david rigby

My perspective has a different emphasis. If the plan sponsor does not want to bring his plan into compliance, I would advise him to get proper legal advice, and I would probably include my (non-legal advice) opinion that his course of action may not be wise. His attorney and/or auditor might be able to guide him in the best course of action, and let him know what are the consequences of taking different action.

It is harder to generalize about SERP plan design than it is about qualified plans. Very often, the SERP is designed (or should be) with very specific targets in mind for very specific individuals. (Not that qualified plans are not designed that way, just not as often.) This is true with respect to Early Retirement features also. Some SERPs do not have any early retirement. Some contain a very high subsidy. The correct answer is to determine what you want to accomplish with the SERP, and evolve the plan from there. It may also be that issues such as early retirement or death benefits are not clear; in that case, you may design the SERP to ignore those issues, with the intention of revisiting them in a few years. For example, if your SERP is for the purpose of making up any limits umposed by 401(a)(17) and 415, then the SERP design might be an exact mirror of the qualified plan at early, normal, death, disability, etc. Alternatively, if the purpose of the SERP is to create a target of total benefit s at age 65, then you design that target (such as 60%). But what early retirement provisions you include will be driven by what early retirement incentives you want, or don't want.

Negative assets a "little odd"? Yep. Why aren't your assets zero for a new plan?

I apologize for misinterpreting the original question. This discussion might relevant: http://benefitslink.com/boards/index.php?showtopic=11691

The number does not surprise me, but be careful how you use averages. As the article points out, there are noteworthy differences by geography, by size of company, by duties. In addition, a majority of those included had a bonus.

As usual, BenefitsLink is the place to go for references. This was posted on BenefitsBuzz 01/07/02. http://www.ifebp.org/2002/01/05/37516/9804...ORD.Missing.asp

I agree. I see no action that caused termination of employment or termination of the plan. In fact, on the day of acquisition, the only thing different was that the plan sponsor became a subsidiary of another company. It appears that sponsorship of the plan did not change on that day.

Thanks to MGB for his usual lucid explanations. One item to add though is the catch-up contribution. If the plan is amended to permit catch-ups, that would not be covered in the reference in the state statute for 2002. This could be a nightmare in the following manner: the tax basis for federal purposes would differ from the tax basis for state purposes, and could differ by state. Anybody's recordkeeping system track that?

If you have a relationship with a reputable employee benefits consulting firm, ask their advice. You might also ask if your attorney and/or auditor has referrals. (Full disclosure: I work for an employee benefits consulting firm.)

The likely scenario you describe is that bankruptcy would automatically trigger the termination of the plan, which would in turn trigger 100% vesting. Absent any regulatory statements on this (sorry, don't know), I don't think that scenario is valid, with a possible exception for liquidation in bankruptcy. Anyone else?

My understanding of the terminology is that "unit" is the correct answer for your situation. However, it may be possible that your form asks two questions: fixed or variable? then unit or flat? FYI, the source for my description above is found in chapter 5 of Fundamentals of Private Pension Plans, written by Dan McGill and Donald Grubbs, published by the Pension Research Council. (I have a copy of the sixth edition.) BTW, this book is an excellent resource.

Defined benefit plan formulas fall into two basic categories: fixed and variable. Two types of fixed formulas are: A unit benefit formula accrues an explicit unit of benefit for each year of service. The unit may be expressed as a percent of comp or as a dollar amount. A flat benefit formula provides a benefit that is unrelated to service, although there may be some minimum service requirement. Variable formulas are less common and include the use of variable annuities or some other mechanism whose goal is to "protect" the purchasing power of the benefit.

I have a client with a conventional DB plan, and a subidiary with a mirror plan. The only difference between them is special minimums that apply to accruals prior to a specific date. Client wants to merge. My question is what would be the appropriate effective date to do so: 12/31/2001 or 1/1/2002. I think 12/31/01 is valid as long as we complete the amendment(s) by 3/15/2002. However, anyone see any downside to this? A merger as of 1/1/2002 would give us much more time to do all the paperwork, but it gives a one-day plan year. Does this mean I have to do a 5500, including a Schedule B for a one-day plan year? I think the answer is yes, but I looking for feedback on pros and cons of each alternative.

I think it is a vesting schedule.

I can't resist. I also have experience with "being bought out." The result is ususally twofold: - someone (or a few someones) get paid nicely for the buyout, - but afterward, the buyer wants the acquired company to produce enough profits to pay for the acquisition. This means higher profits/margins than before the buyout. All the employees who are left have to work that much harder/longer to accomplish this. In other words, you are paying for the money that was paid to your boss.

Just a minor clarification to the post by Bri: As a participant, you should have been given a summary plan description (SPD). This is the first place to start. Second, you also have the right to your own copy of the plan document, for a fee to cover copying costs. Third, you have a right to sit in somebody's office and read the plan document, for no cost. The information needed to help your original question is: - what type of plan (profit-sharing, 401(k), pension, etc.) - what type of contribution are you referencing? (employee deferrals under a 401(k) plan, employer match under a 401(k) plan, employer contribution under a profit sharing plan, employer contribution under a pension plan, etc.) - assuming you are referring to a 401(k) plan, what does the plan say about who is entitled to a match and/or profit sharing contribution? For example, it might say that only employees who are still employed on 12/31 will get the match for that year. Thus, as implied in the earlier posts, the employer may have been doing something in the past that was more generous than required by the plan, and now they are changing it. In addition, there is the implication that the employees have not received any official notification of this change. Is is possible that what you read is not final, but just somebody's suggestion? Another issue for readers is to consider whether the plan may have de facto changed a plan provision. That is, if the plan had a last day rule, but it was never observed, is there a possibility that would be considered a plan change? Opinions?

The determination of "severance date" is usually a personnel matter, not a definition in the plan. However, Kirk's point is to look at the plan definition of compensation for a possible reference to severance pay.

Good spot! Here is the link to that publication. http://ftp.fedworld.gov/pub/irs-pdf/p590.pdf

You might try the Q&A columnn on correcting plan defects. See in particular Q&A 147. http://www.benefitslink.com/qa_columns/pla...cts/index.shtml

Minimum Required Distributions is a concept created so that the amounts in IRAs and qualified plans can be taxed. Because amounts distributed from a Roth IRA are not subject to taxation, there is no need for a MRD.

Not sure, but perhaps these earlier discussions will help. http://benefitslink.com/boards/index.php?showtopic=12671 http://benefitslink.com/boards/index.php?showtopic=10562

I'm not sure this EE is an HCE. From the original facts, I inferred that the EE was hired in the current year. Unless the EE is also a 5% owner, then he will not be an HCE until next year. Have I missed something?

Unfortunately, those answers sound quite reasonable. However, if there is any doubt, I volunteer to be the beneficiary. Just doing my civic duty.

Good suggestion. A better first step would be to read the SPD. This will identify the trustee. It might be useful to remind the employer that there is no authority to "freeze" any plan assets. This is exactly the reason that federal law requires the plan to have its own fund, separate from the books, and the fingers, of the company. The SPD very likely will have some generic information that describes this. Another point not clear in the original post: it is not clear if the participant is entitled to a distribution. Most plans do not permit a distribution to a participant while still employed. Vesting status has nothing to do with this.

I think that is correct. Merging the plans on 1/1/2002 will give you a one day plan year, requiring a 5500. But so what? That gives you more time to get the paperwork done.