david rigby

http://www.benefitslink.com/IRS/ann2001-12.shtml

I think Q2 is an answer to Q1. ERISA preempts state laws as they propose to regulate employee benefit plans otherwise covered by ERISA, but it does not preempt state laws which determine income taxable for state purposes.

I think the merger is not what triggers a 204(h) notice, but a change in the rate of future employer contributions. This might occur on merger, but it may have already occurred if the plan was frozen earlier. If so, one hopes that the notice was given then.

In addition, have any participants been paid out with values assuming the existence of the accrued contribution? If there had been no contribution, would that have changed the results of any top-heavy test?

I don't think anything prohibits it. Happened to a client of ours that was about 700% funded. But the primary discouragement is the tax, both income and excise. In addition to the 20% excise tax, the plan sponsor must include the reversion in current year income (federal and state purposes) so the total tax bill could be pretty steep.

The 401(k) is not really "under" the cafeteria plan, but it is linked. The purpose is to permit the employee to save extra dollars (typically not matched). It is usually not relevant in a 125 plan that is "premium only."

... and you should fix your payroll system to avoid this problem in the future.

You can get to that reg. here: http://www.access.gpo.gov/nara/cfr/cfrhtml...26cfrv5_00.html But a more basic question. Why terminate? Why not merge the plans? Avoid the expense of termination. Having more money in one trust might give more options in offering investments.

I helped a client prepare a waiver about 3 months ago. We advised them on several points: - it is not guaranteed, - the purpose of a waiver is for temporary financial hardship, and - if the IRS views it as more than temporary, then it is likely the IRS will deny the request. (I'm skeptical about whether this client can recover.) The client made the application anyway. No response from the IRS yet.

May be unlikely that any employer can deduct from a paycheck without proper authorization. Perhaps your state agency can help. http://wagehour.bes.state.oh.us/w3/webwh.nsf

Huh? Each state has its own withholding rules and effective date(s).

3. invest in some other assets (to avoid this problem in the future).

I just reviewed a DB document that included the following steps: - company will attempt to locate "missing" participants, - after 5 years from date payment is due, send a registered letter to last known address, - 3 months after letter, if no response, the Committee may "cancel" the benefits, - if the participant later shows up, the benefits will be paid.

I got the same results you did. But one caution. Let's be clear that the mortality table in use here is the unisex version of the GAR94 table, with projection to 2000, issued by the IRS in Revenue Ruling 2001-62. http://www.benefitslink.com/IRS/revrul2001-62.shtml

Sounds like you both need some tax advice. The pension plan cannot send anything directly to you without a Qualified Domestic Relations Order (QDRO). Highly unlikely that a divorce order would also consititue a QDRO. That is, the divorce order likely tells him to pay you, but it does not tell the plan to pay you. If he is not paying you, then your attorney should probably seek judicial enforcement, depending on the laws in your state. It may be possible to have the court issue a QDRO, even though he has already retired. You should probably anticipate some attorney costs, but maybe you can make him pay that. Highly unlikely that such a QDRO would be retroactive. By the way, the common advice given around here is that if your attorney does not know the meaning and importance of a QDRO, then you need a new attorney.

Minor clarification. Are you stating that both plans are terminating? The PBGC will take "missing participants" only if the DB plan is terminating. BTW, I'm not sure about the answer to your question, but I doubt that the PBGC would look favorably on it. There is a proposed IRS reg that permits a DC plan to set up an IRA for missing participants under certain circumstances. http://www.benefitslink.com/IRS/revrul2000-36.shtml

As so often is the case, the website can be a great place to start. Go here. Use the Search function with words such as "demutualization" or "prudential".

One minor caution. IRC 411(a)(8) defines the latest point at which the plan can define NRA. 411(a)(9) then defines "normal retirement benefit", commencing at NRA. But many plans also use a definition of NRB. This plan definition should not be confused with the Code definition.

Sounds to me like that provision does incorporate 401(a)(17) by reference. Yes, the plan can be amended to use a $170K limit, but IRC411(d)(6) will require that any resulting benefit not be less than the accrued benefit immediately prior to the change. Has any participant already exceeded $170K? If not, such amendment should accomplish your goal.

I'm skeptical also. Sounds to me like a plan amendment, which means the plan is not frozen. Or perhaps it is frozen, then amended, and frozen again.

Suppose a DB plan with mandatory employee contributions: 1. Is it possible that SSCRA could be interpreted to require the employer to make contributions on behalf of the employee? 2. Is it possible that SSCRA could be interpreted to require a minimum of 6% interest? I think the answer to both is NO, but let's hear other opinions.

"...Alternatively, you could treat the switch to the new employer as having terminated the employees' service with the old employer. That would require full vesting of account balances." Why?

Probably look to the terms of the plan for answers to both questions. w/r/t the union status, it appears that the employment status has not changed. Why would anyone think that union representation changes employment status? The presence of the union may or may not change whether the employees are eligible for future accruals. w/r/t the layoff vs. termination, it's a good question. Ideally, the plan should address it, but we should not be surprised if it does not. Then might look to other personnel practices for help in being consistent. As always,precedence can be mighty useful.

Your alternatives should work. Another method is to limit any HCE's allocation to $X or Y%, without limiting NHCEs. Remember that you are permitted to discrminate against one or more HCE's.

To the best of my knowledge, the provisions of a "divorce decree" are not relevant. The plan cannot divide the benefit between X and Y. The only document that can do that is a Qualified Domestic Relations Order.