david rigby

... and for that reason is very common.

Sounds like a loan in default. Then look to the plan document to see what happens next.

Structuring a plan document to allow future administrtive flexibility is probably a good idea. But maybe not necessary; if they want to add a benefit later, an amendment at that time is not necessarily complex. But defining "what ifs" in an SPD is much different, as stated above. Why invite confusion?

Census data was collected and testing performed as if the plan had been in existence.

Thanks for the comment Blinky. I read Rev. Proc. 2000-40 differently. Rev. Proc. 2000-40, section 6.02(5) reads: “5) Non-Applicability if Benefit Accruals are Frozen Under the Plan. Approval to change to any method described in sections 3.02 through 3.09, does not apply if a plan provides that no participant may accrue a benefit as of a date that is no later than the first day of the plan year. In such a case, approval to change to the method described in section 3.01 applies only as described in section 4.02(5).” I think the reference to 4.02(5) is a typo that should be 4.01(5), which reads: “(5) If a plan provides that no participant may accrue a benefit as of a date that is no later than the first day of the plan year, approval is granted to change to the unit credit method described in section 3.01.” Thus, in my example, I can (must, apparently) change to UC on 1/1/2004, without regard to the 5-year cycle, but cannot use automatic approval to change on 1/1/2003 unless I have permission under section 3 of that Rev. Proc.

Change of trustee usually indicates amendment of trust documents, and would require amendment of the plan document(s) only if the plan and trust are contained in the same document. As always, read the document to verify. If a collective bargaining agreement is involved, read that also.

GrayBook 93-10 and 93-12 indicate that spreading over one year of service is not acceptable. My current situation is to recalculate the 2003 aggregate normal cost, without any change in my PV of future comp, which appears to be (2) in above post. MGB does not like it, but I'm not so sure. I agree that the method should be changed effective 1/1/2004.

Need a gut check. Anything wrong with this? CY plan year, val date at BOY. Aggregate funding method. Sponsor gasps when told of the 2003 minimum funindg requirement and asks to freeze the plan, as of the end of current year. As of 10/1, we amend the plan as of 12/31 and re-do the valuation results, using only one year of future service. (Assume the 204(h) notice is adequately distributed.) The IRS has stated (see Gray Book 99-6) that the method must be changed from aggregate to an individual method if the plan is frozen. However, that statement clearly is focusing on the year(s) after the freeze is effective, not the previous year. Any problem with using the Aggregate method for the 2003 year? Does Rev. Ruling 77-2 inhibit my process?

Seen it. The testing included those who were employed during that service, even if not employed at the plan's effective date.

Could be a leave of absence. Probably look what the plan document says about how that would be treated? But don't forget to see if there is a precedent? P.S. I'm not a lawyer. Plan might need counsel.

Does "left the practice" mean "no longer an employee"?

Once upon a time, on a small island, there lived many people. For days, the weather forecaster announced that a fierce storm was approaching that would hit the small island on October 15 at 12:00 noon. Early that morning, most of the inhabitants left the island, that is, all except for a small group of actuaries. You see, each of those actuaries had determined that it would take exactly 5 minutes to cross the bridge. At 11:55, however, there was a traffic jam at the small bridge. At 12:00, the fierce storm came and swallowed up the actuaries. And then everybody lived happily ever after on time.

401(a)(13)© Special rule for certain judgments and settlements. - Subparagraph (A) shall not apply to any offset of a participant's benefits provided under a plan against an amount that the participant is ordered or required to pay to the plan if - (i) the order or requirement to pay arises - (I) under a judgment of conviction for a crime involving such plan, (II) under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, or (III) pursuant to a settlement agreement between the Secretary of Labor and the participant, or a settlement agreement between the Pension Benefit Guaranty Corporation and the participant, in connection with a violation (or alleged violation) of part 4 of such subtitle by a fiduciary or any other person, (ii) the judgment, order, decree, or settlement agreement expressly provides for the offset of all or part of the amount ordered or required to be paid to the plan against the participant's benefits provided under the plan, and (iii) in a case in which the survivor annuity requirements of section 401(a)(11) apply with respect to distributions from the plan to the participant, if the participant has a spouse at the time at which the offset is to be made - (I) either such spouse has consented in writing to such offset and such consent is witnessed by a notary public or representative of the plan (or it is established to the satisfaction of a plan representative that such consent may not be obtained by reason of circumstances described in section 417(a)(2)(B)), or an election to waive the right of the spouse to either a qualified joint and survivor annuity or a qualified preretirement survivor annuity is in effect in accordance with the requirements of section 417(a), (II) such spouse is ordered or required in such judgment, order, decree, or settlement to pay an amount to the plan in connection with a violation of part 4 of such subtitle, or (III) in such judgment, order, decree, or settlement, such spouse retains the right to receive the survivor annuity under a qualified joint and survivor annuity provided pursuant to section 401(a)(11)(A)(i) and under a qualified preretirement survivor annuity provided pursuant to section 401(a)(11)(A)(ii), determined in accordance with subparagraph (D). A plan shall not be treated as failing to meet the requirements of this subsection, subsection (k), section 403(b), or section 409(d) solely by reason of an offset described in this subparagraph.

If the sponsor amended the plan definition of NRD, it is there and is not "an early unreduced pension." Certainly, the sponsor will want legal advice, but attempting to claim "scrivener's error" after 5 years seems to be more than a "stretch". Remember that NRD is relevant for several purposes. For example, it is the date at which a top-heavy benefit is assumed to be applicable.

Correct, but that is not new, as we have often had the minimum override the maximum. Don't forget about the credit balance. It can exist under the IA or Agg method, and is usually the way in which the minimum is less than the maximum. If you have one, suggest the sponsor hang on to it. Without a credit balance, I'm not sure you have any options for getting a range.

Not sure if this will help, but there have been a couple of questions in the GrayBook about this topic, with some change over the years. Gray Book 1992-39 Regulation Section 1.401(k)-1(a)(6)(ii) requires "any arrangement that directly or indirectly permits individual partners to vary the amount of contributions made on their behalf" will be treated as a cash or deferred arrangement. (a) Would it be permissible for a Highly Compensated/Key Employee to make a revocable election not to participate initially in a new Plan, but to commence participation at some future date, specified or unspecified? (b) For non-401(k)/CODA Plans sponsored by entities other than partnerships, (e.g., a Profit Sharing Plan for a professional corporation), could contributions on behalf of certain Highly Compensation Employees be varied without being subjected to 401(k)/CODA testing rules? If yes, how could such variations be made? (i) Participant election (ii) Plan Amendment (iii) Other ANSWER: (a) No. This does not fit the standard of the regulation. (b) It may be possible to set up an arrangement, however, the IRS is not in a position to indicate how this might be done. Gray Book 98-24 A defined contribution plan permits HCEs to waive participation on a year-by-year basis. Would this be considered to violate the requirement that benefits, rights and features be available on a nondiscriminatory basis? Would the availability of the waiver be viewed as a tacit cash or deferred arrangement resulting in current taxable income for any HCE who elects not to waive? RESPONSE This would not be viewed as a violation of the requirement to provide nondiscriminatory benefits, rights and features because the result is a smaller benefit for HCEs than otherwise available. However, if the facts of a particular situation reveal that the HCEs who waive participation receive cash compensation in return for their waiver, then indeed, the arrangement would be viewed as a cash or deferred arrangement (CODA). Absent evidence to the contrary, there would be a presumption that the individual did receive consideration in exchange for the waiver. If viewed as a CODA, not only would adverse tax results occur for the HCEs with respect to current accruals, but also the plan would violate the requirement that benefits, rights and features be offered on a nondiscriminatory basis because the NHCEs have been barred from using the CODA. Copyright © 1998, 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.

If you invest at 3% and pay out exactly 120 payments (that is, without regard to forfeiture upon death), the $500K would produce a monthly amount of about $4,800. I agree that an annuity purchase is not wise for someone who expects a shorter than average life expectancy. Perhaps he should look at some forms of trust. Something that could pass on a remainder to a charity or beneficiary. Of course this is assuming the individual has access to a lump sum option.

It is tempting to respond as: - No. - Yes. - How much ya got?

http://benefitslink.com/IRS/revrul2002-45.shtml

As Tom states, "facts and circumstances" is the point. The reg. cite is a type of "safety valve" that the IRS built in to allow for circumstances that could not be anticipated in the writing of the regulations.

Issuing payment to Trustee might be a good idea, but... - do you have written instructions? - if your gut tells you something is wrong, and you ignore it, and it is later shown to be so, then you might have some liability. I would suggest protecting yourself by talking first to YOUR attorney.

I don't understand that either. Scale H is given in Volume XXXV (1983) of the Transactions of the Society of Actuaries, pages 881-883. It is related to age, related to a particular year of birth. Just as important, Scale H is sex-distinct, but your definition appears to ignore that. Perhaps the given definition is suggesting that you project (to NRD?), starting with the NRD of someone who was born in 1930.

In case you have not seen it yet, Exposure Draft RE SFAS87/106/132 at http://www.fasb.org/

It will be difficult to find a link to PLR from 1985. Good luck. There have been several discussions on these Message Boards about this topic. Try the "search".

Could be suspicious. Be careful about - PT, - ERISA section 407.