taking the annuity, then determining the lump sum value of it, then doing your ratio of immediate to deferred factors, then dividing back by the current immediate value to arrive at the newly rolled up month amount. I just wanted to clarify that the change in the monthly amount will be greater than the "ratio of immediate to deferred factors".

Which of the 3 segment rates would you use for adjustment? I guess you could argue the 1st segment since you are really determining the value of payments missed within that year. I like the year by year approach with a new rate/table each year, as Lou stated.

Why was an owner only plan doing FASB accounting? Just seems really odd. Typically you only do FASB for companies that do GAP accounting. The FASB accounting entries generally impact the value of the company. FASB expense is only an accounting expense and not real cash. The tax impact is generally based on cash contributions which are determined independently from the FASB expenses.

You should probably take a look at 1.401(a)(9)-6. If they are taking a lump sum, they have some options.

Doesn't really matter how it sounds. What matters is how it impacts the group. Are you generally restricting the compensation of HCEs, or NHCEs. You would need to annually demonstrate that the definition is non-discriminatory.

I moved this to the healthcare board. It might be better responses on that board. Not really a "multiemployer" question, which are a specific type of pension plan for collectively bargained groups.