david rigby

The IRS let its position be known clearly in the 2008 Gray Book: Gray Book 2008-42 Other DB Plan Issues: Declining Accrued Benefits May an accrued benefit decrease during continued employment due to any of the following: a) Increases in a Social Security offset? b) Increases in covered compensation? c) Reductions in average compensation? d) Reductions in the maximum benefit limitations under 415 (other than legislation or changes in response to a variable index)? e) Investment performance underlying a variable annuity? RESPONSE a) Yes, but only to the extent that the offset meets the restrictions specified in Rev. Rule 84-45 and is in keeping with the qualification rule stated in IRC §401(a)(15). b) and c) No. In this situation, the reduction would be on account of increasing service since the reduction would not occur if the participant terminated employment. A reduction in benefits due to increases in age or service would violate IRC §411(b)(1)(G). This was the rationale behind the answer to Question 33 from the 2003 Gray Book which dealt with situation c) above. d) Where a post age 65 actuarial increase would be limited by the compensation limit as capped by IRC §401(a)(17), the benefits must be started, or “suspended”, to avoid an impermissible forfeiture. Benefits accrued prior to the IRC §415 regulatory effective date would be insulated from having to make this change and could continue to provide actuarial increases in spite of the 401(a)(17) limit. In addition, note that for benefits accrued after the regulatory effective date and prior to adoption of plan amendments, regulation §1.411(d)-3 would limit the ability to add a suspension of benefits approach. Moreover, for participants who have attained age 70-1/2, suspension of benefits would generally not be permitted. e) Yes. In this case the reduction is not on account of age, service or plan amendment. The above Response is a summary, prepared by representatives of the Program Committee, of the oral responses to the question posed to certain staff members of the Treasury and IRS, which represent only personal views of the individuals who provided them. Accordingly, the Response does not necessarily represent the positions of the Treasury or the IRS and cannot be relied upon by any taxpayer for any purpose. Copyright © 2008, Enrolled Actuaries Meeting All rights reserved by Enrolled Actuaries Meeting. Permission is granted to print or otherwise reproduce a limited number of copies of the material on the diskette for personal, internal, classroom, or other instructional use, on the condition that the foregoing copyright notice is used so as to give reasonable notice of the copyright of the Enrolled Actuaries Meeting. This consent for free limited copying without prior consent of the Enrolled Actuaries Meeting does not extend to making copies for general distribution, for advertising or promotional purposes, for inclusion in new collective works, or for sale or resale.

You may be able to address this confusion by amending the plan to offer a slightly more generous entry provision.

Predictions are difficult, especially about the future.

The TPA's legal counsel will probably ask to see a copy of the service agreement between the TPA and the plan sponsor.

Interesting. I suggest your proposed response is reasonable. However, you should have plenty of space, with creative "spelling". Something like "frozen AB + cash balance"?

Don't overlook the potential for interaction with qualified plans, such as the spousal survivor requirements.

I think Mercer has copyrighted the term.

Search for "retirement shares". Mercer design.

... and it's very easy to create a phony form just for this purpose. Seems that the ER is putting all its eggs in one basket, a leaky one at that.

Peter, IMHO, the practioner has a responsibility to act professionally, which (to my mind) means to draw attention to any perceived problems. Stating "tax-disqualified" is a conclusion that may not yet be warranted. Yes, it's possible, but there may be facts not yet in evidence. [As an Enrolled Actuary, even if all the facts are known, I would try to avoid stating "disqualified" in all cases, believing that is the prerogative of the attorney and/or the CPA.] If the practioner has any ERISA "qualifications" (Enrolled Actuary, atty, CPA, Enrolled Agent, ERPA), then I suggest replacing "responsibility" with "duty". If the practioner has any actuarial credentials, the actuary must also ensure compliance with Actuarial Standards of Practice (ASOPs) as well as the Actuarial Code of Conduct.

... and in extreme cases, consider the possibility that this is a client you don't want.

QDROphile is correct. It might be hasty to assume that state/local law is silent on this area.

Is there a distributable event under the plan?

Very important. From PPACA Therefore, if the "kid" is not a dependent, the plan/employer is not required to provide coverage. (It might provide coverage for another reason, but not for this one.) That's how I read it; I would be interested in other opinions.

Let me guess: the insurance agent recommended this!

Implicit in the original post is that the 25-year-old son is not a dependent. Correct? If so, does anything else matter?

The comments above are (for the most part) correct. I don't want to excuse any of the IRS' mistakes, but this one belongs at the feet of the DOL.

Very likely this issue has arisen before. Have you checked with the DOL? Q&A here, esp. #4: http://www.dol.gov/ebsa/regs/fab2008-4.html In addition, uyou could contact the EBSA: http://www.dol.gov/dol/contact/

Are you saying: (a) the termination of the 2 participants caused the partial termination, or (b) the plan experienced a PT and these two other participants terminated employment at or near the same time, or © other?

Yes, correct. The IRS has stated often that the 10% excise tax under IRC 4971 is not waivable, but that there is some leeway with respect to the 100% (second) excise tax. (A few prior discussion threads on this topic.)

http://benefitslink.com/boards/index.php?showtopic=46183 Post number 4.

Well....., I've seen similar problems that were traced to a plan sponsor incorrectly re-using a plan number of a (long ago) terminated plan.

OK, I'll bite. What is this?

Data as of 30-JUL-10 (Friday) Moody's Daily Long-term Corporate Bond Yield Averages Utilities Industrial Corporate Aaa NA 4.70 4.70 Aa 4.87 4.86 4.87 A 5.17 5.14 5.16 Baa 5.80 5.90 5.85 Avg 5.28 5.15 5.22 Moody's Daily Treasury Yield Averages Short-Term (3-5 yrs) 0.33 Medium-Term (5-10 yrs) 1.51 Long-Term (10+ yrs) 3.31

Any of this discussion relevant? http://benefitslink.com/boards/index.php?showtopic=13472