Effen

As an interviewer, I would much rather see "bad" experience than "no" experience. The "unspoken truth" would definitely raise some huge flags about you, if & when I found out. Although you may not realize it yet, the actuarial/benefits field is relatively small community. Therefore, I would most likely know more about you, than you know about me when you walk in the door. I would eventually find out about your past experience and then you would need to explain it. You may or may not get fired for it, but it would be a mark against you. I would definitely list the prior "bad" experience even if it were raised as an issue. Since it was your first job, no one should hold it against you, unless you try to be deceptive about it. Most of us worked at one place or another that wasn't the best. That is what makes experience valuable.

I think I might argue one point.... the annuity starting date for a lump sum is the date "which all events have occurred which entitle the participant to the payment". Therefore, if they didn't turn their paper work in before the end of the year, all events haven't occurred and the "annuity starting date" could not be in 2004. 417(f)(2)(A) IN GENERAL. --The term "annuity starting date" means -- 417(f)(2)(A)(i) the first day of the first period for which an amount is payable as an annuity, or 417(f)(2)(A)(ii) in the case of a benefit not payable in the form of an annuity, the first day on which all events have occurred which entitle the participant to such benefit. Also, Gray Book - Response to Q/A 96-29 (Q dealt w/ 401(k) plan) RESPONSE .... IRC 417(f)(2) provides that in the case of a benefit not payable in the form of an annuity, the ASD is the first day on which all events have occurred which entitle the participant to the benefit. It is reasonable to include paperwork as one of these events.

Do the owners need to be licensed or certified in any way to do what they do? If not, you are most likely subject to PBGC premiums. If the individuals are married, you probably aren't subject to PBGC since it's treated like a on-life plan. If they adopt the plan on 12/31/04, you have 90 days to file your 2004 PBGC premium. Act Sec. 4021.©(2) For purposes of this paragraph and for purposes of subsection (b)(13) -- (A) the term "professional service employer" means any proprietorship, partnership, corporation, or other association or organization (i) owned or controlled by professional individuals or by executors or administrators of professional individuals, (ii) the principal business of which is the performance of professional services, and (B) the term "professional individuals" includes[,] but is not limited to, physicians, dentists, chiropractors, osteopaths, optometrists, other licensed practitioners of the healing arts, attorneys at law, public accountants, public engineers, architects, draftsmen, actuaries, psychologists, social or physical scientists, and performing artists. (3) In the case of a plan established and maintained by more than one professional service employer, the plan shall not be treated as a plan described in subsection (b)(13) if, at any time after the date of enactment of this Act the plan has more than 25 active participants.

I'm a little bothered by something that might not be an issue: Are you saying that everyone else signed the paperwork and had their lump sums paid prior to the rate change? Everyone except for the one of the HCE's who just happened to drag his feet and now the interest rate might be lower and now he gets a bigger lump sum? Maybe all completely innocent, but it smells a little fishy to me. Did the HCE gamble the rates would be lower and his lump sum would be higher? If so, did he give all of the NHCE's the same opportunity? Did he tell them that if they waited, their lump sum might be higher? Did he make them aware of the basis of the rate? Are there excess assets that would have been re-allocated to the NHCEs? Again, maybe fine, but I thing you should tread lightly. It could be a "discrimination in practice" issue.

I am starting to wonder if Gary's handle is being used by someone other than Gary. A few of his last questions have been a little "non-Gary'ish"?

I do not believe the "pure subsidy" disability benefit is subject to the spousal consent since it has no impact on the spouses benefit. The biggest problem we see is that the Plan Administrator sometimes forgets to get the disabled participant's "retirement" election at the time the benefit switches from a disabilty benefit to a retirement benefit.

The Plan should NEVER draft the DRO! As SoCal points out, you are just asking for trouble. Also, I think it needs to be pointed out that Field Assistance Bulletin 2003-3 only applies to DC plans.

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?