david rigby

Well actually, maybe the application of the 415 limitation would limit the allocation to certain HCE's, which might then permit the ACP test to be passed. Possible?

Not unless the Plan says to do it that way. The usual understanding of the phrase "normal retirement benefit actuarially increased" is to apply such increase to the actual dollar amount (monthly or annual as the case may be). Intervening plan amendments are not applied.

Is top heavy an issue? What about 415 limit?

Lots of PS plans have given different discretionary contributions based on what division the EE works in, usually somehow related to the actual performance of that division.

Don't know the answer to your question, but I am amused by its phrasing. You asked if the marriage would be a prohibited transaction. Probably not, but there might be some jokes others would like to contribute. [This message has been edited by pax (edited 11-04-1999).]

My understanding is that the dsicrimination rules are related to discrimination in favor of HCEs. If there are none, then the rules don't have any applicability. Also, the ADP and ACP tests deal with the relationship between HCEs and NHCEs.

I'm with Wessex on this one. The only thing I am aware of is that the participant can change his mind *before* a distribution is made. Obviously, if the check has been cut, then the distribution has been made.

What do you mean by "licensing" ?

There is point to re-emphasize with regard to the investments. If you have been hitting home runs over the last 15 years in a DC plan, you probably have a sizable account balance. However, what retirement income this account will provide depends on future earnings, not past earnings. This is very easily seen by pricing a single premium annuity from a commercial insurance company. It would be unwise to assume that future actual rates of return will be as generous as the last 15 years. [This message has been edited by pax (edited 11-03-1999).]

I'm curious about the top-heavy comment. Do most firms classify associates as key or non-key?

Correct MoJo. Another point to jlf: If a wage freeze to employees is "unthinkable" to the ER, then it won't be for the "loss of purchasing power" but because of the supply and demand within the labor market. If the retired EEs on fixed income are "second class citizens" it is not because of ANY benefit program but because our society primarily values and recognizes individuals on what they are *currently* producing, not on their historical production. If this is the case, let's not blame the benefit program, or the employers or the government or the IRS or the unions, etc., let's recognize that it is an attitude of individuals who collectively make up a society. Do you remember the Fifth Commandment, "Honor your father and your mother..." [This message has been edited by pax (edited 11-01-1999).]

dsilver has a good point, but that is also my point about "facts and circumstances" If the EE has made an election (without ambiguity presumably) and the check has been delivered, then the Plan is merely inviting employees to have a second chance, which will eventually cause a problem with some EE feeling "left out". There are circumstances in which the Plan may want to take the opposite approach, such as when the EE group is small, or when there is obvious precedent, or (most importantly) when the EE may not have been fully informed of the election. This last point is exactly why the election should be in writing.

Can you do it? That is, has the withheld amount already been deposited in the IRS depository account? If you have the ability to accomodate the request, then it should be considered. However, this does not mean that you must. But the last part of your message casts some doubt that the participant was properly informed of his options. That should probably be investigated. If true, then you should make a sincere effort to reverse the transaction and reissue it as a direct rollover. As always, facts and circumstances can lean you one direction or the other.

I don't agree. If a DB plan is guaranteed to lose its purchasing power, then one can conclude that inflation is guaranteed. Not so, although it does seem to be fairly common. However, that also means that any EE's pay is equally guaranteed to lose its purchasing power. jlf, you seem to be cynical about DB plans (or perhaps about their sponsors). Rather than just complain, what is your suggestion for improvement? (Try to keep it short.)

Not sure what you mean by "second class citizen". If you refer to the dependence of the the DB plan participant on the plan and the employer, I think you are being overly cynical (admittedly, there are some employers that no one should be dependent upon). If there is any maintenance of second class citizenship in our society, I would be reluctant to blame it on a tax-advantaged employee benefit, especially one that is voluntary on the part of the plan sponsor.

I agree with Sheila, although I'm not sure the word tacky is strong enough. If the "bonus" is paid in advance and there is no agreement (probably written) about paying it back under some set of circumstances, then the EE would just laugh at the ER for making that request. If there is a written agreement, then OK but I would not use the word bonus to describe such a situation.

Client is a large national home builder. Reviewing retirement program. Wants info on what other similar organizations provide. Main focus is on 401(k) and level of match, and indication other plans, with specifics if possible. Any info or suggested sources of info?

Thank you John A for your well versed discussion. With respect to jlf comment immediately above, he notes an important characteristic, although some may put it in the category of "philosophy". That is, the term "deferred compensation" has come to be applied to all DB and DC plans, pimarily because that is how the US laws, especially tax laws, treat and label them. However, throughout the history of DB plans, it would be more correct to view them as related to "paternalism" rather than "compensation". I know that this is an overgeneraization, but consider taht this is very often the difference between DB and DC plans.

Tom is correct, but a further point of clarification: For those who have not performed an hour of service in the past 5 years, do not count the account balances OR the payouts, even if the payout occurred in the last 5 years. But beware, in some companies, rehires even for short time periods may be common.

I'm bothered by mailing something as important as the 1099 to the "last known address" when you already know that it is incorrect. Of course, that may still be OK as far as the IRS is concerned, but you will probably get the form returned by the USPS and will need to store these forms (and remember where they are stored!). I'm also bothered by doing a 100% withholding on an amount where the participant is supposed to be given the opportunity to elect out of withholding (that is, a direct rollover).

The Society of Actuaries website (soa.org) has a library of tables. Not sure if the UP84 table is there. That table was originally published by the Conference of Consulting Actuaries (ccactuaries.org) in May 1975. [This message has been edited by pax (edited 10-25-1999).]

I'm looking for some studies/tables on rates of retirement. Could not find anything on the SOA website. Any suggestions?

I think there are negative consequences, and the 100% withholding does not solve any problems. First, on what authority do you withhold 100%? Second, you still have to mail the 1099R somewhere. Where are you going to send it?

Two suggestons: Have you tried internet searches, or private locator services? IRS forwarding program is pretty good. Although some may call this "style", I suggest you avoid the term "forced distributions". May have negative public relations overtones. An alternative perspective is to view the $5000 as the limit which defines the "involuntary distribution" threshhold.

There are also professional standards issued by the Actuarial Standards Board. But before throwing stones, the prior actuary is entitled to payment for services (such as it is). It might be prudent to inquire about any outstanding invoices.