david rigby

As is very often the case, it is important to see what the plan document has to say about any issue. With this particular issue, it is important to see if there have been any recent amendments on this issue. All qualified plans (DC and DB) were required to commence benefits to any participant who attained age 70-1/2. Latest such commencement date is the April 1 after the calendar year in which the particicpant attains that age. Note that plans could, and some did, have an earlier commencment date. The reference above to amendments is that the law has been changed recently: the 70-1/2 requirement must still apply to 5% (or more) owners but is not required for others. However, if the plan has not been amended, or the plan sponsor has not yet specified how it intends to amend this provision, then the existing plan provisions still apply, even to those who are not 5% owners. [This message has been edited by pax (edited 12-16-1999).]

If that is the complete language applicable, then it looks to me that he "completes" the sixth month on June 30 and would enter on July 1.

I've often wondered the same thing, but I don't think it is supported by the instructions to the form. I think richard's second paragraph above is accurate.

Excellent history lesson from Carol. It may be worth adding (with respect to her 4th paragraph) that the IRS was not alone in discussing these issues. There were a number of public statements, and even some proposed legislation, that were "trial balloons" in the political sense. My recollection is that the issue of a law covering govt. plans ("PERISA" was the most common acronym) had some supporters and detractors, but that the sheer volume of plans and potential problems contributed to the lack of legislation. The IRS and DOL are already overwhelmed. Why spread their resources even further?

I just read Rev. Rul 99-51. Am I missing something or is this a slam dunk? Did someone think they could get away with this blatant violation of the nondiscrimination rules, both in letter and spirit? [This message has been edited by Dave Baker (edited 12-14-1999).]

Section 401 is in Subchapter D - Deferred Compensation, Etc., which contains two "Parts". Part I - Pension, Profit-Sharing, Stock Bonus Plans, Etc., contains several Subparts. Subpart A contains sections 401 thru 409. Subpart B contains sections 410 thru 417. Subpart C contains sections 418 thru 418E. Subpart D contains sections 419 thru 419A. etc. Sections 501 thru 529 are in Subchapter F - Exempt Organizations. Most hardcopies of the IRC will contain these designations of title, chapter, part, subpart, section, etc. [This message has been edited by pax (edited 12-13-1999).]

A private letter ruling might be a good idea.

Boy is this cool! http://www.freeerisa.com/customer/login.asp [This message has been edited by david rigby (edited 12-21-1999).]

What kind of plan are we discussing? I think I know what you mean, but let's be sure.

I think the comments above are accurate but there may be specific circumstances to alter the result. Suppose on December 1, the employer comes to EES and says, "We are considering paying some bonuses. If we do so, do you want to receive it this month or next month? Sign here to indicate which you choose." Would this pass muster on the constructive receipt? [This message has been edited by pax (edited 12-03-1999).]

On this website: http://www.benefitslink.com/IRS/revproc98-22.shtml

So you contend that the "negative deduction" is a distribution? Is that in all cases, or only when it is done in anticipation of passing the discrimination test? For example, it is easy to imagine that the payroll dept. made a mistake and deducted $2000 from a paycheck instead of the correct $200. Would you have a problem if this clerical error were corrected by altering the subsequent deduction, say by using a negative $1600? I probably need to do some reading on this point, but it seems to me to be a very impractical perspective to say that we cannot correct something in advance when we know it will need to be corrected later. I take the approach that there is no excess until the end of the plan year, so if I can fix the problem before it is a problem, then the plan (and the entire administration process) is better off. Although I have just skimmed the regs, it looks to me like the correction described in 1.401(k)-1(f) is based entirely on the assumption that the year-end has passed, as does the definition in 1.401(k)-1(g)(7). But I continue to read. Any other opinions or comments would be welcome. [This message has been edited by pax (edited 12-03-1999).]

somewhat. do you have specific areas or questions?

Ouch, you have a difficult problem. The generic answer is to use search service, or the IRS forwarding program, or the commercial locator services, etc. But you have problem if you don't have SSn and if the beneficiary does not have any knowledge of the possible benefit. The only other thing that comes to mind is an intenet search by name. SSN probably would not do any good there anyway.

No it is not customary. In fact, my understanding is that it is possible for an accrued benefit to go down if compensation goes down. Normally, the accrued benefit is defined in a formula which is based on service and final avg comp. The formula need not contain any reference to "last year's accrued benefit", etc. However, the benefit at NRD cannot be less than the benefit payable at any ERD. Also be careful with plan amendments. [This message has been edited by pax (edited 12-01-1999).]

Are you asking about "negative elections"? [This message has been edited by pax (edited 12-01-1999).]

I believe that correcting during the year of deferral such as by the use of a negative deduction in the payroll, in order to not fail the ADP test, is not a distribution. Anyone have a different opinion? [This message has been edited by pax (edited 12-01-1999).]

Sorry if this seems too trivial, but make sure there is no QDRO that may have an impact.

Another good source is the ERISA Outline Book, published by http://cyberisa.com./ [This message has been edited by david rigby (edited 12-03-1999).]

There have been several discussion threads on this topic. Try a search of the message boards.

If you are "refunding the excess during the plan year", then you are not "refunding" anything. You are correcting. There is no need for a "refund" until the plan year is over, so if you can correct it, you should do because you may avoid the (more cumbersome) refund process.

No expert I, but that sounds to me like an IRS transition. Perhaps we should just be thankful.

Maybe the retiree simply failed to report her 18K pension on her 1040. Is that too simple?

No expert on 401k admin, I offer a comment. It is my observation that most decent payroll systems will accept a negative amount as a deduction, and that most recordkeeping systems will also recognize a negative deduction. If so, then you have the option of making the correction directly in the payroll system BEFORE the end of the year. This seems to me to be ideal. It may not be exact, or perfect, but it holds open the possibility of simplifying the process. Probably others can offer more details. [This message has been edited by pax (edited 11-29-1999).]

Interesting comments. Could you elaborate on your "public policy" comment?