david rigby

I agree with SoCal. Any actuary can do this; most prefer to be paid for their services. Also, an experience pension actuary will ask the same question SoCal asked: what is the puprose? It's best to answer that question before chossing an interest rate and/or mortality table. A follow-up question will be, what do you mean by "balance"?

Can he save some FICA tax?

Don't overlook the possibilty that the beneficiary designation is modified, not revoked, due to remarriage. (As you know, the employee's will is not relevant to the Plan.)

Just a thought: if the company has a bankruptcy attorney, it would be prudent to get that person's opinion before amending and/or terminating the plan.

I agree with Bird that this could be a disability rider inside the insurance contracts. However, don't get too concerned about taxable payments, since (almost) all ER contributions to a qualified plan are eventually paid to recipients as taxable comp.

IMHO, regular DC admin fees that are reasonable in and of themselves, will be considered reasonable under IRC 4980(d)©. However, it's been a few years since I looked at this section. Read carefully. (There was an IRS Notice/Announcement/Rev Ruling on this section a few years ago.) But, it's just my opinion.

For some other discussion, use the Search feature with the phrase "retirees don't like change"

Data as of 28-FEB-13 Moody's Daily Long-term Corporate Bond Yield Averages Utilities Industrial Corporate Aaa NA 3.84 3.84 Aa 3.87 3.90 3.89 A 4.12 4.16 4.14 Baa 4.66 4.90 4.78 Avg 4.22 4.20 4.21 Moody's Daily Treasury Yield Averages Short-Term (3-5 yrs) 0.49 Medium-Term (5-10 yrs) 1.25 Long-Term (10+ yrs) 2.63

Clarity is always important. Consider this: an ambiguous plan provision will generally be interpreted (by IRS, DOL, courts) in favor of the participants. This is the reason ERISA requires a plan document be in writing.

It appears to me that Mike's "Yes" refers to your quesiton "Does 411 prevent the lump sum amount from being lowered in this manner?" I agree with Mike. The facts of this situation are similar to the Supreme Court decision in Central Laborers vs. Heinz a few years ago.

Lesson for whether or not to amend the plan prospectively?

Some employers might not use hours because there is logisitical difficulty in tracking hours, especially if multiple locations are involved. While adding hours to the plan definition may solve your problem, just make sure you have the administrative tools to handle it.

There may be other issues when comparing a terminated plan (presumably with rollover to IRA) vs. frozen plan. For example, the bankruptcy protections differ for IRA vs. qualified plan.

This is likely a matter of understanding what the plan says. It's possible the plan uses a more generous provision than is required. But, it's not likely. Might need an independent review of the provision, from a pension actuary or an ERISA attorney.

Plan termination is expected to be an orderly and time-bound process. Regulatory oversight expects it to be completed without unreasonable delay; while not an absolute, this usually means within 12 months. (That does not mean you can, just because you want to, stretch it out to 12 months if there are no impediments.) It may be reasonable to pay out lump sums sooner than other payments, based on administrative convenience, but delaying the purchase of annuities by multiple years will (likely) fail the "smell test". Taking such action could produce a regulatory conclusion that the plan was not terminated, and might require reversing any actions already taken.

Yes, of course this should be included in funding. The Plan owns the asset and still has the liability. However, be very careful about the "post-NRA adjustments". My guess is they should be zero (assuming the plan provisions are approximately what all other plans use).

Wild guess: the record-keeper thinks that one or more of the employee records is invalid because it matches to someone else already in their database. That's a pretty good clue that an employee record uses a "borrowed" SSN, but (and this is important) it does not determine which matching record is invalid. It's possible the existing record is not valid, or prehaps both. Here is a related discussion: http://benefitslink.com/boards/index.php?/topic/53083-two-participants-with-the-same-ssn/

Call me skeptical, but I believe there is hidden other motivation for this idea, and it's likely an attempt to minimize taxes.

Don' assume one of them is lying. Might be both!

Indeed it does. Click on "Monthly Yield Curve Tables", then click on "Recent Yield Curve Spot Rates". This will open a spreadsheet.

Yes. http://www.irs.gov/Retirement-Plans/Interest-Rates-Tables

Is the trust the beneficiary of the policy? Does the plan define the death benefit in relation to the policy or to some other formula?

Strongly agree with comments about avoiding insurance as the primary funding mechanism for the plan. When you engage an actuary, select one (or more) who has experience similar to your situation (ie, small plans). The properly experienced actuary will also be able to recommend 2 or 3 similarly experienced attorneys that you might consider. Your actuary will guide you in discussing what death benefit to include in the plan. The answer to that might require the plan to include some life insurance as part of its investment, but not the main mechanism for funding (ie, the death benefit is ancillary to the main purpose of the plan, which is to save money for retirement). BTW, you are almost a prime candidate for a DB plan (a "prime" candidate is just a few years older than you), so your exploration of this option is very good.

Don't assume a Distress Termination is available. Review the definition and you will liberal use of the word "bankruptcy".

Don't forget the high-25 limitation.