david rigby

Who is "we"? What is "legal"?

Here is Gray Book 97-2: Funding: Recognition of Mid-year Changes in Benefit Structure A collectively bargained plan with a calendar plan year provides a benefit of $20 per month per year of service. Under the collectively bargained agreement adopted on 5/1/97, the benefit level will increase to $21 per month per year of service on 7/1/97, $22 on 7/1/98, and $23 on 7/1/99. What benefit level should be used for the normal cost and actuarial accrued liability for determining the minimum funding requirements under the regular FSA for the 1/1/97 and 1/1/98 valuations? What benefit level should be used for the various current liability calculations under 412(l) for those valuations? RESPONSE ERISA (Regular FSA) Normal Cost and Accrued Liability: Code section 412©(12) requires that the ultimate ($23) benefit level be used to calculate the normal cost and actuarial accrued liability for the regular FSA for everyone projected to terminate after 7/1/99. Because the plan amendment providing that benefit level was adopted after the 1/1/97 valuation date, Rev. Rul. 77-2 permits the actuary to ignore this plan amendment for the 1997 valuation and instead to use the benefit level in effect prior to the amendment ($20). For the 1/1/98 valuation the $23 benefit level will be recognized for everyone projected to terminate after 7/1/99. Current Liability: The statutory definition of current liability is based on plan provisions as of the beginning of the plan year, although some current liability values (e.g., the 150% current liability full funding limit and the 100% current liability deduction limit) involve projection with the year's current liability normal cost. While the IRS has not defined the impact of a mid-year plan change on all of the current liability calculations, three approaches were described as potentially reasonable: (1)The first approach would be to calculate current liability for the year based on the plan provisions as of the beginning of the plan year and to determine the current liability normal cost (i.e., the value of the benefits earned on account of the amount of additional service during the year) as the weighted average of the amounts based on plan provisions before and after amendment based on the period in the plan year during which each benefit structure was in effect. Under this approach, the current liability would be based on the 1/1/97 benefit level ($20) for the 1997 plan year and on the 1/1/98 benefit level ($21) for the 1998 plan year and the current liability normal cost would be based on the prorated benefit levels of $20.50 for 1997 and $21.50 for 1998. (2)The second approach would be for the employer to take the 412©(8) election on Form 5500, advancing recognition of the benefit level in effect at the end of the plan year. Under this approach, all current liability calculations (including current liability normal cost) would be based on the 12/31/97 benefit level ($21) for the 1997 plan year and on the 12/31/98 benefit level ($22) for the 1998 plan year. (3)The third approach would be to base the current liability calculations on the benefit level in effect as of the beginning of the plan year, but to include the full impact of the mid-year plan amendment (including its effect, if any, on service in prior plan years) in the current liability normal cost. Under this approach, the 1997 valuation would start with a 1/1/97 current liability at the $20 benefit level, but projections using the 1997 current liability normal cost would end with a 12/31/97 current liability at the $21 benefit level. Similarly, the 1998 valuation would start with a 1/1/98 current liability at the $21 benefit level, but projections using the 1998 current liability normal cost would end with a 12/31/98 current liability at the $22 benefit level. Since the full effect of the mid-year plan amendment is included with the current liability normal cost under this approach, the additional funding charge is likely to be larger under this third approach than under the first two approaches. Copyright © 1997, 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.

The orginal post declared the amendment to be adoped during the current year. Therefore, ©(8) does not apply. Your synopsis of Rev. Rul 77-2 is not quite correct, but close. Also, take note of section 3.

Don't you first have to determine if the IA method is a reasonable funding method for a plan with no active participants? As discussed in several prior threads, the IRS is of the opinion that it is not.

From your first statement, it appears that 412©(8) does not apply. So, the answer is Yes. However, if there is an audit involved, prudence may indicate advance communication with the auditor.

You want to reduce a payment by a plan so the taxpayers can pay some/more? (Public policy be damned?) Is this in-pay status? If so, the "implication" is (likely) that the plan administrator will be in violation of the terms of the plan document.

Aside from the unlikely plan provision of EE contributions, it seems even more unlikely that the participant failed to make "mandatory contributions" prior to the date of participation.

Ta da! http://www.careerjournal.com/salaryhiring/...614-intro1.html

Is this a QDRO or merely a proposed QDRO? If it's a DRO submitted for qualification, perhaps it has conflicting/confusing clauses, in which case it should not be accepted for qualificationn.

There may be some prior discussion threads of value, such as http://benefitslink.com/boards/index.php?showtopic=25697 http://benefitslink.com/boards/index.php?showtopic=21189 http://benefitslink.com/boards/index.php?showtopic=24248

Have you read IRS Publication 590? http://www.irs.gov/pub/irs-pdf/p590.pdf Call the IRS and they can mail you a copy.

Several prior discussions on this topic, most with links to other sources. Try the Search feature, perhaps using a keyword such as "withholding" or "state tax". Also, try the CA department of revenue website.

Review plan provisions and written administrative procedures. It appears he made an election to have a distribution, but the payee of the check is incorrect (due to simple error). Simple remedy might be to void the check and re-issue it to his IRA, or to him (less withholding).

That is very charitable of you. It is possiblethat Blinky was getting at something else. Does the plan have a PS component that is also impacted by this (proposed) change in eligibility?

I was not aware that the trustee could decide what goes in the trust. Thought it was the plan administrator.

Several related discussions in the past. Try the Search feature. A good search word might be "treaty".

Others may disagree, but I suggest you process a negative deferral in your payroll system, and let the payroll system take care of the tax withholding issues.

Sorry, I'll have to get back to the rest of your question later, but here is GrayBook 2002-9. Funding: Quarterly Contributions and Application of Credit Balance Plan A has a calendar-year plan year. For 2001, Plan A makes the entire minimum contribution on December 31, 2001. The resulting credit balance on that date is exactly zero. For 2002, Plan A owes a quarterly contribution of $50,000 each quarter. Plan A makes the first two contributions of $50,000 each on April 15, 2002 and July 15, 2002. If these were classified as 2002 contributions (on the 2002 Schedule B), they would exactly satisfy the first two quarterly contribution requirements. However, suppose the actuary reports these two contributions on the 2001 Schedule B as 2001 plan year contributions. Plan A will now report a $100,000 credit balance as of December 31, 2001, which can be used to satisfy the first two quarterly contributions for 2002. In particular, under Q&A-12 of Notice 89-52, the credit balance and interest thereon can be used to satisfy subsequent quarterly contributions once the prior year contributions have been made to generate the credit balance. What is the next quarterly contribution amount due on October 15, 2002, assuming a valuation interest rate of 8%? RESPONSE $46,651. On April 15, 2002, per Notice 89-52, contributions for the prior plan year made by that date can be reflected in the credit balance. Therefore, on April 15, 2002, Plan A has a $50,000 credit balance, effective December 31, 2001. This credit balance is increased with interest to $51,135 on April 15, 2002, and $50,000 of it is used to satisfy the quarterly due. On July 15, 2002, another $50,000 worth of credit balance is created, effective December 31, 2001. This credit balance is increased with interest to $52,128 on July 15, 2002, and $50,000 is used to satisfy the quarterly due. The remaining credit balances of $1,135 on April 15, 2002 and $2,128 on July 15, 2002 are increased with interest to $3,349 on October 15, 2002. Therefore, Plan A must deposit only an additional $46,651 on October 15, 2002 to satisfy the next quarterly due. 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 © 2002, 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.

Yes. If I read your facts correctly, you do not have a CB on 4/15/04 to use as an offset to the quarterly. I don't believe the 12/31/02 credit balance has any bearing on the 4/15/04 requirement. Have you reviewed IRS Notice 89-52? Also, see GrayBook Q&A 2002-9.

I agree. Why would the plan and/or plan sponsor want to do something that created an ambiguous (at best) audit trail, especially when it is so simple to do it right.

The sponsor's first problem might be whether those amounts were included in W-2. Not your problem, but very important to get straight. That may be related to your problem because they may be sending you a year-end payroll record with all adjustments applied. If they did, and you did not notice the discrepancy, get ready to hear the question, "why didn't you notice this earlier?" Of course, one must refer to the plan document definition of Compensation to determine if a problem really exists.

What does this mean? What does the plan say?

Vested?

PBGC Instructions: http://www.pbgc.gov/plan_admin/forms/PPP20...nstructions.pdf Don't overlook the discussion of Technical Update 00-4 on page 23.

In my experience, most documents define pay at the end of the year (how much did you earn last year?). I fail to see how a zero accrued benefit at BOY yields zero normal cost under UC. As you state, we need not restrict this to UC. "imminent pax attack"? I'm hurt.