Effen

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.

I have seen them. They do exist. If you are worried about fluctuating compensation, consider basing the cash balance allocation on a bonus and not the total compensation. The entity must control the amount of the bonus, so they need Board justification to pay the bonus, and the participant can't control the amount, but often the Board and the participant are the same individual who is wearing two different hats. Yes, it can be problematic, but it does solve the problem.

Thank you. Getting specific, if the letter says, "We intend to honor the court's former spouse's survivor annuity award. The current former spouses monthly benefit payable is $X.", then the AP can expect to receive $X if the participant predeceases, even though X is greater than the amount they are currently receiving. They should not expect that X would be adjusted in any way. Is that correct? That was the only mention about the FSSA in the letter from OPM. It was a 2 sentence paragraph. I didn't see anything in the COAP/QDRO about it.

Coming back to this, we did find a letter from the Office of Personnel Management that talks about the marital share and the amount of the "former spouse's retirement benefit". That part is all good and matches what is actually being paid. However, the next sentence says, "We intend to honor the court's former spouse's survivor annuity award. The current former spouses monthly benefit payable is $X." The strange thing (from my perspective) is X does not equal the former spouse's gross annuity or the portion being paid to the former spouse. It is smaller than the gross benefit, but more than 2 times larger than the AP's portion. Does this mean that if the former spouse predeceases the AP, that the AP's benefit will increase? Or, would the same coverture fraction be applied to the "former spouse's survivor annuity award"? What is a "former spouse's survivor annuity" and how is it different than the "retirement benefit"?

What are the other options? You could do a consolidated notice, but it would need to disclose the individual impacts, which would probably require them to disclose that everyone has different benefits. How did you handle the SPD?

Roger that!

We have had luck using Midland for small cash balance accounts. You can contact them directly (on behalf of the plan administrator) or use a broker. If you prefer a broker, PM me and I will supply contact information.

I appreciate what you are saying, but this one uses the words "Domestic Relations Order", and "This Order is intended to meet the requirements of a qualified domestic relations order ...". I don't think any of that really matters since the AP is receiving payments, so they have honored it, regardless of what is was called. I will suggest the AP contact the PA and confirm the death benefit payable to the AP, if any. Thanks for your responses.