Effen

I guess I came across a little strong - I'm feeling much better now. Anyway, don't get me wrong, I hope you sell a bunch of them as well; I was just trying to caution you and your manager about selling something without fully understanding it. A lot of people see the $ that can be put in a db plan and want a piece of it. They hook up with an actuary (or not) and start selling. The problem I see quite often is that they forget about the client. They underestimate the complexity and make promises they can't deliver. We have all seen the crap documents that prototypes users can create under that assumption that if it is in a prototype, it must be ok. Most clients have no idea what is legal and what is not. If you jump in, jump in with both feet; learn everything you can, learn what you know and what you don't know. Choose good people to work with and stay within your expertise.

I just want to make sure I understand what you’re manager is asking. He/she would like a sample letter that explains db plans to prospective clients because he doesn't really know anything about them, yet he is willing to "sell" them. And he doesn't really know anything about administration, but he did stay at a Holiday Inn Express? I would strongly urge you to ask your manager reconsider. DB (or any qualified plan) is nothing to be "dabbled" in. Just because you do excellent DC work, doesn't mean you can do the db side. I just spent the last 3 months unraveling a db mess, sold by someone who didn't really do the work, who had an agreement with an actuary. The 100K invested in db contributions turned out to cost them about $300K to settle the law suit and pay all the legal bills. I have several relationships where someone else makes the contacts and handles the investments and maybe the 5500, but we handle the valuations and ben calcs. The relationship works very well for both of us because we both do only what we have expertise in. Your clients will be better served, they will be happier, you will be happier. So, to answer your question, if you are working with an actuary, ask him/her for the explanation. Isn't that his role? If he won't do it, or doesn't have it, I suggest you're probably working with the wrong actuary.

Tom, Any discussion about the possibility of the proposed 415 Regs becoming final? I know they are being heavily criticized and wondered if any changes were coming.

I thought this might be helpful. From CCH: NEWSLETTER, PENSIONPLANGUIDE, Letter No. 1603, October 24, 2005, Showing of good cause for failure to make timely election allowed IRS to consider Form 5310-A to be timely filed for 2002 Showing of good cause for failure to make timely election allowed IRS to consider Form 5310-A to be timely filed for 2002 A corporation's Form 5310-A, Notice of Qualified Separate Lines of Business, was considered to be timely filed, and the corporation was treated as operating separate lines of business for purposes of passing the ADP test because the corporation showed good cause for its failure to make the timely election, the IRS has privately ruled. A consulting firm had suggested that the corporation, which was engaged in a diversified agribusiness and retailing business, make a qualified separate line of business (QSLOB) election, and advised it of its need to file Form 5310-A. The consulting firm, however, which did not yet have the responsibility to prepare the company's Form 5500, failed to further advise the corporation to file the Form when the consulting firm ran an ADP test on the plan. When the corporation realized that the Form 5310-A had not been filed, it filed immediately, in 2004, long after the required filing date. The IRS reviewed the corporation's affidavit describing the events leading up to its failure to timely file notice of its intended 2002 plan year QSLOB election, and based its conclusion that the corporation had shown good cause for its delay in filing on the fact that the failure could partly be attributed to the corporation's unusually high turnover rate in its tax department, as well as to a split in tax-related responsibilities between the corporation's department and outside firms that assisted the corporation in dealing with the IRS. Because the Form 5310-A will be considered by the IRS to be timely filed, the company will be treated by the IRS as operating qualified separate lines of business under Code Sec. 414®. IRS Letter Ruling 200534027 is reproduced at ¶17,422I.

The Plan will be Top Heavy and therefore must use either a 6-yr. graded or 3 yr cliff vesting schedule. You can exempt the Key EE's from the minimum 2% accrual, but not the vesting schedule. Therefore, the participant will either be partially vested after 2 yrs or 100% vested after 3 years. Since they are vested, this will trigger the MRDs.

I think the DOL gave some guidance on expenses. there are lots of old threads on the various boards that you might want to read. Search for "Settlor" and you will find a bunch. My initial reaction is they can't, but I don't have anything to back it up.

benefits link This might help, but as you will see, there can be wide swings depending on the type of plan. The fees quoted in the post were most likely "small plan" type plans i.e.: 20 participants and may not be applicable to larger, more traditional, db plans. That is just my opinion, I didn't post the schedule. Your fee is impacted by # participants and complexity of the benefit formulas (retirement, early, disability, death). Assets generally have nothing to do with the process, so be careful of anyone who wants to charge an asset based fee. The RFP process doesn't have to be involved. Most firms just need a copy of the last valuation report to give you an estimate.

I assume you won't share the actuaries name, but the ABCD might be interested in his "solution".

Is this it? benefitslink

My understanding is that you can not use a waiver to avoid a required contribution. Therefore, if the HCE signed a waiver and then funded the plan based on the reduced benefit, you may have a problem. I don't think you will find anything to support your position, since the IRS has been pretty consistent with their position. The IRS will accept waivers in order to deem a plan sufficient upon termination, but I believe that is the only time. Even then there logic is a little suspect. Also, I'm assuming your HCE was a majority owner. If not, he/she wouldn't be allowed to waive even on plan termination.

Did you start the QDRO process at the time of divorce or at the time of death? I have never heard of a "QDRO firm", but I thought you had to be a lawyer to practice law? I would assume the QDRO firm has lawyers. If not, this could be a problem. Just because it was expensive, doesn't mean it's worth something. Assuming you have a valid QDRO and are entitled to a portion of the death benefit, you will get what you are entitled to. This may be less than the entire benefit. QDRO's typically only assign a portion of the benefit earned during the time of marriage to the alternate payee. If your marriage was relatively short, this can be significantly less than the total death benefit. You have a very complex case and I strongly urge you to seek out a lawyer who has good ERISA counsel.

Ya, 2005 forms should go to Detroit. Funny thing about instructions, I don't read them much either, but I make sure someone else does. Sometimes they are actually useful. I hope you read the 5500 instructions; they tend to move their locations around as well.

Who controls the employer contribution rate? Some funds the union decides how much of their increase they will allocate to the plan. Other funds, the employers tell the union how much will go into the plan. Ultimately the Employers are responsible. If the Plan becomes deficient, the Employers will owe the excise tax, plus the contribution. I don't know specifically how the Trustees force the employers to contribute more, but if the Plan is close to deficiency, the employers will have to pay it one way or another. This is why projections are critical.

Sorry to say, but "what does the document say?" The Plan document will define how the early retirement benefit is determined. It could be the actuarial equivalent of the $100,000 account balance (ie:100,000 / immediate annuity factor) or it could be the actuarial equivalent of the age 65 monthly annuity. It may be calculated using a set interest rate and mortality table, it could be determined using plan factors (ie:4% per year reduction), it could have a subsidy or a supplement, bla bla bla. Only the document knows for sure. Whatever is says, be careful of the relative value disclosure requirements. If the ER benefit is subsidized, the monthly annuity might be worth more than the LS. If it is not, it will most likely be worth less.

What I wrote is exactly the way it is stated. According to the document, the entry date is the fist day of the plan year following 1000 hours of service. I know a plan that uses dual entry dates can require 1000 hours in an employement year before an employee becomes a participant. I also know that if you use a sigle entry date, you can't require more than 6 months of service. What I didn't know is could you one entry date AND require 1000 hours. Saeissler, are you saying you think this is ok?

I agree, that ruling applied only to DC Plans. The IRS was very clear about this at the 2004 EA meetings. I don't believe you can charge db participants a processing fee.

That is what I thought as well. It seemed to me that they could a 6 month wait, but not a 1000 hours. Is this something the IRS would pick up on an audit or do you think it is beyond most agents knowledge level? The plan has some other "issues" and there is a chance these "issues" will trigger an audit.

Based on the following I agree with Rcline, noting that if the NRD is more than 6 months from NRA it does not meet the safe harbor and would need to be tested. I also agree that you can assume what ever is reasonable. I have several plans where NRA is 65, but I'm assuming an higher age for the HCE. If it feels unreasonable, ask for a letter from the HCE stating his intention to work to the assumed age. If he doesn't give it, then it probably wasn't reasonable to begin with. 411(a)(8) NORMAL RETIREMENT AGE. --For purposes of this section, the term "normal retirement age" means the earlier of -- 411(a)(8)(A) the time a plan participant attains normal retirement age under the plan, or 411(a)(8)(B) the later of -- 411(a)(8)(B)(i) the time a plan participant attains age 65, or 411(a)(8)(B)(ii) the 5th anniversary of the time a plan participant commenced participation in the plan. 1.401(a)(4)-12 - (4) Conversion of normal retirement age to normal retirement date. A group of employees does not fail to have a uniform normal retirement age merely because a defined benefit plan provides for the commencement of normal retirement benefits on different retirement dates for different employees if each employee's normal retirement date is determined on a reasonable basis with reference to an otherwise uniform normal retirement age and the difference between the normal retirement date and the uniform normal retirement age cannot exceed six months for any employee. Thus, for example, benefits under a plan do not fail to commence at a uniform normal retirement age of age 62 for purposes of §1.401(a)(4)-3(b)(2)(i), merely because the plan's normal retirement date is defined as the last day of the plan year nearest attainment of age 62.

Can a plan that is using 1 entry date (1st day of PY) require 1000 hours of service to become a participant? It just feels wrong to me. It is a prototype - are you surprised? Entry Date = 1st Day of PY following the date on which the EE meets the eligibility requirements Year of Participation/Service for eligibility is defined as "Completion of 1,000 hours of service" (note "s", not "S") Service in the Eligibility Section is defined "The Service requirement shall be 1,000 hours Year(s) of Service (if hours counting method is uses) or Period of Service (if elapsed Time method is used)....If the Hours of Service method is used and the period selected is less than 1 year, an Employee will not be required to complete any specified number of Hours of Service to receive credit for such period." (This doesn't seem to allow an hours requirement to be entered.) Plan using elapsed time for benefit accrual, 1000 hour rule for vesting. I think it is a MH prototype, but I can't tell for sure. These provisions just don't seem to fit together.

I agree with rmeigs, I need a little more info before I click into "help" mode. Your original typifies today's media culture. A lot of flashing accusations without a lot of meat. The government/society takes lots of peoples houses for lots of reasons. I don't know of too many instances that they just did it because they could. P.S. I'm sure sure what you expect a bunch of "employee benefits" people can do for your poor brother in his "partner".

Boy, maybe I forgot my actuarial funding 101, or maybe I never learned it, but that seems like a lot of work Pax. I have always thought of an FIL as basically a spread gain method, except that assumptions changes and amendments create bases and gain/losses do not. Therefore, I would take a simplistic solution and just take the difference of the AL's before and after the change. This assumes that Plan's UAL will be > 0 and the Plan is not in full funding. I have never thought of trying to create some hypothetical asset to calc a UAL, but that certainly doesn't mean your solution isn't without merrit, I just wouldn't have done it that way. Regarding the lump sum question, I could probably argue both sides. Do you assume a lump sum payment in your funding assumptions? If not, then your method treats the payment form selection as a gain/loss, which doesn't belong in the FIL base. The theory would be that they elected the window, so you should value the window on the standard assumptions. If after they elect the window, they select a lump sum form of payment, then that piece is a loss and is not part of the base. On the other hand, if the lump sum is part of your assumption, than I think you can argue it should be part of the base. You could always add the assumption of a lump sum payment with your other window assumptions so that it becomes part of the base. I just think you need to be reasonable and be able to defend either position.

Time to get back to work! :angry: Actually, I love the thread.

I think you need to establish a base, unless your assumption is that no one will take the window, but since you know people did, that would probably be unreasonable to assume they won't. Since you know who is taking it, won't it be reasonable to create a base equal A-B, where A = EAL for those who took the window, including the value of the window and B - EAL prior to any change (not assuming they retired or terminated, but just whatever the EAL was). Isn't that really the impact of the amendment?

A different view of the world. Makes what the Indians did even more impressive. $ spent / win Tampa Bay D Rays -- 438,255 Cleveland Indians -- 446,263 Milwaukee Brewers -- 493,023 Pittsburgh Pirates -- 569,149 Toronto Blue Jays -- 571,494 Washington Nationals -- 599,772 Oakland Athletics -- 629,838 Kansas City Royals -- 658,589 Minnesota Twins -- 676,940 Texas Rangers -- 706,949 Colorado Rockies -- 718,731 Florida Marlins -- 727,817 Chicago White Sox -- 759,374 San Diego Padres -- 771,839 Arizona Diamondcks -- 809,470 Cincinnati Reds -- 847,844 Houston Astros -- 862,685 St. Louis Cardinals -- 921,068 Atlanta Braves -- 960,637 Detroit Tigers -- 973,127 Baltimore Orioles -- 998,842 Los Angeles Angels -- 1,028,688 Philadelphia Phillies -- 1,085,477 Chicago Cubs -- 1,101,683 Los Angeles Dodgers -- 1,169,563 San Francisco Giants --1,202,660 New York Mets -- 1,220,552 Seattle Mariners -- 1,271,802 Boston Red Sox -- 1,300,054 New York Yankees -- 2,192,703

So where is all that happy Yankee / Red Sox banter now? $331,811,942 and what did it get? Maybe if they would have put a few more million in they could have won something. Personally - I love it. The only problem is now I don't have anyone to route against. Red Sox, Yankees, Braves all lost. hmmm, LETS GO PENS!