david rigby

Perhaps this is a perfect example of "what does the plan say?" It is very common for a plan to include language that would answer the question "what happens if the participant dies without a beneficiary".

Get to that IRS reg. from here: http://www.access.gpo.gov/nara/cfr/cfrhtml...26cfrv5_00.html

I read the sequence of events a bit differently. See above "...the plan was not fully funded as of the date of termination." How can the plan then terminate? Probably because the plan sponsor made it sufficient. Therefore, the contribution in the year of termination looks like the UC normal cost.

If you have not already, you might try searching both the Message Boards and BenefitsLink. Here is one item: http://www.benefitslink.com/reish/guidelin.../valuation.html

Looks to me like it is greater than 60%. Whenever you are close to 60%, always check very carefully, especially with respect to prior distributions.

Back to basics first. If the assets exceed the PV of the benefits, let's make sure we have "used up" the permissible benefits. Can the benefit definition in the plan be increased to use up the surplus? Merlin is correct: make sure the plan is amended to recognize the EGTRRA changes to the 415 limit.

Of course. But what does the plan say? BTW, since the second distribution is due 12/31/2003, it might be worth considering taking the first in 2002.

Try IRS Reg. 1.401(a)-20, Q&A 25, and 1.401(a)-11(d)(3) http://www.access.gpo.gov/nara/cfr/cfrhtml...26cfrv5_00.html

MGB is correct. Insurance is usually able to reduce over-funding in a pension plan, approximately the same way it can reduce over-funding in your wallet.

Depends on plan provisions. As I recall, the "five-year rule" is an outgrowth of an IRS GCM (General Counsel's Memorandum) and focuses specifically on defined contribution plans. (Probably MGB will give us the exact details.) The net effect of that GCM was to imply that all participants who terminated in the five years preceding a plan termination with less than 100% vesting should be given 100% vesting upon plan termination. The reasoning was that, if the employee had been rehired anytime within 5 years following his severance of employment, then he would again begin to earn vesting service. In true bureacratic fashion, this ignored a couple of obvious problems: if the employee had died, rehire seems unlikely; if the company ceased to exist, rehire also seems unlikely. OK, I'll get down off my soapbox. The typical way of avoiding this issue now seems to be to include in the plan document two provisions: - automatic cashout of vested benefits below the limit ($5000), and - statement that any participant who severs employment non-vested will be deemed to have received (immediately) the entire amount of his "vested benefit". (So called "deemed cashout provision.) BTW, this probably also means that the plan should state that individual has a "deemed repayment" if rehired. If you have these provisions in your plan, then the only terminated employees who get 100% vesting upon plan termination would be those who severed employment during the plan year in which the plan termination occurs. This assumes there is not also a partial termination which could extend 100% to others.

The IRS instructions are still a good place to start. http://www.irs.gov/pub/irs-pdf/i5300.pdf

Many plan definitions of comp do not include any reference to "services performed". It could refer to "compensation actually paid to the employee by the employer". This type of reference tends to steer one in the direction of the W-2. However, the original post stated "terminates service". That may or may not mean "terminates employment". Need more information on particular facts and circumstances. There are probably thousands of employers who include the owner's spouse on the payroll, perhaps in some trivial amount. These spouses may never perform services that are related to the business. They still get a W-2. Final question about 70-1/2. This depends on two things: is the employee an HCE? if so, yes the payments must commence under 70-1/2 rules; if not, what does the plan say about NHCEs at 70-1/2?

PWBA / DOL regs. http://www.access.gpo.gov/nara/cfr/waisidx...v9_01.html#2509

Ideally, the final Schedule B will have "Final" added somewhere easily seen. However, in the 2001 instructions to the Schedule B, http://www.irs.gov/pub/irs-pdf/i5500sb.pdf, under "Who Must File" is the following footnoote: "For terminating plans, Rev. Rul. 79-237, 1979-2 C.B. 190, provides that minimum funding standards apply until the end of the plan year that includes the termination date. Accordingly, the Schedule B is not required to be filed for any later plan year. However, if a termination fails to occur - whether because assets remain in the plan's related trust (see Rev. Rul. 89-87, 1989-2 C.B. 81) or for any other reason (e.g., the PBGC issues a notice of noncompliance pursuant to 29 CFR section 4041.31 for a standard termination) - there is no termination date, and therefore, minimum funding standards continue to apply and a Schedule B continues to be required."

I agree with Belgarath RE his comment about involuntary termination. To be considered a partial termination, the termination of participation in the plan must be involuntary, either by plan amendment or other employer-initiated action (such as, firing, layoff, or plant closing). However, the IRS presumes all terminations are involuntary unless the employer shows otherwise. In the original post, there is the phrase "have been terminated". Don't know what that means, but it certainly can convey an involuntary termination.

Every discussion of a partial termination should include a review of "facts and circumstances." Some prior discussions here might be useful, such as http://benefitslink.com/boards/index.php?showtopic=14055 http://benefitslink.com/boards/index.php?showtopic=10187 Based on the limits facts presented, my guess is that the plan sponsor should probably be willing to treat this as a partial termination. However, that will require close examination of your term "voluntarily". In general, the result of a partial termination is to award 100% vesting to "affected participants." This usually does not have any bearing on the plan's operation in the next plan year, except that it may trigger additional payouts, hence affect cash flow.

Correct. Or in actuarial terminology, use N's, not a's.

Looks pretty good. But MGB, how can we old folks (OK, were not old, just "older") explain that to the younger crowd that did not learn commutation functions? Hurray for Jordan!

This might help. http://www.benefitslink.com/IRS/revrul2002-42.shtml

OK this does not address your question, but my thought is that I would not pursue this as a client. The term "black hole" comes to mind.

The Cigna summary of state withholding requirements linked above is from 2001. The summary was updated in early 2002 and posted in this message: http://benefitslink.com/boards/index.php?showtopic=14109

Hmmmm. If the "assets were liquidated", that implies some prior action, probably either formal declaration by the plan sponsor (such as resolution by the board of directors) or an event that caused all participants to have a distributable event, such as severance of employment. If the former, then you do have a plan termination. If the latter, then you have a "matured" plan, one that has distributed all benefits due, and properly filed a final 5500.

At the risk of irrelevance, was the plan terminated or was it "terminated"?

This might be the thread you were seeking: http://benefitslink.com/boards/index.php?showtopic=15011

Most GUST restatement dates I have seen are as of the first day of the plan year beginning in 2001. I have also seen dates as early as the first day of the plan year beginning in 1997.