david rigby

A QDRO could assign a dollar amount. Does not have to be a percentage. As far as John's specific situation, it looks like this plan needs to have some good legal advice by someone who knows QDROs. The change from employer-directed to participant-directed is likely not trivial to the QDRO issue.

Not so fast. If the plan is a DC plan, I would agree that "interest" probably refers to investment earnings, whether positive or negative, but it might not, so getting input from QDRO drafter might be appropriate. If the plan is a DB plan, it seems likely that "interest" does not refer to investment earnings.

Earlier discussion: http://benefitslink.com/boards/index.php?showtopic=7605

I'm not sure it is proprietary. At any rate, it is the 71GAM projected to 1980, but I'm not sure of the projection parameters. In theory, there are other tables with different projection dates. I have a table that I think is the right one. I'll see if I can locate a copy and email it to you.

I agree, this is over 60%. However.......... Caution. Does the plan have any definitions or procedures for determining the present value of accrued benefits for purposes of the top-heavy test? Some plans define a set of actuarial assumptions (interest rate and mortality table) for this purpose. If not defined, it must be reasonable (IRS reg. 1.416 Q&A T-26), turnover assumptions should not be included. Use of an interest rate that might be considered "low" for funding purposes might be appropriate here, such as 5%. In addition, this will tend to lower the T-H ratio, since the Key Employees are usually among the older members of the group. Also, be extremely careful with the five year lookback (Q&A T-1 and Q&A T-30). Good records can help you provide a high level of accuracy to this test. Whenever you are this close to 60%, you probably owe the plan an accurate test.

In deciding which type of service definition(s) to use, the primary issues are usually what type of employee base is covered, and what type of administrative practices are available. For example, if there are many part-time workers, then using the hours definition will often exclude them from participation, vesting, and benefit accrual. That may or may not be the goal of the plan sponsor. In general, there are trade-offs related to amount of administrative cost and amount of benefit cost.

I agree with Andy. In fact, in 20+ years, I have never seen a plan that calculates vesting service in fractional years, except for plans which use the elapsed time method for everything.

I would urge caution about giving partial credit in first and/or last year. This is because the "last year" is at date of any termination, not just retirement. Employee could be rehired. Note that you are already giving partial credit when hours are between 910 and 1820. If the employee terminates and is rehired in the same plan year, then the employee might get more credit than someone who works the same number of hours but does not terminate. If it is important to give partial credit, maybe you could use elapsed time method, but this has drawbacks also.

Might be a problem with how the plan defines the lump sum actuarial equivalent. Such definition usually states that the amount is determined as of the date of payment. If the delay is significant (in the eye of the beholder), then it might mean the original amount is not valid under the definition. Even if that is not an issue, then the determination of interest might be related to several factors, such as what precedent, what is the reason for the delay, etc. Most plans sponsors I encounter do not have a problem with a reasonable interest adjustment whenever the payment is delayed. However, it is probably the decision of the sponsor, and should be applied consistently.

Does the amendment have an effective date, either in the amendment itself or in the resolution that adopts it? If there is an effective date, that should imply that it is not retroactive unless specified otherwise.

Yes, being a "safe-harbor" plan means that the plan is deemed to be non-discriminatory. But be careful about this because the plan must be safe harbor in all areas, not just in the permitted disparity. This includes such issues as the definition of comp, normal form, uniformity of benefits, etc. For example, I had a plan that was safe harbor (actually quite vanilla) in all areas except that the normal form was a life annuity with 10 years certain. This failed the safe harbor definition because the SS integration was defined assuming a life annuity. General Test.

Gary, not exactly on point to your comment, but be careful about safe harbor. We have noticed that quite a few safe harbor plans do not pass the general test.

Correct. IRC 401(l) is essentially a safe-harbor definition of SS integration. As always, if you fall outside of safe-harbor, then 401(a)(4) testing applies.

I think that freezing the plan at 5/15/2000 will freeze new benefit accruals/contributions and participation but won't freeze the investment of the exising accounts. What does the plan say about how the money is invested? The plan must define how often earnings on invested monies are allocated (at least once per year), so the assets are what the assets are.

I might be missing something, but all of the prior discussion seems to be focusing on automatically making such transfers. What about employee election? Where you have such identical plans, what does the plan say about this?

Here is some prior discussion. http://benefitslink.com/boards/index.php?showtopic=7127 http://benefitslink.com/boards/index.php?showtopic=6744 http://benefitslink.com/boards/index.php?showtopic=4462

A few thoughts. Honesty never goes out of style. We had a session at the 1998 Enrolled Actuaries Meeting titled "Exercising Professional Judgement". Do you have a copy?

I'm confused. What does the Designated Hitter rule have to do with a 401(k) plan?

I don't know if you can but I would recommend against it. Each plan has to report the income on a 1099-R separately, both to the participant and to the IRS. Why try to get it confused.

I don't think the Alternate Payee gets counted as a separate participant for anything, certainly not for purposes of the 5500 form. I think you would "attribute" the prior distribution to the employee/participant.

Kip has this absolutely correct.

A better question is "what is the plan's definition of compensation?" The plan will usually define the period (such as plan year or calendar year) and what comp is included (such as gross pay, base pay, etc.). The rule of thumb is "definitions rule".

Well, precedent might be important. My interpretation (of the phrasing you have given) would be to use the UP84 Table (that is, no setback or setforward, which is the same as 20% female weighting). Of course, post-GATT this might still be the definition, with the GATT value serving as a minimum.

Just an observation, that small plans do not have different vesting schedules in qualified plans. More likely would be differences influenced by industry, rather than size (see, size doesn't matter). However, small plans are more likely to be top-heavy, which means that they are more likely to be affected by the top-heavy vesting schedule.

Problems big time! See Revenue Ruling 85-131. The 415 maximum is subject to phase-in. Try this to link to that revenue ruling: http://www.taxlinks.com/rulings/findinglis...evrulmaster.htm