david rigby

No debate about the "obvious" answer. Just wondering if the bureaucracy / regs might look at it differently.

I got this question twice recently. Maybe my easy answer should be re-thought. With Ford and GM amending their plans to offer a lump sum to current retirees, I wonder about the case of a retiree who choose a J&S, but the spouse is now deceased. If you bought a commercial annuity for this retiree, the price would (I assume) value this as a LA to one person. Suppose the plan pays a LS (417e3) to this retiree, would such LS be based on the remaining LA? Any interpretation that might require the plan to value it as a LS of a J&S benefit?

Yes. However, the plan may not say, in which case the presumption (at least by me) is annual compounding. Caveat: Check for precedent, especially with respect to how to handle a fraction of a year.

Is this a cash balance (or other) hybrid plan? - If so, showing a balance probably makes sense (but it won't be frozen). - If not, take the PVAB off the statements. Never use the word "account", always emphasize the annuity form of the accrued benefit.

What a mess. I agree with SoCal, but caution you to look for other docuemtnatino (precedent, administrative interpretation) that might help decide whether "portion" has any reasonable limitations on its definition.

BTW, I not aware of any requirement that the plan definition of AE must include both interest and mortality. For example, the plan could define the AE for post-NRA as "8% per year".

Some might use the word "earning", but not I. That word implies an investment account, and an accrued benefit is not an account. Instead, I describe the actuarial increase as adjusting the payment to reflect the payments not received between NRD and actual retirement, or some such nonsense.

Don't get too excited. It's not going to happen.

http://www.irs.gov/pub/irs-pdf/i1099r_11.pdf Is the explanation under "Box 8" on page 12 relevant?

Why restrict this to small cashouts?

No. No.

Two years later, any new developments? Inquiring minds want to know.

Might be prudent to ask what new information has changed his mind?

My best guess; please check the 5500 instructions: - the "old" plan exists until all assets have been transferred to "surviving" plan. Note: this does not require physical movement of assets, but does require changing title of which plan owns those assets. - a merger date creates the end of the plan year (if not already EOY); - the 5500 includes a checkbox for "final filing"; if this has been properly checked, no filing the next year.

IRC 1563 http://www.law.cornell.edu/uscode/text/26/1563

What do you mean "merged plan"? Perhaps an oversimplified statement, a 5500 is required until the plan no longer exists. For example, suppose Plans A and B are both CY, and A merges into B effective 12/31/2011. Both plans must file a 5500 for the 2011 plan year. Probably, the 5500 for plan A would have zero particiapants and zero dollars at the end of the year, so that it will not exist on 01/01/2012 (no 5500 for the 2012 plan year).

"allowed?" That could be a scary thought. This "problem" may be related to inexperience of one analyst, rather than incompetence of that analyst's employer. Chill out, perhaps? The sponsor can probably solve this "problem" very easily, by submitting a letter stating they are making a contribution in the exact amount of the forfeiture account. If the analyst does not understand, then the sponsor calls the analyst's supervisor and gently identifies the training opportunity.

"taxpayer expense" might be a debatable point, as is "should"

Data as of 31-MAY-12 (Thursday) Moody's Daily Long-term Corporate Bond Yield Averages Utilities Industrial Corporate Aaa NA 3.63 3.63 Aa 3.77 3.77 3.77 A 4.04 4.18 4.11 Baa 4.87 5.10 4.99 Avg 4.23 4.17 4.20 Moody's Daily Treasury Yield Averages Short-Term (3-5 yrs) 0.46 Medium-Term (5-10 yrs) 1.03 Long-Term (10+ yrs) 2.17

Sort of. OP indicates real estate in the plan, but does not indicate whether other assets are in the plan. Has any portion of the distribution commenced?

Depends. Has benefit been distributed? If so, "un-terminate" seems pretty difficult.

Only my mother is permitted to call me Dave.

Clarity needed: - The AE adjustment is not determined by the actuary, but by the plan document. - "most of the time" is in the eye of the beholder. Many plans do not define the AE adjustment as interest only, but also include mortality. And the plan's death benefit design might be a relevant factor in this distinction.

Huh? What does this mean?

Well............ this is Congress and the IRS/DOL, so "purpose" might be in the eye of the beholder. In general, there are a few purposes behind most statutes and regulations: - set a minimum level of "reporting" (ie, from the plan/employer to the government) - set a minimum level of "disclosure" (ie, from the plan/employer to the participants) - set minimum fiduciary standards - set standards for "non-discrimination" (usually objective, but not always) - set standards for eligibility (getting in the plan), vesting (getting a right to the benefit), and funding (paying for the plan) Others may add to this list. Other rules were changed or added with a specific eye on money: Congress wanted more tax revenue, so they tightened certain things. Not good design, just a different purpose. There are some rules that were added in response to a situation that had previously been overlooked, such as IRC 416 and IRC 401(a)(26). BTW, keep in mind the big-picture historical information that you find in your reading: the Studebaker situation and other pre-ERISA lack of standards, as many of the original parts of ERISA grew out of those experiences.