david rigby

Well, my guess is that the quote from that PLR is taken out of context. See Rev.Rul. 95-51, esp Sec. 4.02(2) for references to an Unfunded becoming negative. Note that it states "approval is granted". Thus no specific method is required, just that a change of some type must be made to avoid an unreasonable funding method.

Caution. Focusing on "termination date" is shorthand that may not be correct. The correct emphasis is the last date on which the EE had an hour of service. Not hard to imagine that the last hours date could precede or follow the the term date.

I'm a bit rusty on this, but I think that if you have FIL and get a zero UAL, then you have more than one choice: 1. switch to Agg., 2. switch to any other method that is valid, 3. fresh-start the UAL under the EA method (this is equivalent to switching from FIL to FIL). I don't think you are *required* to switch to Agg. method.

If the plan is frozen, it might not matter what you call it.

Looks to me like the AP gets the continuation of $500, but it could be something else. My understanding is that where the QDRO is silent, then you should not impute any benefit. If the benefit has commenced, then the form of payment should be fixed, not subject to change. The way you have described it, this is what I would interpret: P has retired with a 50% J&S form of payment of $1000 per month, with $500 continued to AP upon death of P. During P's lifetime, P has assigned half to AP. When P dies, then P's $500 stops and the assigned $500 also stops. But now the survivor $500 begins to AP. Thus, AP sees no change and the plan has not paid out more in total actuarial value. But, be careful that my summary is truly applicable under the terms of your QDRO. Special request: I believe every QDRO should explicitly address all possible happenings, which would include: P dies first, before benefits commence, AP dies first, before benefits commence, P dies first, after benefits commence, and AP dies first, after benefits commence.

To Lorne, there is extremely common language in plan documents that addresses plan termination. This is what the "standard" reference meant. To Lorne and Frank, if you know what is good for you, stay away from this message thread. [This message has been edited by pax (edited 03-29-2000).]

I don't think so. See 414(p)(9) and 401(a)(13). But don't overlook 414(p)(11) special language for govt. and church plans. [This message has been edited by pax (edited 03-29-2000).]

I don't think so. See 401(k)(4)(A).

Here is a link: http://www.bls.gov/

I don't understand the comment above: "The statute does not permit you to disregard service prior to the effective date of the plan, except for vesting purposes, ..." Please explain. [This message has been edited by pax (edited 03-23-2000).]

Governmental Employers are exempt from many ERISA and Internal Revenue Code requirements. The primary ones are: · ERISA Title I, Section 4(B)(1) · ERISA Title IV, Section 4021(B)(2) · Minimum Participation Standards IRC § 410©(1) · Minimum Vesting Standards IRC § 411(e)(1) · Minimum Funding Standards IRC § 412(h)(3) · Top-Heavy Plans IRC § 401(a)(10)(B)(iii) There is also an exemption under IRC 417, but the reference is more difficult to list (it's from the explanatory notes in ERISA) so I have omitted it here. Of course, the absence of such regulation means that state laws still apply, not that I am an attorney, but this is exactly what several attorneys have told me. Also, Carol Calhoun, a frequent contributor to this site, maintains an excellent reference: http://benefitsattorney.com/ [This message has been edited by pax (edited 03-22-2000).]

Unless the plan specifically mentions service prior to the plan's effective date, then it is probably ignored. Most plans also state that service prior to effective date is used only if the EE is employed on the effective date (or possibly the day before).

I think the difference is whether the EE is employed on 1/1/76. I would love to hear from others, to see if my explanation is too oversimplified.

From what you have related in your immediately prior message, I would say that no pre-76 svc counts for anything. It is the word "continuous" that stands out most to me, particularly in the following: "Defines eligibility for employees not employed on Dec 31, 1975 as age 25 and 1 year of Continuous Service with the initial eligibility computation period as beginning on the date of hire (or re-hire)." Your last comment about pre-71 service is interesting. Look carefully at that reg, especially the first sentence of 1.411(a)-5(B), and then subsection "(6)Service before effective date". My read of that subsection is that the service prior to 1/1/76 need not be counted if the prior plan would not count it. Therefore, my focus would be on whether the prior plan as of 12/31/75 would have counted the pre-76 service. It looks to me like it would not, since he was not actively employed at 12/31/75, unless he was vested under the vesting provisions in effect at 12/31/75.

Good question. The answer may lie in the definitions of service in both plans (76 and pre-76). If the pre-76 plan states that the EE must be employed on 1/1/76 to get any pre-76 service, then it probably does not matter what definitions apply in the pre-76 plan. However, if the 76 plan is silent on that point and defines pre-76 service as determined in the pre-76 document (as you state), then look in the pre-76 document for any provision which would/might state whether any service after a break would count. That is probably too wordy. But let me offer an example: We have a number of plans which define pre-76 service as "completed years and months since the employee's most recent date of hire", or similar. We interpret "most recent" (and our clients meant it this way) such that service prior to a severance of employment (prior to 1976) is lost, no matter when the rehire date occurs.

Well, it is/was fairly common for plans to use your Pre-ERISA definition of service (that is, to refer to the prior plan). However, it is/was also fairly common for plans to require that to get pre-1976 service that the EE must be employed on 1/1/76. So, the summary you relate seems to be silent on this last point. I would suggest a very careful review of the language in the 1976 plan restatement, focusing on such definitions as "Employee", "Service", "Participant", etc. Then if there is still ambiguity about the plan's intent, see if there is any precedent related to this point. That is, the participant in question may not be vested at all because the Plan ignored the 1957 to 1974 service, thus treating the 1976 rehire as if it were an original hire date. Your task is to review the history, in the form of plan document and prior examples.

Amount of assets is not an issue with regard to plan termination.

Internal Revenue Code section 411 establishes minimum standards for vesting. All qualified plans must adhere to these minimums, but the plan can be more generous. For example, sec. 411(a)(d)(4) permits the exclusion of service before age 18 in the determination of vesting service. The plan is not required to have that exclusion. Thus, the Plan must set forth the vesting schedule and the definition of vesting service, both with concern for minimums established in IRC 411.

I'm very unsure of the substance of your question. some rewording might help. However, you ask about whether the calculation of a lump sum was "proper". The determination of a lump sum actuarial equivalent should be based on a definition in the plan document itself. If the plan sponsor chose to provide an amount greater than the definition would provide, then it should be done by amendment to the plan, and should also be done on a non-discriminatory basis. It appears that you believe the opposite happened: that the amount was less than as defined in the plan. There are certain circumstances under which that could happen. However, that does not involve discounting from a different age, as you imply. In order to provide you more useful information, I think you will need to provide more details, including the definition of "actuarial equivalent" in the plan.

The options would be governed by the terms of the Plan. Many 401(k) plans have a lump sum as the only available option.

I have heard some say 10-15%, but the only backup provided was very rough budget numbers.

Sorry I cannot provide cite, but my understanding is that notice is required (thru DOL regulation) unless the plan does one of two things: 1. Pay the benefit to employees upon attainment of NRD, or 2. Provide a benefit at the late retirement date that is the *greater* of the benefit determined using continued accruals, or the NRB actuarially increased to late retirement date. The plan is not required by statute to provide this "greater of" benefit. [This message has been edited by pax (edited 03-10-2000).]

Do you have the amendment from 1995? Does it also freeze the plan to new entrants? If not, sounds like an oversight. If so, then your problem vanishes. If there are new entrants since 1995, then some must have gotten a (possibly only one) top-heavy allocation (or was it provided in a DC plan?). If the plan is terminated, then a praticipant with a zero accrued benefit is just that, nothing to do. However, watch for a minimum of some type (say $50).

I think you have missed my point. What is the funded percentage of the plan (BoY) before the proposed plan change, and what is the percentage after the proposed plan change? Also, this discussion has centered on a change in the plan definition of NRA. An alternative might be to change the actuary's assumed retirement age, if there is evidence that such change is appropriate to the particular plan participants. A friend once told me, "Pigs get fat, but hogs get butchered."

I agree with Keith, with some more comments. ERISA states that a VT must be able to "age into" the early commencement date if he has met the service requirement. No problem. However, there is no requirement that the early retirement reduction factor has to be the same for this person as for the active employee who retires at an ER date. In fact, it makes sense that the Plan/sponsor does not "owe" the VT person the same early retirement subsidy that is given to those employees who retire from active service. However, the plan document is what governs as to the definition of the early reduction factors. If there is ambiguity in the document, then two choices seem obvious: 1. amend the plan to remove any ambiguity, or 2. establish a (written) procedure by the administrative committee to remove the ambiguity.