david rigby

Ok, but who gets the allocation? Is it only those who were there on the date of plan termination? date of plan freeze? Since this is a refund of taxes, could/should it be "attributed" to certain years and therefore should be allocated to those who were participants at that particular time?

Raises an interesting point about whether past payouts were based on some ficticious "book value" (or whatever it was). A price of $100 that does not change for over 10 years sounds a lot like something that does not reflect market value.

Hmm, as best I understand, you state that the amount was incorrect due entirely to mistaken calculation, arithmetic, etc. Not sure if that helps you, but it certainly points away from anyone trying to do anything that was a violation of the plan or the 415 rules. At least that part is good. Might need to investigate the various procedures for plan correction(s). Perhaps the plan sponsor's ERISA attorney should be included in that discussion.

I suggest using the age on the commencement date and compare to the SSNRA. I usually think of both of those dates as "the first day of the month following." In this case, the age will always be interpolated to X years and Y months. Days will no longer be relevant. But caution, this oversimplification is because most plans define any payment commencement date as the first of a month. Check carefully with your plan.

Not sure if this is a defined benefit (DB) plan or a defined contribution (DC) plan. It sounds like it is a DB plan. Likely, the 6% per year you refer to is the plan's definition of early retirement reduction. This is common in many plans and is for the purpose of recognizing that a benefit which starts before "normal" retirement will be payable for a longer period of time, hence the monthly amount must be reduced to reflect this longer time. Your plan may or may not have additional early retirement provisions that would use a different (smaller) reduction for those employees who have at least X years of service. Example, employee may retire early with no reduction if at least age 55 and 30 years of service. If your plan has something similar, it may not be possible to eliminate it merely by freezing the plan. However, even if that provision still exists, it can be restricted to those who retire from active employment. If you are no longer actively employed there, that provision might not be available to you. You need to obtain all written documentation. Start with the summary plan description (SPD, sometimes referred to as the "pension booklet"), and any amendment or addendums to the SPD. Then get any written documentation that was provided at the time of buyout and the plan freeze. Good luck.

I agree with Keith. If the QDRO has been structured as if the plan were a DC plan, then the order is very likely incomplete (at best).

Yes. Use age without regard to the SS phase-in. Year of birth SSNRA 1938 or earlier: 65 1939 - 1954: 66 1955 or later: 67

Maybe. A QDRO can assign any portion of a benefit. That can be on the basis of percentage or flat $ amount. However, if you mean can the QDRO assign a flat amount as a lump sum, this may not fly if the plan does not allow a lump sum form of distribution.

Is it possible that the first payment was half of the maximum because it was 6 monthly payments instead of 12, retirement occurring in the middle of the year?

Are we talking about a 70-1/2 distribution? Is the benefit payable as a monthly annuity?

The original post did not say anything about the ESOP terminating. More facts are needed. Is the ESOP terminating? being frozen? converted to a 401(k) plan? merged into a new 401(k) plan? These are different situations. Only the first of these could lead to a distribution.

Might be hasty to assume that the original amount was incorrect. Probably need a great deal more information about how the amount was determined. I doubt that the plan defines the benefit as "the 415 limit." As for a "make-up", this actuary tries not to give legal advice, but it sure seems like the answer is "too bad". Love to hear some other comments.

This plan sponsor is in need of some very strong advice from his ERISA attorney!

An old, bearded shepherd, with a crooked staff, walks up to a stone pulpit and says . . . And lo it came to pass that the trader by the name of Abraham Com did take unto himself a young wife by the name of Dot. And Dot Com was a comely woman, broad of shoulder and long of leg. Indeed, she had been called Amazon Dot Com. And she said unto Abraham, her husband, "Why doth thou travel far, from town to town, with thy goods when thou can trade without ever leaving thy tent?" And Abraham did look at her as though she were several saddle bags short of a camel load, but simply said, "How, Dear?" And Dot replied, "I will place drums in all the towns and drums in between to send messages saying what you have for sale and they will reply telling you which hath the best price. And the sale can be made on the drums and delivery made by Uriah's Pony Stable (UPS)". Abraham thought long and decided he would let Dot have her way with the drums. And the drums rang out and were an immediate success. Abraham sold all the goods he had, at the top price, without ever moving from his tent. But his success did arouse envy. A man named Maccabia did secrete himself inside Abraham's drum and was accused of insider trading. And the young man did take to Dot Com's trading as doth the greedy horsefly take to camel dung. They were called Nomadic Ecclesiastical Rich Dominican Siderites, or NERDS for short. And lo the land was so feverish with joy at the new riches and the deafening sound of drums, that no one noticed that the real riches were going to the drum maker, one Brother William of Gates, who bought up every drum company in the land. And indeed did insist on making drums that would only work if you bought Brother Gates' drumsticks. And Dot did say, "Oh, Abraham, what we have started is being taken over by others". And as Abraham looked out over the Bay of Ezekiel, or as it came to be known, "eBay", he said, "We need a name of a service that reflects what we are". And Dot replied, "Young Ambitious Hebrew Owner Operators". "Whoopee!", said Abraham. "No, YAHOO!", said Dot Com.

Another point is the allocation. Even if you deposit the match, it does not have to show up on EE statements until allocated. BTW, the plan probably already tells you when that should be. By showing a match allocated, you might actually be violating the plan.

I would not try or even go near your suggested "reimbursement". To the best of my knowledge, there are no IRS regs under section 4980, which probably means that common sense applies. IRC 4980(d)(2)©(i)(II) states "...over the 7-plan-year period beginning with the year of the transfer." My interpretation is that refers to the plan year of the replacement plan in which the transfer date occurs. The plan year may differ from the plan which is being terminatied. It may be that the plan sponsor's may use its judgement as to whether that date is the physical asset transfer date, or the plan termination date, or some other. My own view is that the first date on which you know how much the surplus is (and hence can then find 25%) is the point in time that makes the most sense. It might also be prudent to get a written opinion from ERISA counsel. BTW, note that 4980(d)(2)(B)(i) uses the word "equal" in its definition of the 25% cushion. It does not use "at least". Therefore, it appears that only the 25% is eligible to be subtracted from the surplus for purposes of determining the excise tax. In other words, if you have $100 surplus, you must transfer $25 to the replacement plan, and pay a 20% excise tax on $75. It does seem reasonable, but not documented anywhere, that you could transfer more than $25, but you would still owe excise tax on the full $75.

The original post used the term "plan". All of the other posts are concerned with IRAs. My hunch is that the IRS would find a difference between an IRA and a plan. If this is an issue of distributions from a qualified plan, then only a QDRO is relevant. Even then, it seems questionable whether a judge has standing to make any change in a benefit after distribution has commenced.

Is he over the plan's defined NRD? If so, does the plan permit an in-service distribution to participants in this case?

I would certainly recommend against this. Better would be to make the change on plan anniversary date. You might end up with 2 required contributions in the year of change.

NRA has some very important characteristics. For example, in any qualified plan, it is the point of vesting without regard to service. ERA won't (necessarily) do that. Also, in a DB plan, it is the point in time at which a topheavy minimum benefit is defined. Likely also, the plan defines actuarial equivalence based on the normal form of payment at NRA. Notwithstanding the comments by Kirk and Wessex, I still believe that the definition of NRA is not part of the vesting schedule. However, this is probably semantics. I believe that 411(d)(6) will require that the NRA be "protected" for those who are participants, at least with respect to current accruals.

I disagree. The amendment has no effect on current participants, so the plan sponsor is within its rights to make such amendment.

Purchasing a paid-up whole life policy?! Wow! Where is the advantage to the IRA owner? This looks like the goal is to generate a large commission.

Generally, no. One of the primary purposes of a tax-qualified plan such as a pension plan, profit-sharing plan, 401(k) plan, etc. is that any amount of earnings inside the plan is tax-deferred. Amounts are not subject to taxation until they come out of the plan, that is, they are paid directly to a plan participant. Since earnings inside the plan do not have any immediate impact on taxable income, losses inside the plan are treated in the same manner.

Twenty years ago, I drove a cab for a living. It was a cowboy's life, a life for someone who wanted no boss. What I didn't realize was that it was also a ministry. Because I drove the night shift, my cab became a moving confessional. Passengers climbed in, sat behind me in total anonymity, and told me about their lives. I encountered people whose lives amazed me, enobled me, made me laugh and weep. But none touched me more than a woman I picked up late one August night. I was responding to a call from a small brick fourplex in a quiet part of town. I assumed I was being sent to pick up some partiers, or someone who had just had a fight with a lover, or a worker heading to an early shift at some factory for the industrial part of town. When I arrived at 2:30 a.m., the building was dark except for a single light in a ground floor window. Under these circumstances, many drivers would just honk once or twice, wait a minute, then drive away. But I had seen too many impoverished people who depended on taxis as their only means of transportation. Unless a situation smelled of danger, I always went to the door. This passenger might be someone who needs my assistance, I reasoned to myself. So I walked to the door and knocked. "Just a minute," answered a frail, elderly voice. I could hear something being dragged across the floor. After a long pause, the door opened. A small woman in her 80s stood before me. She was wearing a print dress and a pillbox hat with a veil pinned on it, like somebody out of a 1940's movie. By her side was a small nylon suitcase. The apartment looked as if no one had lived in it for years. All the furniture was covered with sheets. There were no clocks on the walls, no knickknacks or utensils on the counters. In the corner was a cardboard box filled with photos and glassware. "Would you carry my bag out to the car?" she said. I took the suitcase to the cab, then returned to assist the woman. She took my arm and we walked slowly toward the curb. She kept thanking me for my kindness. "It's nothing," I told her. "I just try to treat my passengers the way I would want my mother treated". "Oh, you're such a good boy," she said. When we got in the cab, she gave me an address, then asked, "Could you drive through downtown?" "It's not the shortest way," I answered, as we pulled away from the curb. "Oh, I don't mind," she said. "I'm in no hurry. I'm on my way to a hospice". I looked in the rear-view mirror. Her eyes were glistening. "I don't have any family left," she continued. "The doctor says I don't have very long." I quietly reached over and shut off the meter. "What route would you like me to take?" I asked. For the next two hours, we drove through the city. She showed me the building where she had once worked as an elevator operator. We drove where she and her husband lived when they were newlyweds. She had me pull up in front of a furniture warehouse that had once been a ballroom where she had gone dancing as a girl. Sometimes she'd ask me to slow down in front of a particular building or corner and would sit staring into the darkness, saying nothing. As the first hint of sun was creasing the horizon, she suddenly said, "I'm tired. Let's go now." We drove in silence to the address she had given me. It was a low building, like a small convalescent home, with a driveway that passed under a portico. Two orderlies came out to the cab as soon as we pulled up. They were solicitous and intent, watching her every move. They must have been expecting her. I opened the trunk and took the small suitcase to the door. The woman was already seated in a wheelchair. "How much do I owe you?" she asked, reaching into her purse. "Nothing," I said. "You have to make a living," she answered. "There are other passengers," I responded. Almost without thinking, I bent and gave her a hug. She held onto me tightly. "You gave an old woman a little moment of joy," she said. "Thank you." I squeezed her hand, then walked into the dim morning light. Behind me, a door shut. It was the sound of the closing of a life. I didn't pick up any more passengers that shift. I drove aimlessly, lost in thought. For the rest of that day, I could hardly talk. What if that woman had gotten an angry driver, or one who was impatient to end his shift? What if I had refused to take the run, or had honked once, then driven away? We're conditioned to think that our lives revolve around great moments. But great moments often catch us unaware--beautifully wrapped in what others may consider a small one. PEOPLE MAY NOT REMEMBER EXACTLY WHAT YOU DID, OR WHAT YOU SAID, ...BUT THEY WILL ALWAYS REMEMBER HOW YOU MADE THEM FEEL. (Author Unknown)

Correct. My point is that there may be another issue if the EE is still subject to 70-1/2 distributions under this plan. Of course, the timing is different.