david rigby

From facts given, looks like a simple NO. 1. If the DB lump sum value exceeds the cashout limit, then the plan appears not to permit a lump sum distribution to this participant. Absent any other information, that should be enough to answer the question. 2. Also, the provisions of the DC plan will say whether it accepts rollovers. However, most plans that do so also include a requirement that the individual be an active employee of the sponsor.

A few thoughts. You are not amending for GUST, so the remedial amendment period is not relevant (?). December 31, 2001 is probably relevant only in the sense that the plan must be formally adopted by the last day of the fiscal year for which you are taking the deduction (or is it March 15, 2002?). And this plan document should already be "GUST-ready". You never have to submit a plan to the IRS for a determination letter, although most consultants, attorneys, auditors, etc. will advise you to do so.

I don't think a plan merger is a problem. It happens all the time. However, it usually happens when A purchases B, not just the assets of B. If B still exists, then it might be the plan sponsor. You need some qualified legal beagle to tell you if that distinction is important. Also, note that merging the plan (or purchasing all of B for that matter) will certainly shift any potential liability from B to A, if there are any skeletons in B's closet.

Makes sense to me. There is probably an important timing issue. That is, would the amendment to the money purchase plan have to be enacted prior to 10/1/2001? You might also have to watch out for vesting for the short plan year.

In general, all distributions from qualified plans (ie, pension plans, profit-sharing plans [which includes 401k plans], etc.) are taxable to the recipient. The first exception is for amounts previously contributed to the plan by the participant with after-tax money. 401k contributions are made on a pre-tax basis (hence tax deferred until paid out), but some profit-sharing plans permit the EE to also make after-tax contributions. The second exception is when the distribution is eligible for a rollover, and is actually rolled over to an IRA. In this case, the tax is deferred until the amount is distributed from the IRA. In the case of a distribution due to the death of the employee/participant, the amount is taxable to the beneficiary. If the beneficiary is the surviving spouse, then a lump sum distribution is generally eligible for rollover to an IRA. Non-spouse beneficiaries do not have rollover rights. If I have errors of omission or commission, someone more qualified than I will correct me.

Seems unlikely to fit with the intention of the Code. As you describe it, the former employees of B were never employees of A. Any qualified plan is usually for the employees of the plan sponsor (and their beneficiaries). IRC 401(a)(1) includes the phrase "...for the exclusive benefit of his employees or their beneficiaries.... BTW, why does A want to be so generous with these people who were never A employees?

Hmmm. I also need more time to digest this, but it looks to me like a plan whose benefit is defined by the greater of formula A or formula B. Not sure that causes discrimination, although the change could be considered discriminatory under 1.401(a)(4)-5. Also, potential for problems with backloading.

Great list! Hey Dave, the attachment in Appleby's post is a one-page document. Perhaps that information would be a useful page of links. Whatcha think?

Some similar discussion here: http://benefitslink.com/boards/index.php?showtopic=6713

Plan X has been exempt from PBGC premiums because the only employees of the company are husband and wife. Now they have an employee. The employee first became a participant at 1/1/2001. The participant count at 12/31/2000 is 2. I thing the 2001 PBGC premium is $38. What am I missing?

You might also want to look at this "calculator" provided by the American Academy of Actuaries. http://www.actuary.org/briefings/pension20..._calculator.htm

Compound interest. If you invest $100 per month for 40 years and get a 12% annual return (I assumed 1% per month for simplicity), you will have about $1,175,000 at the end of 40 years. If you did the same thing for 30 years, the amount would be about $350,000. However, don't forget the inflation component. That is, part of the rate of return is reflective of inflation. If that is 4% for 40 years, then that gallon of gas that costs $1.50 today will be over $7.00, taking in account inflation only. If the inflation rate is 5% (instead of 4%), then the gallon costs about $10.50. Not sure where Suze got her numbers or what interest rate she assumed. Such statements are generally of no value without such information.

Hmmm. No attorney I, but charging a "breach of fiduciary duty" just because the account balance (I assume this is a DC plan) "lost 40%" seems a bit hasty.

Most plan documents will have provisions which address suspension of benefits, and what to do upon rehire. These are related but are not necessarily the same. Common provisions upon rehire would include accrual of service and also a provision to offset the value of the additional accrual by the amount of the benefits already received. Note, such offset is common but not required. My understanding is that it must be in the plan document in order to be applied. Usually, rehire will also cause a suspension, but not necessarily. Another point, accrual of service might (under the terms of the plan) require that the employee work a minimum hours during the year. For example, a retiree who is rehired on a part-time basis might not be expected to work this minimum (1000 is common). In this case, it might not make sense to suspend the payments.

When you merge the plans, do you not have a final 5500 due for the first plan, probably showing a merger date? If so, that emphasizes the 2001 plan year?

Not sure if Reg. 1.414(l)-1(d) helps. http://www.access.gpo.gov/nara/cfr/cfrhtml...6/26tab_00.html (d) Merger of defined contribution plans. In the case of a merger of two or more defined contribution plans, the requirements of section 414(l) will be satisfied if all of the following conditions are met: (1) The sum of the account balances in each plan equals the fair market value (determined as of the date of the merger) of the entire plan assets. (2) The assets of each plan are combined to form the assets of the plan as merged. (3) Immediately after the merger, each participant in the plan as merged has an account balance equal to the sum of the account balances the participant had in the plans immediately prior to merger. The noteworthy item is that vesting is not mentioned.

I have no cites, but my perspective on this is the analogy to a terminated plan. Until the merger date, you have two plans, each which must be in compliance with GUST (operationally) and must be amended formally by the end of the 2001 plan year. If the first plan is never amended formally, then it has never been brought into compliance. (The compliance in form as well as in substance.) Also, would you have a short plan year at the date of merger? If so, seems that you would automatically create the last day of the 2001 plan year. My vote is to amend.

Carol's resource is quite good. However, you asked a question about 401(k) plans, even though you posted it to the Governmental Plans Message Board. Do you mean your question to apply to a governmental plan, or to a typical (non-governmental) 401(k) plan? You are welcome to post any question, but it helps to have it posted to the correct board.

No. Vesting service cannot be frozen. The term frozen is used (usually) to refer to benefit accruals (DB plans) or employer contributions (DC plans). It can (but does not necessarily) mean that the plan is also frozen with respect to new entrants. In the case of a DB plan, it is easy to imagine a not-well-funded plan that is frozen, but employer contributions continue to be required. None of this has any effect on the vesting provisions of the plan.

How much? (I doubt you can afford me.)

This link is the DOL publication referenced by QDROphile: http://www.dol.gov/dol/pwba/public/pubs/qdro.htm

You may also have de facto changed your plan document. If the actual distributions have in any way been discriminatory, get thee to a lawyer.

In my CCH copy of regs and statutes, I have the following commentary at the beginning of several regs: "Prior to July 1, 1996, PBGC regulations were under Chapter XXVI of Title 29 of the Code of Federal Regulations. Effective July 1, 1996, PBGC regulations were moved to Chapter XL, and were renumbered and reorganized." Not sure why this was done, but one result was to make the reg numbers conform to the ERISA section numbers. Reg. 4044 has an Appendix A containing several tables. Table I is labeled "Mortality Table for Healthy Male Participants." This is the 1983 GAM table for males (no set-back or set-forward).

Please be careful of absolute statements such as "This is not allowed under 411(d) and erisa 204(g)." The "anti-cutback" provision found in Internal Revenue Code section 411(d)(6) is with respect to accrued benefits. A plan can be amended to make changes that affect future benefit accruals.

Does the plan have a provision that permits loans to participants?