Effen

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.

b. The participant would be entitled to the great of the two lump sums. You also need to make sure your relative value disclosures accurately compare the values. Correct, the 417(e) lump sum is the minimum amount payable to the participant. If the plan AE provides a greater amount, the participant would be entitled to the larger amount.

"401(a)(26): In general. In the case of a trust which is a part of a defined benefit plan, such trust shall not constitute a qualified trust under this subsection unless on each day of the plan year such trust benefits at least the lesser of ..." I don't know how you could satisfy the "on each day of the plan year" requirement using an accrued to date method. I don't use accrued to date for any of my testing, so there might be a way, but without doing a lot of digging, I can't see how it would work.

I am not really sure what the question is, but this might be helpful.

To me, that was the point of the thread...you won't find any black/white answers. Safe approach is the limit the deduction for 2021, aggressive approach is don't. This should not be your call. Present the facts as known to the plan sponsor and their accountant and let them make the call.

Recourse from what? The QDRO cannot supersede the plan's provisions. If the plan document does not permit a lump sum, then they are not legally permitted to pay one. If the participant is eligible for early retirement under the plan, you might be able to start receiving the monthly benefit prior to the participant's normal retirement date, however, the reduction for early commencement would be significant. Likely more than a 50% reduction at 55.

No. That just means that whatever benefit he had earned as of June 16, 2016, you are entitled to 40% of it. That statement does not impact when, or how, you will be paid those benefits.

check out 1.401(a)(4)-5. Plan amendments and plan terminations before proceeding.

There is a lot here and it is difficult to address all the various issues you raised. 1) If the plan is being terminated, you should have been given a lot more than "a page to sign". You should have received a benefit election package which detailed your options on the distribution. Assuming the amount of your lump sum is > $5,000, it would have explained your monthly annuity options, as well as your lump sum option. It should have also provided tax information related to the distribution, and spousal consent forms. 2) You have the right to request a benefit calculation worksheet that details your benefit amount. 3) You have a right to a Summary Plan Description that explains how the the plan works and the benefits are determined. This should also define how any excess assets are allocated. 4) Regarding the allocation of the excess assets, they must be allocated in a non-discriminatory manor. Discrimination in this setting only looks at Highly Compensated Employees (owner) vs. Non-Highly Compensated Employees. (These are defined terms under the law.) Because the testing for a cash balance plan is typically done by looking at the benefits paid at Normal Retirement Age, older people often get more than younger people because younger people have longer for the money to accumulate. Often the allocation is done based on age and compensation. Older & higher paid get more $, younger & lower paid get less $. If you have a 65 year old making $200,000 and a 25 year old making $20,000. The plan can give $50,000 to the 65 year old and $191 to the 25 year old and that would not be discriminatory because each would receive 25% of pay at 65, assuming 8.5% interest. 191 * 1.085 ^ 40 = 5000/20000 = .25 50,000/200,000 = .25. This is just an example to illustrate the point that younger people will likely get less. The actual allocation is often more complex, but this illustrates the method.