david rigby

So what if they whine! If they can't find the time to do it right now, ask them when they are going to find the time to do it over.

BTW, IRC 404 does not permit a deduction to be based on a violation of 415. I think it is subsection (j) of 404 [Edited by pax on 08-24-2000 at 02:58 PM]

Perhaps being discrete is not the best approach. If the union is hoping to entice others to join, then shouldn't they be engaged in full disclosure? You might try this site for 5500 information: http://www.freeerisa.com/customer/login.asp

I think that the J&S rules of IRC 417 will require a "yes" answer to your last question, but I would be interested in other opinions.

Interesting. Is this comp included in W-2? If so, would that by itself answer the question?

Instructions to the Schedule B, Line 3 , include this sentence: "Show only contributions actually made to the plan by the date Schedule B is signed." I have copies of the instructions back to 1993, and all have the same sentence. I would accept as proper documentation items 1, 2, or 3. Item 4 is not acceptable. Written documentation might also be acceptable from another source, such as auditor, but that seems less likely. To me, the bottom line is that the documentation should be written (and NO! the new law on electronic signatures will not change my opinion on this). BTW, I have never heard of a client that had a problem with this. The 1999 Form 5500 and instructions are here: http://www.dol.gov/dol/pwba/public/pubs/fo...rms/fm99inx.htm [Edited by pax on 08-21-2000 at 09:33 AM]

Yes, vesting service continues. But, no you do not then "transfer" the account or benefit to the second plan, unless both plans anticipate that action. Actually, this is the perfect example of why the ERISA vesting rules were created in 1974. In fact, service both before and after the transfer will generally count towards vesting in *both* plans.

No argument with the comments by Sdolce, but a word of caution. "...the mortality is fixed by Rev. Rul. 95-6." Based on earlier posts by jlf, it is likely that his reference to "...the Retirement System" is a governmental plan. The relevant sections of the Internal Revenue Code (and regs) generally do not apply (at least not automatically under federal law) to governmental plans. So, the plan terms, and any relevant state laws, should be reviewed to determine the proper definitions of "actuarial equivalent". BTW, my guess is that the single premium cost of a $50,000 annuity at age 60, if purchased from an insurance company on the open market today, would be more than $500K. I would guess at least $600K.

Or you can go to the source: http://www4.enron.com/corp/jobs/benefits.html Apparently, Enron has a cash balance plan but the summary is very brief. BTW, it is possible, but I have never seen a cash balance plan that did not have a lump sum option.

Non-attorney opinion: I think you are correct that governmental plans are exempt from all of IRC 411, thus permitting other statutes to apply. Those are usually state laws, rather than local ordinances. However, notice IRC 411(e)(2), which steers you to the IRC provisions in effect immediately prior to ERISA.

Non-lawyer opinion: a benefit in pay status cannot be changed by anybody (retiree, spouse, plan sponsor, court, etc.), unless specifically authorized by the plan. Most plans would not want to include such a provision, as correctly suggested by QDROphile, due to adverse selection. I believe that the proposed change to a J&S benefit is contrary to the original intent of ERISA. The only situation I have ever encountered where the form of benefit was changed was a plan termination, with the plan being amended to permit the retiree (with proper spousal consent) a one-time option to elect a lump sum payment. If the retiree declined the election, then the plan would purchase an annuity to provide the balance of the promised annuity payments.

Generally, if an EE changes jobs *within* the same organization, then no distribution is expected to occur because no "distributable event" has occurred. Such events usually are death, disability, retirement, or other severance of employment. The benefit accrued (or account balance, depending on the type of plan) will remain in the plan and will be paid at some later date (death, termination, retirement, etc.). The EE may then have a benefit coming from 2 different plans; nothing wrong with that. Unlikely that the plans would include provision to transfer assets and liabilities upon a transfer of employment, but it is possible. You also asked if the participant could "roll the assets". No, because that first requires a distribution (see first paragraph). If the plan the EE is "leaving" is a DC Plan that contains the ability to modify investment elections, then the EE should still have those same options.

Good question. I think you have it correct, that the plan year ended 1/31/99, so that the due date of the form was 7 months (unless extended) later, or 8/31/99. One possible caution, verify that 1/31/99 was the final distribution date, not the begininng the distribution process.

My math is a little different. I interpret the facts as creating a $60,000 contribution. It seems to me that contributing an additional/extra $x per participant is not going to be discriminatory, but you might need to amend the allocation formula in the document to accomplish this. Also, as Bill states, watch out for 415, etc.

I'm not an attorney, but this does not smell right to me. If assets and liabilities are transferred from C's plan to A's Plan, then 414(l) is at issue. I think C's plan must already state that excess assets (that is, if the plan were terminated) will be returned to the ER. Anyone disagree? Next issue, if C's plan has "overfunding" as described above, then nothing happens to it unless that plan is terminated. The rules of the Plan govern where that excess goes. Assuming the Plan states that the excess will be reverted to the ER, then C gets that full reversion, and pays the appropriate taxes. Then the owners/management of C can decide what to do with whats left (after Uncle Sam takes out his very large chunk). If the goal is to transfer the "overfunding" into the plans of A and B, then a plan merger is the way to do that. If A and B each want their share of the excess, then it may be necessary to split C's plan first, and then merge the appropriate split plans into A and B. Have I missed something?

Yes, all above is good advice. But there is a practical issue: almost no plan participants are aware of this limitation. I'm not sure if the ER has any responsibility to notify them. The danger might be: if the ER does such notification (probably in a generic manner), and then later misses an employee who is affected by the 402(g) limit, would the ER have some liability. Any opinions or advice or examples to offer?

Well, the answer to Andy's question can be obtained by viewing the "profile" for Matt Tuttle.

Yes, it is back to the basic question. Larry makes some very good points. Even if you decide that showing individual cost is a bad thing, that may not be an acceptable answer to the client, or some other vendor. If you are forced to show it, i suggest that you use some standard method, preferably applicable to all clients and all situations. To me, that leads directly to use of the Normal Cost. Then you must decide which. I don't think the funding method is relevant in this case. For example, if you are using the Aggregate method, then that provides you no help in this regard. My preference is to use Entry Age normal cost, because this is typically a "truer" measure of the underlying cost, spread over the employee's working lifetime. Also, note that if you were to use the PUC Normal Cost, you might end up with an individual cost that is small when you (and the employee) don't expect that. This is likely if the plan has a service maximum, which can also lead to one year's normal cost being less than the prio year's normal cost. In any case, I believe that the text is just as important as the number. Here is the text I used once: "During (year), (Company) contributed over $ to fund these benefits, including $ in Social Security contributions. None of these amounts are placed in an individual account under your name, but are contributed in total to fund benefits for all eligible employees and beneficiaries." [Edited by pax on 08-07-2000 at 01:20 PM]

No disrespect to Larry, but I strongly disagree that individual cost of a DB plan should be shown by prorating the actual contribution. There are several problems with doing that. The most obvious ones are: First, the total cost usually includes inactive participants, so it could overstate the cost of an active participant. Second, the actual cost of each individual is related to age, service, comp, etc., so that a proration based on comp (which is simple) will overstate the cost of participants who are younger than average and understate the true cost of those older than average. I have seen first-hand the problems this one caused, when a division of a large plan was sold, and the participants were given lump sum options. The younger employees (which were most of this division) were very unhappy with the amount. They had previously seen EE statements showing a prorated amount of contribution "for that employee", which had averaged about 5%. As you might expect, they perceived this as an "account" and did not understand the actuarial equivalent concept. Third, what if the plan is limited by the full funding limitation? The actual cash contribution may be zero (although the accounting expense might not be). There is still a cost to the plan for that individual and the increase in benefit. My suggestion is to find a way to use the actual cost of that employee's *increase* in benefit. Some approximations may be necessary.

Information on state tax withholding can be found at http://www.cigna.com/retirement/sponsor/y2ksw_w.html

I disagree with RBeck's last sentence, especially his choice of verb "is". Filing of the 5500 is a task related to the plan and the sponsor. It is not part of the audit. However, it might be a task related to the audit. In my experience, 5500's prepared by others (whether the sponsor or an independent TPA) are usually reviewed by the auditor before filing. That does not make it a part of the audit, but rather takes the practical step of making sure that the information in the form does not conflict with the auditor statement.

Note that you don't really care how many employees that sponsor has, just the number of plan particicpants.

I don't think I agree, but before answering, perhaps you could provide a bit more information. What do you mean by "full normal cost"? Numerical examples of your 412 and 404 amounts would help.

To my knowledge, there is no specific definition of "spouse" in the Internal Revenue Code, so the answer by IRC401 would seem to make sense, meaning a default to state law. However, but there may be another factor to consider. Congress recently passed the Defense of Marriage Act (I think that is the title), the primary purpose of which is to affirm that, for federal law purposes, marriage is defined as between one woman and one man. (Hard to believe that we need a law to tell us that.) That statute might have some relationship to this question. Can anyone help here?

I don't see anything that would per se prohibit it. I would want to inquire about the reasoning behind the original advice. Also, it is possible that the advisor may realize some benefit from that action (such as administrative fees) that would not exist if the plan is amended.