david rigby

(2) I viewed the ALI-ABA teleconference last week. One or more of the IRS representatives stated that, in general, EGTRRA provisions must be adopted by the last day of the plan year for which it is effective, else it cannot be effective in that plan year. The only exception I recall was if the plan incorporates by reference the relevant section of the Code, then the plan will have already recognized the changed provision, such as the increased 415 limit(s).

I think I can answer that. The other notification is to tell participants the plan is being terminated. I'm not decreeing any "required" notification, just stating what I think is appropriate. Why would you not do so?

I agree. I don't think a spin-off would give rise to a partial termination.

The plan administrator needs legal advice. In addition, I notice that your profile states you work for a bank. If your role here is representing the trustee, then the trustee may need separate legal advice. Can any of our contributing attorneys out there fill in the details?

My company is in the business of employee benefit consulting. One of the services we offer is just what you are describing, as do many of the users and readers of these Message Boards. It is usually not our policy to give away such service. We would be glad to discuss these services if that is what you mean.

Oooh. My turn! The famous actuarial response: What do you want the answer to be? The lump sum can be any definition under the plan as long as a few conditions are met: - nondiscriminatory in definition and application, - unisex, - cannot be less than the minimum under 417 (GATT mortality for pre and post, and the appropriate 30-year treasury rate) Did I leave anything out?

Sure you can have a short plan first plan year. But the point of the original post was that certain EGTRRA changes are effective for plan years ending in 2002, so a short year that ends 12/31/2001 does nothing to take advantage of this.

At this late date? I would think that the nuisance of having a plan year begin on January 2 would be more trouble than it's worth. But it's a fair question.

There may be a different problem. The previous comments on the "rule of 80" seem to assume that this is one definition related to Early Retirement under the plan. If instead, the "rule of 80" is an alternate definition of Normal Retirement, the resulting analysis may be different.

Not so sure it's a good idea. Does the plan permit it? (I admit, I'm not sure a plan has to explicitly state this. Just trying to be cautious.) If the account is divided, what would you do if the spouse had not been a participant? Would the Alternate Payee have an account set up for the divided portion? If so, what rights would that AP have, such as withdrawal, investments, loans, etc. It seems that you do not want to combine the divided portion for the AP if it might "muddy" the understanding of these questions and/or any other administrative function.

Oops. My earlier response of "Yes" was an answer to the second question in the original post. I think the answer to the first question is "No".

...and 401(l) is a safe harbor definition. General test available as an alternative to safe harbor design(s).

My guess is the Publication 575 is irrelevant. Since this is a governmental plan, the relevant issues probably are the plan provisions and the state or local statute which permits the purchase of service credit.

Thanks for the info. I wonder if this issue has ever been discussed as possible legislative change, or if there have been other examples, such as court cases or NLRB "commentary". I am troubled by the issue being decided thru PLR's. Seems like the statute could easily address this issue. I might even be happy if the IRS reached a conclusion in a reg., but then you could build a case to say that the silence of the statute and reg is a conclusion.

Yes. See IRC 401(d). http://www4.law.cornell.edu/uscode/26/401.html

It appears that IRC 423 http://www4.law.cornell.edu/uscode/26/423.html and the regs. thereunder http://www.access.gpo.gov/nara/cfr/cfrhtml...26cfrv5_00.html make no disctinction regarding collectively bargained employees. See especially 1.423-2(e).

If the stock is not publicly traded, then the Plan likely has an option for you to receive it in cash. Might be a requirement, since there might be a requirement that all stock be owned by employees. Check the SPD.

First things first. A distribution from a 401(k) plan cannot occur unless you have a severance of employment (in general, although there are some exceptions). Are you stating that your layoff was a severance of employment? If so, then look to the terms of the plan to see what options there are. For example, if the value of your account(s) is $5K or less, then the plan might (but not necessarily) state that your account will be distributed to you. If over that amount, it may be distributed, with you being the one who decides. In either case, you should be given the option of receiving the distribution in the form of a direct rollover to an IRA, or paid directly to you. The latter case requires a 20% withholding for federal tax purposes. Locate, and read, a copy of the Summary Plan Description (SPD).

Or read the regs. directly: http://www.access.gpo.gov/nara/cfr/cfrhtml...26cfrv5_00.html

IRC 401(a)(13) also addresses this. Here is the first part of that subsection: (13) Assignment and alienation.-- (A) In general.--A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that benefits provided under the plan may not be assigned or alienated. For purposes of the preceding sentence, there shall not be taken into account any voluntary and revocable assignment of not to exceed 10 percent of any benefit payment made by any participant who is receiving benefits under the plan unless the assignment or alienation is made for purposes of defraying plan administration costs. For purposes of this paragraph a loan made to a participant or beneficiary shall not be treated as an assignment or alienation if such loan is secured by the participant's accrued nonforfeitable benefit and is exempt from the tax imposed by section 4975 (relating to tax on prohibited transactions) by reason of section 4975(d)(1). This paragraph shall take effect on January 1, 1976 and shall not apply to assignments which were irrevocable on September 2, 1974. There are some exceptions, such as QDRO's. IRC sections relevant to employee benefits can be accessed here: http://www.benefitslink.com/taxcode/index.shtml

The PWBA has online advisory opinions back to 1992: http://www.dol.gov/dol/pwba/public/program...ams/ori/ori.htm If you go here, you can request other info from the PWBA: http://www.dol.gov/dol/pwba/public/pubs/ho...tob/howtobt.htm

I agree, except that I think the commencement of benefits is at the option of the employee: "... benefits may commence..." Another variation is that the plan could be amended to permit commencement at NRD, but cannot permit commencement at ERD, assuming this is a qualified plan. Thus, in the original situation, we are assuming the 70-1/2 employee is at or beyond NRD.

I'm not sure but have been told that merger at 12/31/2001 is preferable to 1/1/2002. The latter gives you a one-day plan year.

Actually, it is in writing. See Q&A's T-13 and T-15 in the top heavy regs. 1.416-1.

I am reviewing a draft QDRO for a conventional DB pension plan. The date of divorce is after the participant's date of hire, but prior to the participant's date of participation. Upon participation, the participant gets a full year of credited service back to January 1 (which precedes the date of divorce). Got the picture? Specifically, it awards X% of the participant's accrued benefit "as of date of divorce" to alternate payee. Does this have any force? Could it (assuming all other provisions OK) be a valid QDRO but with an award of zero dollars? Could it be construed to award part of the benefit which has not yet been earned as of date of divorce? What responsibility does the plan sponsor have to point out these issues? (Sorry, that is kind of open ended.)