david rigby

Any thoughts on whether it makes sense to continue doing the MEA calc, or at least gather the data on annual basis, until we know for sure that the MEA repeal does go away permanently? Any experience discussing this with the plan sponsors?

As Dave was getting at, this question probably needs some initial clarification. Has the participant separated from employment? If not, then there is probably not an event which would entitle a distribution from the plan. If so, then the participant is then free to use the amount distributed as desired. (If you need some ideas, then my daughter's college tuition is available.) Perhaps instead the questioner is asking if the plan (and/or the participant?) can direct, prior to a separation of employment, that some or all of the portion invested in company stock can be sold and invested in something else? If that is the question, the answer will depend entirely on the terms of the plan. For example, does the plan give the right to switch investments? Moving money between investments is not a withdrawal hence there can be no 10% penalty. Another possibilty is that the plan specifies that all or a portion of a company match (or other company contribution) will be invested in company stock. If so, it seems unlikely that any of this could be "switched" to another investment or distributed prior to separation of employment.

Raises an interesting question (to me anyway). Virtually every employee who dies prior to a separation of service will have this problem. Should employers have a beneficiary designation solely for the purpose of disbursing a final paycheck? Or must it be paid to the EE's estate?

Sounds good. But I'm not so sure that 12/31 is the "correct" date to merge the plans. A january 1 date might give you some more flexibility with respect to when you get the work done. So what if you have to do a 5500 for a short plan year. Is that a burden?

I agree with the comments about amending the plan as needed. Usually a bad idea to try to anticipate all possible permutations in one document. What's wrong with doing a one-page amendment each year, after you have identified the cross-tested formula you want to use? Seems a lot safer than trying to do it all at once.

Lots of instances of this. It is the very essence behind a profit-sharing plan: the amount of company contribution will depend on how much profit we have. This concept is now extended to the 401(k) plan, which is a prfit-sharing plan. For example, "the company will match your employee contribution by 50%, but if our net profits are at least X% or$Y, then we will increase the match to 75%."

More help from the Society of Actuaries website. Go to this link http://www.soa.org/tablemgr/tablemgr.asp , read the qxtables.txt file, and scroll down to see that many different projection scales are available.

That's a nasty spot you're in. I suggest the PWBA: http://www.dol.gov/dol/pwba/ Especially focus on the "Contact PWBA" link. Having agreement from the participants might be a good idea, but it will not guarantee anything (this is the government, after all).

Found it. TRANSACTIONS OF SOCIETY OF ACTUARIES 1971 VOL. 23 PT. 1 NO. 67 Discussion of new scales D and E begins on the sixth page of this article: http://www.soa.org:80/library/tsa/1970-79/...V23PT1N6724.pdf

Yep, that's correct. Of course, this (or any) formula can be made to pass the accrual rules of IRC 411(B) by putting a "project and prorate" around the whole thing.

Whole thing: http://www.benefitslink.com/IRS/revproc2001-55.shtml

That's what I thought also. Thanks for the feedback.

I decided to re-read this thread. I think the answer to the original question is Yes. But MGB is absolutely correct: what does the plan say?

Consider an otherwise vanilla DB plan, safe-harbor. Upon the death of an active employee, the surviving spouse receives a benefit of the following: - assume the participant had remained employed to NRD, at the same rate of pay as in effect at date of death (thus a "projected NRB"), - spouse gets one-half of this amount, payable immediately, - benefit ceases at the earlier of spouse's death or remarriage. Plan also contains the following statement: "In no event will the death benefits received by the surviving spouse be less than the Actuarial Equivalent of the amount the surviving spouse would have received under the QPSA." [QPSA is defined according to common meaning of that term under the regs.] I'm not sure the 417 statute or regs would anticipate that a surviving spouse annuity could cease on remarriage. A provision that reduced the amount to the QPSA seems passable, but total cessation does not. Anybody think the quoted sentence above is valid? Any other comments?

Several prior discussions on this topic: http://benefitslink.com/boards/index.php?showtopic=11911 http://benefitslink.com/boards/index.php?showtopic=11566 http://benefitslink.com/boards/index.php?showtopic=8979 To find other discussions, use the search feature.

A plan amendment cannot change the eligility to participate for those already in the plan. But it can change the requirements for non-participants. (That is, the "anti-cutback" provisions affect participants, not employees.) However, there might be other reasons for the plan sponsor to make the change prospectively based on hire date. This is generally a human relations issue, rather than a plan issue.

As usual, Carol's comments are thorough and correct. There is also a practical side, where the governmental sponsor may want the plan to look similar to prevailing plans in the private sector. For example, use a 5-year vesting schedule, or offer joint&survivor options, etc. These are issues of design philosophy and competitive position.

But you might have an anti-cutback problem.

Actually, they do have the forms at the link above, although out of order. When you get to the list of forms, scroll all the way to the bottom. The 5500 C/R and instructions are there.

Oh, even better. The IRS website goes back to 1992. http://www.irs.gov/forms_pubs/index.html Scroll down to "Download Prior Years Forms and Publications"

I have some blanks for some, but not necessarily all, prior years. Also not sure if I have all the schedules. I might be able to fax to you, if I can find the time, and if that is acceptable. Let me know.

You may have a point, but "fairness" is an issue that is defined in the relevant statutes and regulations by comparing benefits and/or contributions between two groups: either compare Key EEs versus NonKey EEs, or compare HCEs versus NHCEs. Although it may be an oversimplification to say this, there is no prohibition in federal law and regs against "discrimination" within the HCE group or the NHCE group, as long as it does not violate other statutes (such as ADEA).

...and the TPA should investigate its own E&O insurance coverage.

The issue of "officer" is not relevant to determination of HCE status. Only the compensation test and the 5% owner test. Officer might be relevant to the determination of Key EE for top heavy determination. In general, if a plan has no HCEs, then issues of discrimination testing evaporate. However, there could be an issue if this group is part of a controlled group.

Do-able? Yes. Best design? That depends. As Stephen as stated, you could get a larger contribution/deduction in a DB plan, but depends on a few factors, most importantly, the ages of the participants.