david rigby

Does history support this presumption?

Data as of 31-MAY-13 Moody's Daily Long-term Corporate Bond Yield Averages Utilities Industrial Corporate Aaa NA 4.09 4.09 Aa 4.10 4.17 4.14 A 4.36 4.40 4.38 Baa 4.86 5.03 4.95 Avg 4.44 4.42 4.43 Moody's Daily Treasury Yield Averages Short-Term (3-5 yrs) 0.63 Medium-Term (5-10 yrs) 1.48 Long-Term (10+ yrs) 2.85

Link?

Consulting opportunity: investigate the reason for the proposed term/restart.

Q1. I think your synopsis is correct. However, some Key EE issues to worry about? Q2. The most common reason for life insurance in a DB plan is to provide a boat for the salesperson. Second most common might be to provide whole life, since you cannot buy it with deductible contributions (I think) outside the plan (I'm not saying it's a good idea). If the 415 limit is not in play, it might make sense to put those dollars toward increasing the retirement benefit (DB or DC) rather than Life Ins. Many years ago, a wise consultant told me to think of "hazards": the hazard of becoming disabled, the hazard of dying, the hazard of reaching retirement without enough money, the hazard of having large medical expenses, etc. and to keep those hazards separate when spending your compensation dollars. The result is you buy term life insurance, or disability insurance, rather than provide those benefits inside a DB plan. ERISA created a requirement to have a spousal death benefit in a DB plan, but many plans (most?) don't provide anything more generous, usually because term life is an inexpensive method of doing so.

For a DB plan, don't you limit the benefit, rather than the PV?

For vesting service, see IRC 411(a)(4).

Will this also exclude HCEs?

Actuarial Directory, https://www.actuarialdirectory.org/SearchDirectory/tabid/242/Default.aspx (assuming he/she is an actuary current credentials).

Sometimes the best response is: how much bigger? will you have a similar larger profit for multiple years in the future?

Not saying this is a problem, just throwing it out there: top-heavy minimums? BTW, back in 2010, should the 5500 have been filed with "final"? If so, maybe it can be amended?

Don't forget to remind the AP that she will be taxed on these distributions, whether or not she wants to receive them.

K2: it's unlikely the SOL for the 5500 is relevant in this fact situation. Perhaps it's just me, but it seems that not creating a 1099, although late, is a bad idea. The "control" issue could be significant: It appears this plan has a procedure that permits a payment, no matter who initiated it, and no procedure that identies the need for a 1099 (and the rollover notice). Not good.

You might have some control problems as well.

No. (iv) part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of such employee and his designated beneficiary

Most, but not all risk is transferred to the EE. Effectively, the EE assumes the investment risk, but the longevity risk remains with the ER. BTW, this also means that administrative expenses paid by the plan will be paid by the participants.

Does IRC 72(t)(2)(A)(iv) help?

FYI, there have been two Q&A's on this topic in the BlueBook over the last few years. Not exactly on point, but you can use them to understand the PBGC reasoning, and support the answer from Effen above: PBGC Blue Book 2007-8 QUESTION 8 Standard Terminations: Determination of Majority Owner Status PBGC’s standard termination regulations provide that a majority owner (based on a 50% or more ownership interest taking into account the constructive ownership rules) may elect to forgo receipt of his or her plan benefits to the extent necessary to enable the plan to satisfy all other plan benefits (29 CFR §§ 4041.2, .21(b)(2)). Assume that two or more participants are each substantial owners, but not majority owners, and together have a 50% or greater ownership interest. Assume further that they agree among themselves that they will each elect such an alternative treatment under the majority owner rules. May they elect the alternative treatment? RESPONSE: No. To be eligible to elect an alternative treatment under the majority owner rules, a participant must be a majority owner (taking into account the constructive ownership rules). There is no aggregation of ownership interests among participants (except to the extent provided under the constructive ownership rules). PBGC Blue Book 2013-5 QUESTION 5 Standard Terminations: New Definition of Majority Owner PPA amended ERISA section 4022(b)(5) to change the limitations on guaranteed benefits for “substantial” owners. In doing so it substituted a new definition of “majority” owner. Such an owner is defined using a 60 month look-back - i.e. a person that had the requisite ownership in the preceding 60 months is considered a majority owner and subject to the phase-in. Section 4041.21(b)(2) of PBGC’s regulations on Termination of Single-Employer Plans (29 CFR Part 4041) provides that a majority owner may waive a portion of his benefit to the extent needed to allow an underfunded plan to terminate in a standard termination. Regulation §4041.2 defines majority owner, and in doing so makes no mention of a look-back. Indeed, in the 2004 Blue book, Q5, the PBGC made it clear that a participant has to be a majority owner at the time of the waiver for the waiver to be valid. Did the PPA change to ERISA section 4022(b)(5) change the definition of majority owner for purposes of a majority owner waiver on plan termination to now include a 60-month look-back? RESPONSE No. The preamble to the existing regulation explained that the majority owner definition in the regulation had been developed using the substantial owner definition and specifically did not incorporate the 60 month look-back. The changes in PPA were aimed at other purposes and create no compelling reason to modify the regulation to change the individuals who are permitted to waive benefits.

I have not verified this one, but note that many of the exemptions are predicated on compliance with the pre-ERISA statute.

I think QDROphile is correct here. It seems that this must be a distribution, with 1099. This should be the case even if the plan has the ability (and plan provisions) to record the distribution without any money being sent or a check produced.

Many participants receive an annual statement, showing the accrued benefit. Many plan sponsors provide more detailed estimates (including optional forms) only when the participant applies for retirement benefits.

Well, someone believes in punctuation.

Sorry, I did not retrieve April 30 rates. Here is May 1: Data as of 01-MAY-13 Moody's Daily Long-term Corporate Bond Yield Averages Utilities Industrial Corporate Aaa NA 3.65 3.65 Aa 3.65 3.71 3.68 A 3.92 3.96 3.94 Baa 4.39 4.57 4.48 Avg 3.99 3.97 3.98 Moody's Daily Treasury Yield Averages Short-Term (3-5 yrs) 0.39 Medium-Term (5-10 yrs) 1.04 Long-Term (10+ yrs) 2.36 Provided by another reader: Data as of 30-April-2013 Moody's Daily Long-term Corporate Bond Yield Averages Utilities Industrial Corporate Aaa NA 3.70 3.70 Aa 3.70 3.74 3.72 A 3.96 4.01 3.99 Baa 4.43 4.62 4.53 Avg 4.03 4.02 4.03 Moody's Daily Treasury Yield Averages Short-Term (3-5 yrs) 0.40 Medium-Term (5-10 yrs) 1.07 Long-Term (10+ yrs) 2.41

Not to express doubt about Tom's advice, but ... this situation screams to get the original questions answered by the plan sponsor's tax advisor or legal counsel.

If the plan overpaid benefits, it should make an attempt to recover. There have been some previous discussion threads about this.