Effen

We have one (1000+ actives) that went to 0 accrual and they still may not make it. I have another (400 actives) that is looking at a combined 1/3 reduction of multiplier and 10%/yr increase in contribution rate over the next 5 years. That still may not be enough, but it's a start. You probably need to run some projections and see what it will take to save the fund. I find the Trustees are usually hesitant to implement any reduction, but once you or the attorney explains the consequences of not doing it, they will. If you can, I strongly recommend Paul Angelo's "Multiemployer Plans Workshop" at the 2005 EA meeting. This session is not taped so you have to be there, but it is usually a good source for this type of information.

.... and if you find one, depending on the size of your group, it will probably cost the plan more than the lump sum would have. PAX is right, it depends on what the Plan says, but you can always amend it to allow for lump sums at the time of Plan termination. If your plan contains a lump sum provision, the ins. co. will assume everyone will take it, so you will probably be further ahead to just pay the lump sums to the active participants. Why give the money to the ins. co.? The employees will appreciate it more and it probably will cost the Plan less.

Has someone hijacked your handle or is this a trick question, like who is buried in Grant's tomb? One employer, one 415 limit. The actuarial equivalent of the benefit paid at 55 would generally completely offset any future db benefits from that employer. This ignores the impact of changes in the 415 limit due to Congressional action.

Was the person fired for cause or did you tell them that they just weren't needed because you didn't have the work? If you fire a person for cause, what makes you think you need to wait? Maybe an employment attorney can chime in. This probably isn't the best forum for employment practice advice. You should probably ask your corporate counsel. You pay them to keep you out of trouble.

I'm a little confused. How can he be "in-pay status for a number of years" and now be electing a lump sum? Are you giving him a 2nd election? Are the annuity payments MRDs? Assuming they are MRDs, he needs to receive a certain amount in 2004 and a certain amount in 2005. You can't shift one years payments to the next. If they are not MRD's, does the Plan document allow for annual payments? Does the Plan document allow him to switch from monthly to annual? What did his election form say?

Who/what would require you to wait?

Katherine I agree. What I was trying to say was that maybe the agent was using the same argument with the term "cashier". "Casual", "temporary", "cashier" are just words used by employers to describe groups of employees. The problem with our group, that was called "casual", was the IRS felt it was a de facto service requirement, as you stated. If the ER would have changed the group's label from "casual" to "cashier", I don't think the IRS would have changed their position.

Mike, You IRS issue might have more to do with "cashier" classification. They may feel that you are in essence excluding based on hours, which the IRS doesn't like. We had a similar situation where we excluded "casual" employees (a designation used by the employer). Since some of the "casuals" worked more than 1000 hours, the IRS forced the Plan to change the definition to include any "casual" who worked more than 1000 hours. You might be focussing your resistance in the wrong place.

That is not how I understood the rule. I believe the employer must make a contribution to the profit sharing plan and the defined benefit plan for the same individuals in order for the deduction limit to kick in. In addition, 401(k) deferrals do not trigger the limit 404(a)(7)(A) IN GENERAL. --If amounts are deductible under the foregoing paragraphs of this subsection (other than paragraph (5)) in connection with 1 or more defined contribution plans and 1 or more defined benefit plans or in connection with trusts or plans described in 2 or more of such paragraphs, the total amount deductible in a taxable year under such plans shall not exceed the greater of -- 404(a)(7)(A)(i) 25 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries under such plans, or 404(a)(7)(A)(ii) the amount of contributions made to or under the defined benefit plans to the extent such contributions do not exceed the amount of employer contributions necessary to satisfy the minimum funding standard provided by section 412 with respect to any such defined benefit plans for the plan year which ends with or within such taxable year (or for any prior plan year). A defined contribution plan which is a pension plan shall not be treated as failing to provide definitely determinable benefits merely by limited employer contributions to amounts deductible under this section. For purposes of clause (ii), if paragraph (1)(D) applies to a defined benefit plan for any plan year, the amount necessary to satisfy the minimum funding standard provided by section 412 with respect to such plan for such plan year shall not be less than the unfunded current liability of such plan under section 412(l).

Q/A - 1 of Notice 04-78 states 1,866,645 = 165,000/12 * 135.756 (5.5% 94 GAR LO @ 65 payble MONTHLY). Shouldn't this be an annual factor for 415, not a monthly annuity factor? Therefore, shouldn't the max lump sum in 2004 for a 65 year old be $1,942,314? 165,000 * 11.7716 (5.5% 94 GAR LO @ 65 ANNUAL)

MGB, where can I find out more about this?

Mark, as you know, this is highly dependent on the AE used to determine the immediate J&S. We are finding that quite often the QJSA is actually worth more and we need to provide the relative value disclosures. For example, if the plan contains a significantly subsidized early retirement benefit and if the value of the immediate QJSA contains this subsidy, you can easily have a situation where the QJSA is worth more. Also, if the person is near retirement age, the difference in the simplified conversion factors used by the plan and the 417(e) rates can result in QJSA's "worth" > 100% of the lump sum. Not a lot more, but as I read the Regs, 100.01% means you need to provide the relative value disclosures. I just wanted to caution the readers that based on our experience, the lump sum is not "almost always" greater in value than the immediate QJSA.

Thank you for the responses. They are both very helpfull. Do you think this means retroactively? In other words, do you need to go back an recaclulate everything like they never granted the extension or do you just use normal amortizations going forward?

Is it possible for an "insurance guy" to have a conversation with a "non-insurance guy" on this board without it degrading to smearing "insurance guys"? I, like Andy, am generally anti-insurance because of all of the stereotypical reasons. Most of the insurance salesmen I have come in contact with are fairly slimy. That said, I think GBurns presented decent arguments. Andy's response is not a counter argument. I for one would be interested in a more concrete response. Just saying "I disagree" doesn't help those who are interested in why you don't agree. The insurance industry is a multi-billion dollar business that can't be totally founded on crooked salesman (current Marsh & McLennen thing notwithstanding). There must be some situations where it is merited and I would like to know when.

- no way that flys unless the other group has some sort of qualified plan, and even then, you would need to prove that you weren't discriminating.

You get what you pay for!

I can't believe the extra expense you created by making two plans out of one would be less than the amount you save by not doing the audit. You just doubled all of your admin expenses! Two plan docs, two recordkeepers, two 5500s... I can't believe that would be less than the cost of the audit. I would start to wonder what he/she is affraid they might find. Most employers want to consolidate plans because the admin is cheaper. Sounds a little fishy to me.

Has anyone had any experience with an amortization extension under IRC 412(e)? How willing is the IRS for grant extensions? What happens if/when the plan becomes adaquately funded? What happens if the plan increases benefits during the extension period?

I work with a plan that the Trustees recently changed the plans distribution rules from a 5-yr w/ 0 hours to 6 months w/ 0 hours. They did it because work was very bad and the men needed money to live on. They also decided not to allow partial withdrawals unless the participant was eligible for early retirement. The theory being that either they were terminated or they weren't. If they weren't really terminated, then the plan shouldn’t pay them anything to avoid an in-service distribution and it they were terminated - why pay the partial. It worked for them and the men were very appreciative since it allowed them to get through a difficult stretch. We were talking about 50% of the guys weren't working.

I believe it's based on the plan document. If your document states that you get a YOS for benefit accruals after 500 hours, than for your plan it's 500 hours. I'd say based on the limited amount of information, the daughter gets the YOS if she works more than 500 hours. I have seen plans that use a 1 hour rule.

"nondiscrimination" is a fairly generic word. There are several "nondiscrimination" tests, assuming that there haven't been any material changes, are only required to be performed every three years. That is why the 5500 allows you to rely on Schedule T's from prior years. To which nondiscrimination test were you specifically referring?

TREATISE, PENSION-ANSWER-BOOK, Q 12:6 May an employer make a timely contribution to the qualified retirement plan by check? The contribution will be considered timely even if the plan trustee receives payment after the deadline for a deductible contribution (see Q 12:2) if the employer mails the check to the plan trustee before such deadline, the check is promptly presented for payment, and it is paid in the regular course of business. However, the contribution is not timely if the trustee delays presentation of the check because of the employer's financial problems. Also, the contribution was not considered timely in one case because the employer could not explain why the check was not negotiated until two weeks after the contribution deadline. [Flomac, Inc, 53 TCM 305 (1987); Walt Wilger Tire Co, Inc, 38 TCM 287 (1979); Cain-White & Co, Inc, 37 TCM 1829 (1978)] If the check bounces, no contribution is deemed to have been made. [springfield Productions, Inc, 38 TCM 74 (1979)]

Interesting... I was thinking just to opposite. Dougsbpc seemed pretty low to me. I think the service is worth a lot more, but then again, its worth whatever someone will pay.

I agree w/ Pax & Andy that it could matter a great deal, but as GBurns points out, the original message said the contribution "was inadvertently booked". I, like Andy, assumed he meant, "contributed", but he could be just talking about internal bookkeeping, which is a whole different deal. I think we need a clarification from DBTech, who may need to be a little more "technical". Was the amount actually contributed to the VEBA or just “booked” to the VEBA?

I agree with Bird (do you play the sax?). Why wouldn't the client want to take credit for it as an employer contribution? I had a very similar situation where the ins. co. charged a 5% expense for surrendering the GIC. The employer made a corrective contribution to restore the balances. The plan was amended to handle the allocation of the “special contribution.” We “general tested” it and it passed easily.