david rigby

Seems to me always advisable to address the issue up front. He may be misinformed about something. At any rate, getting the questions out in the open is probably a good idea, especially since others may have the same questions. My experience is that most EEs do not understand how DB plans work and my think of them more as "accounts" thus giving rise to "expecting more" especially at the younger ages.

I would look for some other mechanism. Could you change the funding interest rate or mortality table in a small way that might help you? But don't be greedy in this regard.

I have never seen such an increase applied to VT's before commencement date. I have seen several COLAs where the plan sponsor did or did not make a distinction between those who retired and those who were VT's. When the sponsor did not make such a distinction, it was usually because the data was not good enough to positively identify these groups. Other sponsors keep careful track of these groups and have given different benefits.

I believe that Steve's example is a demonstration of how to arrive at a "reasonable" assumption. If the plan establishes some maximum (which might be both annual and lifetime), then that is a starting point. I suggest looking at the history of the index (CPI or whatever is referenced in the Plan), probably at least a 10 year history.

Correct, but don't forget that top heavy testing might be on the basis of an aggregation group, in which case the T-H minimum might already be provided. Also, don't forget T-H vesting applies even if the contribution already meets the T-H requirements.

I think we just discussed this a few days ago. Try a search.

Correct. But be careful about the 25%. Notice the word "equal" in IRC 4980(d)(2)(B)(i). This is different from the "not less than 20%" in (d)(3)(A)(i).

DB termination under standard provisions. Participant could not be located and was handled under the PBGC Missing Participant program. Now, as we are allocating excess assets, he shows up. My review of the MP instructions is that the Plan *can* send the allocation of excess to PBGC, but I do not see any requirement to do so. My opinion is that we should pay the excess directly to participant (with properly executed form) since that is much simpler and avoids having the PBGC track down 2 payments. Any comments?

I agree with Steve's synopsis. I think there is some flexibility with respect to the assumption for those future COLA's, but recommend defining a method, such as looking at 30-year treasury rates, etc. Of course, the plan may establish some mechanism for this already. Be consistent in the application of the method. Write it down.

I find it easy to believe that it is silent on bonuses. But LCARUSI is right: what is the definition of comp in the plan? Many plans do not mention bonuses because the definition of comp is "all comp". In this case, a bonus would be handled the same as other pay.

Agree with Greg. I don't think the union can be a sponsor of the plan because the union is not the employer, can't do salary reduction, etc. It sounds like the company is just avoiding the subject.

Good question. There have been some earlier discussion threads on this topic. I suggest you click "search" (see the top of this page) and search using the word "minor".

Not to my knowledge. The 204(h) is not about termination. Other employee notification is appropriate in that case.

It happens all the time. My experience is that this ususally falls into the area of "administrative practices." I suggest looking for precedent(s). Another perspective could be to review the reason that retroactive payments are required. For example, if the delay is due to the ER being slow about processing the paperwork, then the procedure might state that interest will be paid. But if the delay is because the retiring employee simply did not return the paperwork (J&S election, etc.), then the procedure might state that interest will not be paid. Of course, it is possible that both of the above situations apply to some degree. For the specific situation you describe, you may have to include other factors to decide if interest is appropriate. One suggestion: if you pay interest, it is much hassle to use a variable interest rate. I suggest just picking a rate and sticking with it, such as 7%.

I have not encountered this. My observation is that the reverted assets should not be attached but might be used in determining future costs, at least for the next year. Any "excess assets" might be entirely from higher than expected asset yield, rather than excessive contributions. Therefore, it seems to me perfectly reasonable for the hospital to take the full amount as a reversion. It may also be reasonable to take that into account next year in determining the financial status of the hospital, if that is relevant in determining Medicare/Medicaid payments. (Of course, "reasonable" may not be relevant in any case. Just my opinion.) I would be interested in hearing more. [This message has been edited by pax (edited 06-19-2000).]

I agree with the comment by Kirk.

Interesting follow-up to this issue: http://www.benefitslink.com/cgi-bin/qa.cgi...qa_plan_defects

Ouch! A top-heavy 401(k). Yep, that's a problem. The T-H minimum still applies, unless there is another plan in an aggregation group that may help.

Rev. Proc 2000-16 begins on page 56 of Internal Revenue Bulletin 2000-6. (Requires Adobe Acrobat) http://www.irs.gov/bus_info/bullet.html

Right. In most situations it will not matter because the projected benefit is more than 20% of FAC.

Depends. Usually the plan will remain in the same status, but if you know that a Key EE lump sum is "dropping off" next year, then the T-H percentage may change significantly. However, for most plans I see, it is not significant: the *projected* benefit (which is used to determining funding) is more under the regular benefit formula than under the top heavy minimum. [This message has been edited by pax (edited 06-08-2000).]

No. It is not "five years of service". I think of NRA as the age at which an EE gets 100% vesting without regard to service. Notice that "65 and fifth anniversary definition" requires only that the participant enter the Plan, not the earning of any particular number of years of service.

Anybody know what is the purpose of IRS Reg. 1.411(d)-2((a)(2)? In the context of a DB plan? In the context of a DC plan?

Generally, a plan does not have to define partial termination. I'm not sure that I agree with PJK's comment that the 20% rule of thumb looks only at the "non-fully vested participants". I believe the reference should be to "participants". Of course, the result is only to affect the vesting status of "affected participants". BTW, a plan could award full vesting by amendment where a partial termination may be suspected, thus possibly avoiding any debate about whether there was a partial termination.

I disagree with the last sentence from Brian4. A freeze is NOT a partial termination and does not require full vesting. I'm not sure what a "partial freeze" is. When you freeze a DB plan, be sure to freeze participation as well as benefit accruals. Also, note that certain benefits are not protected by 411(d)(6) so that you might want to consider eliminating them at the time of the freeze, such as subsidized disability benefits.