david rigby

Link to Rev. Proc. 2001-17 http://www.benefitslink.com/IRS/revproc2001-17.shtml

Also depends on the significance of the amendments themselves.

... and it would be really helpful if the plan itself addressed this.

To the best of my knowledge, that's correct. Caution: I'm an actuary, not an attorney.

Possibly not relevant to your question, but an issue about the CBU. IRC 410( B)(1)(3) permits CBU employees to be excluded from coverage testing "...if there is evidence that retirement benefits were the subject to good faith bargaining..." My understanding of this is: If there was no bargaining related to retirement benefits (in general), and possibly related to this plan (specifically), then such unit of employees cannot be excluded from coverage testing. I would love have some feedback about whether my synopsis is valid. Here is a link to the IRS regs. http://www.access.gpo.gov/nara/cfr/cfrhtml...26cfrv5_00.html IRS Reg. 1.410(B)-1( c)1): "(1) Bargaining unit. Under section 410( B)(2)(A) and this paragraph, there may be excluded from consideration employees not included in the plan who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if the Internal Revenue Service finds that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. For purposes of determining whether such bargaining occurred, it is not material that such employees are not covered by another plan or that the plan was not considered in such bargaining." Fascinating: the DOL defines a CBA, but the IRS defines "good faith bargaining."

The "anit-cutback" rule covers benefits earned as of the effective date of the change, not what could be earned if the rule had not changed. If I understand your facts correctly, then the plan could be amended to revise the definition of compensation, retaining a minimum of the accrued benefit. (Alternatively, you could revise other aspects of the rate of benefit accrual.)

The primary goal of a business is to make a profit. That means a constant attention to controlling and/or reducing expenses. A likely result of any mandated expenses is that more jobs will move to other countries. It has already devastated several industries, such as textiles.

Not sure if any readers will disagree with me, but I have added to the Model Notice in the past. I make two changes: 1. Change the paragraph heading from "Mandatory Withholding" to Mandatory Federal Tax Withholding." (page 11 on the above link) 2. Add the following paragraph immediately following: "Mandatory State Tax Withholding. If any portion of your payment can be rolled over under Part I above and you do not elect to make a DIRECT ROLLOVER, many states have a mandatory withholding requirement. For example, North Carolina and Virginia require a withholding of 4% under these circumstances. If your payment is made in the form of a lump sum, then the trustee will withhold 20% for the federal requirement and whatever state withholding requirement applies for your state of residence." (I include the references to NC and VA because that covers most of our clients.)

Hmmm. Perhaps Bill has some strong opinions about this. He has certainly pointed to an important aspect, maybe even more important than any arbitrary limitation on investments: disclosure. In particular, disclosure of fees. There is a definite need in that area. Personally, I would hope for some non-governmental policing, but we'll see.

A little help please. Where can we read this?

This discussion began with reference to California, but many issues probably apply in several states. http://benefitslink.com/boards/index.php?showtopic=12958

I think a bit of history might also be useful. When ERISA was passed in 1974, it imposed a 10% limit on "qualifying employer security or qualifying employer real property". However this limit applied to defined benefit plans. The statute specifically exempted certain plans: those intended to be "individual account plans", such as profit-sharing, stock-bonus, thrift, and money purchase plans. You can read ERISA (as amended) here. http://www.benefitslink.com/erisa/crossref...nce_short.shtml The applicable section is 407. Section 407(a)(2) imposes the 10% limit. Section 407(B)(1) provides the exception for individual account plans. So it is worth asking why the original limit on DB plans and not on other plans. My perspective is that Congress was trying not to protect individuals from making bad investment decisions, but protecting the Pension Benefit Guaranty Corporation (PBGC). (To those who don't know, the PBGC was created by ERISA as a government sponsored insurance company for defined benefit plans. The PBGC has no jursisdiction or influence over defined contribution plans.) Notice that ERISA section 407 is included in Title I-Protection of Employee Benefit Rights, Subtitle B-Regulatory Provisions, Part 4-Fiduciary Responsibility. Thus, the issue of resticted investments falls in the area of fiduciary responsibility and prudent investing. For example, section 404 contains the "prudent man" rule. To the best of my knowledge, this was the first time such rule was ever placed in a statute, and most likely the first time it was applied to employee benefit plans. (Someone else may be able to clarify that.) The committee reports (that is the summary provided by Congressional committees at the time of ERISA's passage) can also shed some light on the reasoning here. This particular section is a bit long, and I have not found a internet link to this yet, but I'm looking. However, here is one relevant paragraph from the Conference Committee Joint Explanation for ERISA section 407: "In recognition of the special purpose of these individual account plans, the 10 percent limitation with respect to the acquisition or holding or employer securities or employer real property does not apply to such plans if they explicitly provide for greater investment in these assets. In addition, the diversification requirements of the substitute and any diversification principle that may develop in the application of the prudent man rule is not to restrict investments by eligible individual account plans in qualifying employer securities or qualifying employer real property." (It may be worth noting that I am quoting from a publication whose copyright date is 1974, not a later summary or later amendments.) While I'm at it, since this thread was apparently started by someone writing an article, I request that he return to this discussion thread when such article appears in press and provide a link so we can all read it. Thanks.

Yes, if the plan has an effective date in 1985, with nothing later, that will be a problem, failure to properly and timely update the document for statutory changes. You might want to check this http://www.benefitslink.com/qa_columns/pla...cts/index.shtml for advice on what to do in this case. In general, remedial amendment periods will be the same for DB plans as for DC plans.

I think Richard has the correct dates. Perhaps it would be helpful to distinguish between an effective date and a signature date. In the case of TRA86, the effective date was (probably) January 1, 1989, but this remedial amendment period did not end until December 31, 1994 (CY plans). I'm still not sure if the original question is referring to effective date or signature date. Yes DB plans need to be amended for GUST.

Probably the reference is to changes from GATT, passed in December 1994. This, along with other legislation in 1995, 1996, 1997, etc. has come to be known as "GUST", primarily because the IRS has given a remedial amendment period for all of them. The most frequently discussed DB-related item from GATT was a change in the way minimum lump sums (actuarial equivalents) are calculated. This item will generally not apply to DC plans.

Well as a matter of fact it does. Plans sponsored by government units (county, state, federal) are exempt from many of the same rules that govern other plans. One of the exemptions affects this. Very possible that a govt.-sponsored plan is subject to a judges's domestic relations order without any requirement that it be qualified. If you ask an attorney for advice, and that attorney does not understand the meaning, importance, effectiveness of QDRO's, then you should probably keep looking.

I may have misread the original post. Ray is correct. Using the PBGC to handle missing participants is a procedure applicable only upon plan termination, and only when you have done reasonable search to find those missing.

Unfortunately, you may have to do some more digging. Federal law that governs pension and profit-sharing plans has stated, since 1974, that benefits under a plan cannot be "assigned". See Internal Revenue Code section 401(a)(13). This meant, among other things, that the court had no right to go after a benefit. Sometimes, judges have a tendency to do what they want, and many courts "awarded" a portion of a benefit in a divorce action, even though it appeard to conflict with the federal law. To settle this, Congress in effect gave in. In 1984, they re-stated the importance of the "non-alienation" policy, but created a specific exemption for a Qualified Domestioc Relations Order. A DRO must meet specifice requirements in order for it to be "qualified". The result is that a plan can observe the terms of a DRO only if it is a QDRO. As you state, the divorce "award" occurred prior to the effect of any of these laws. You will probably need advice of an attorney who is well-versed in family law. One important piece of information is whether any payments had already commenced to your mother before she died. If so, then the terms of that payment likley will govern, for example, a payment of $X each month for your lifetime.

I cannot answer this question directly. However, I doubt that an insurance company will be very eager to bid on annuities for missing participants, especially since these are usually the small amounts. You might also have some negative reaction if you purchased an annuity (small, but not zero risk of insurance company default) versus letting the PBGC take it.

You might also look at the website for your state's Department of Labor. There may be a list of frequently asked questions that covers this issue.

This issue is addressed in IRS regulations, at least to some degree. Reg. 1.401(a)-20. http://www.access.gpo.gov/nara/cfr/cfrhtml...26cfrv5_00.html Q&A 27 reads as follows: Q-27: Are there circumstances when spousal consent to a participant's election to waive the QJSA or the QPSA is not required? A-27: Yes. If it is established to the satisfaction of a plan representative that there is no spouse or that the spouse cannot be located, spousal consent to waive the QJSA or the QPSA is not required. If the spouse is legally incompetnent to give consent, the spouse's legal guardian, even if the guardian is the participant, may give consent. Also, if the participant is legally separated or the participant has been abandoned (within the meaning of local law) and the participant has a court order to such effect, spousal consent is not required unless a QDRO provides otherwise. Similar rules apply to a plan subject to the requirements of section 401(a)(11)(B)(iii)(I). There might be another issue. If your parents are not divorced, then any "remarriage" is not valid. However, you might want to consider whether he did obtain a divorce, just to "cover all the bases."

Good point about the gray book. However, I plan to go to the EA meeting. Perhaps I can remember to ask it in the IRS session.

If you have negative assets, you are recognizing an experience loss before your first valuation date. That does not make sense to me. An alternative is to submit this question for inclusion in the Gray Book.

My understanding is that the assets as of any val date can never consider (in any manner) actual contributions made for that plan year. I vote for zero.

Maybe this is just too simple, but would the lump sum just be the actuarial equivalent of all future benefits?