Effen

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.

Seems to me that you need to ask yourself a more basic question.... Why are you doing an end of year valuation for someone who obvioulsy wants to put the money in earlier?

But you CANT remove the J&S requirements from that Plan. That would be a 411(d)(6) violation.

FWIW, I think as long as the MP distribution requirements (QJSA) apply to ALL PS money, you should be ok. I have had attorneys tell me that if you co-mingle assets, the QJSA rules must apply to all participants, even those who never had a MP balance.

I agree with both PAX & GBurns. I find this very hard to believe. Usually they Union stops sending men if an ER is more than a month or two behind. What do they expect to tell the men who worked for this guy when they ask for their pension benefits? I find it hard to believe that the Union let this get so far out of hand, without some sort of collusion between the other Trustees or the Plan Administrator. If what you say is true, they most likely have BIG problems.

The comparison is great! Thank you for the follow-up.

You aren't talking about me are you? I recently took over a plan from a national firm that prepared and was paid for the 2003 valuation. We did the 2004 valuation. The prior actuary wanted $3K more to do the 2003 Sch. B. We agreed to do it for a lower cost. We had matched the 2003 valuation as part of our takeover, so I was fairly comfortable signing the Sch. B. I did however use my numbers, not the prior actuary. I hear what you’re saying. The shoe has been on the other foot before, but we usually do the Sch. B for a valuation we prepared, assuming that we were paid. If you haven’t been paid for the valuation, you don’t have any obligation to sign the Sch. B. Also, just because you did the valuation, doesn't mean that the new actuary can't redo it. Nothing is really final until the Sch. B is filed. Although you "know" the new actuary is using your numbers, it could be that he “matched” your numbers. Once he signs the Sch. B, they are his numbers and really none of your concern. Getting paid for work you did is certainly something I would continue to pursue, but short of an ethical client, they have no reason to pay you. If you know he stole your work, then you might want to contact ABCD, but it is possible he just redid your work and came up with the same values.

and most likely an "actuary" that isn't in compliance with the actuarial standards.

Is the owner participating in the 401(k)? You said he "wants to have an immediate eligibility 401(k) plan." If the owner isn't eligible to participate in the 401(k), I don't think you have any issues since you wouldn't need to aggregate it w. the CB for TH. Therefore, you don't need to give the ee a TH min. If that isn't the case, your plan documents are suppose to define which plan is dominant if you have more than one. If the DC is dominant, than I think you need to give it to him and it's most likely not deductible. If DB is dominant, possibly amend the CB to let him in so that he gets the TH min in the CB plan. I believe this would be ok under APRSC, but I'm not sure.

You may want to give Actuarial Board for Counseling and Discipline (ABCD) a call. http://www.abcdboard.org/ They should be able to give you some advise.