Effen

You can have J&S options for non-spousal beneficiaries, but there are restrictions and adjustments based on the age differences. A good place to start would be Treasury Regulation section 1.401 (a)(9)-6)

Really? Who would ever think that is a good idea...other than the salesperson? Why would a plan sponsor want to burden themselves with this? Why not just pay a lump sum and if the person really wants a variable annuity, they can buy one outside the plan.

but it is. Not really sure what you are asking? Can you provide an example of what you are concerned with?

That was the point of my first sentence. I wasn't sure exactly what question you were asking. You need to check your plan document and maybe talk to ERISA counsel. The document should tell you how to handle people beyond NRD, but you definitely need to make an adjustment. The total payout should not be lower at the later date, assuming the 415 limit is not in play. You either need to actuarially increase the benefit to reflect the delayed commencement date (NRD to commencement date), or you need to retro the payments from NRD. Both are acceptable under the law, but I think most attorneys would say "retro payments" is the default if the document is silent. IOW, you can only do an actuarial increase if it is expressly stated in the document. If the documents is silent, you should retro the payments from NRD. I am also assuming this participant terminated prior to NRD. If they were active at NRD, it can get even more complicated. Just to be clear, the 1/1/22 date is not relevant, unless it was the termination date and even then it still might not be relevant. The adjustments need to be made from NRD.

You will get multiple answers to this question. I will also assume the accrued benefit has been properly adjusted to reflect the commencement date. I don't think the request date is relevant. We calculate lump sums as of the day of payment, but don't forget to allow time for processing and elections. IOW, if you are just doing the paperwork now, there is no way you can legally pay it by 3/14, so we would probably determine the value as of 5/31 or some future date.

Interesting comment. I would not have said that, but that might just mean I am out of touch. Hard to say what "most" are doing when there are only limited opportunities to network due to COVID. I agree that larger variable plans are becoming more popular, but I haven't seen that thinking invade small plan land.

Not sure what you think is odd about it? Fairly standard operating procedure for many plans. Curious why you say, "there's no need to suspend benefits since in service distribution is allowed"? Unless you are giving actuarial increases to the active participants for delay retirement, you would still be required to provide a suspension notice to anyone working beyond NRD.

Personally, I would say, "don't over think it". No one is really watching this, so if the plan has sufficient assets to terminate, recommend to the sponsor that they terminate. If they don't move to terminate, keep telling them they are out of compliance every year and that they should either terminate or restart accruals. I see this topic talked about a lot on message boards, but have never seen the IRS raise the issue in practice. Not saying they don't, not saying it isn't a legitimate concern, just don't overthink it and try to get the sponsor to move at a reasonable pace to terminate the plan once it is overfunded on a termination basis.

I was thinking they might be asking what "underfunded" means in that context.

Sorry, but I have no idea what you are asking. Are you asking about the exemption from 401(a)(26)? If so, I don't think there is any hard and fast rule, but I would look at it on a termination basis.

'Can you provide any cites or authority for this? ' I am fairly certain you don't need to look any further than the plan document. It is a distributable event and they are eligible to retire, why do you think they don't need to be given all the options? FWIW, I also agree with CuseFan and Dave - "lump sum window" is generally not a term used to describe what you are doing. A "lump sum window" is typically offered in a ongoing plan as a way to derisk the plan of DVs and/or retirees. What you are doing is offering lump sums in conjunction with a plan's termination. I know, semantics.

Yes, that clarifies things. A LS window in connection with a PT, is a little different. For a PT, you need to offer all available options to anyone eligible to retire, including actives. "in-service" language isn't really important, however it might come in to play for a deferred annuity purchase - but most carriers seem to just ignore it. Assuming the LS option didn't previously exist, you are wise to make it a one time option only available in connection with the plan's termination. That way if anyone doesn't elect it, you will not need to include it as an option when you purchase annuities. All of this needs to be specified in the termination amendment. You haven't mentioned retirees. Are you planning to also offer them a LS? If so, you will also need to offer them all available options as it would be a new "annuity starting date". Some people argue this point, but my experience is that most attorneys agree that all options need to be offered.

It could, but in order to be eligible for an in-service distribution, the participant would still need to be at least 59.5. Your comment didn't specify the age, so I assumed you were talking about ALL actives. I would argue that as soon as you add the in-service provision, those participants who are eligible for an in-service distribution automatically become eligible for all optional forms of payment. It isn't like the DVs who are not otherwise eligible for a monthly benefit.

Active employees would NOT be eligible for the lump sum window. In order to be eligible for a lump sum, you must first be eligible for a distribution. The participant either needs to be separated from service, or be otherwise eligible for an in-service distribution.

bargained or non-bargained? As John said this was fairly common when cash balance plans were coming into favor. Most of the kinks have been worked out related to procedures and regulations. The issue will be the impact on the participants. Your actuary should be able to do a "winners and losers" graphic that will help you understand the impact of the change on the various groups of participants. Why are they considering a cash balance and not just moving fully DC? P.S. Thanks for the plug David! Unlike some of us who have retired, due to several acquisitions, I am now one of those "big company" actuaries. Ha ha!

You are probably in the right spot. If you have questions, fire away. That said, IRS 5500 filings are in the public domain. https://www.efast.dol.gov/5500Search/ One of the attachments to the Schedule SB is a summary of plan provisions. That won't give you the language from the plan document, but it will let you see how a plan is designed. That said, your question is like walking out on a fishing pier and asking - is there any where I can see what kind of fish are out there?

There is nothing precluding a sponsor from amending their plan, however the IRS is not reviewing, or providing determination letters, for plan amendments. They will still provide a D letter upon plan termination.

I am not really sure, but assuming the participants are still in the union and there has been no separation from service, I would think they would continue to earn vesting credit in their MEP benefits in the future. Not 100% sure of that. If they are leaving the union, then they are probably term non-vested in the MEP benefits. The MEP would have no obligation to then, nor would they generally care about people who leave the union. This is something the labor lawyer should be asking about as they negotiate the withdrawal. The "recompense" would have to come from the employer, not the MEP. The employer is choosing to leave so they are the one who needs to "make it right" for their employees if they want them to go along with the withdrawal.

Oh, sorry. I just assumed it was but you are correct the OP didn't say that. I think the PBGC missing participants can only be used by terminating plans.

PBGC missing participants

Good advice from both David & BG5150, but to answer your question directly, no problem with lump sum assuming it is permitted by the plan document.

Nothing wrong with it, assuming it is permitted by the plan document and occurs after the participants is at least 59.5, or whatever minimum age is set in the document, if higher.

If that is true, the relative value disclosures should make that apparent to the participant. If your QJSA is not the most valuable (ignoring the LS), you have a different problem. For example, lets say you have a 10CC of 1000 w/ LS value of $140,000. Using plan AE the 1000 10cc = 1050 as SLA. The SLA of 1050 would have a LS value of $142,000. That is ok and the participant would only be entitled to the $140,000. However, your relative value disclosers should show the SLA is worth 101.5% of the 10CC. Lots of different ways to do it, but the participant s/b able to determine the SLA is a higher value than the 10CC. Where you have a potential problem is if the QJSA is not the "most valuable" form of payment. For example if your J&50 option is only worth 97% of the 10CC, you have a potential problem with 1.401(a)-20 Q/A 16.

Sorry, I think I misread your first statement and thought you had plan factors for the lump sum as well. Is this a potential 415 limited lump sum? If so, then it does get more complicated. Ignoring 415 limits, you would apply the 417e rates to the normal form (10cc). No need to convert to Life Only before determining the LS, unless 415 limits are in play. You would use the 417(e) interest rates and applicable mortality table to determine the LS value of the deferred/immediate 10CC accrued benefit. The plan document should tell you what rates to use, whether to use the immediate or deferred AB, and what do with early retirement subsidies, if any. Typically, the LS is the PV of the deferral annuity in the normal form, but not always.