david rigby

Connie, Why would it need documentation?

I don't think it is that simple. Just because the language is vague does not mean you can't interpret it. That is, if there has never been a fact situation like this one, then you do not yet have a precedent. I would be surprised if the Admin Committee would think it is in the best interest of the Plan to accept a rollover from a term EE. Seems counter to the purpose of the permitting rolloevers in the first place. From my perspective, if the EE is termed, she/he is no longer an EE, so why do you think the plan should accept it?

This is probably not what you have in mind, but don't forget IRC 410(a)(1)(b), where you can use a 2-year eligibility period if you give 100% immediate vesting.

Actually, interpretations to the Plan COULD become precedent. My preference and advice is to document (that is, in writing) the interpretation and the reason for it. That way the precendent (and the "problem" that the interpretation is trying to correct) is clear and can be followed correctly in the future. My observation is that no plan definition of "compensation" is completely adequate. Interpretations should be expected. No disrespect to plan drafters intended. [This message has been edited by pax (edited 10-16-1999).]

Wow. Not that I know of. Possibly something pre-ERISA. Besides, the PBGC frowns on this and treats the transaction as a termination of the DB plan. Also see IRC 414.

Relevant IRC section is 4980. It is my understanding that there are no regs under this section. I thinkyour summary is correct, that the excise tax does not apply as long as the ER has always been a non-profit entity. See sec. 4980©(1)(A). I don't have a cite but I have been told that a non-profit that has a for-profit subsidiary (imagine a hospital with a wholly owned collection agency, for example) does not meet the test above. However, this interpretation has an exception, where the for-profit never made any contibutions to a qualified plan. That could be an accounting trick, so be very careful. You might need to search PLRs. Also try a search on the entire BenefitsLink website. Let us know if you get a definitive answer.

Of course, using a unisex mortality basis is required.

OK, I think that is correct; you do have until the remedial amendment period. However, my preference is to document the intended amendment. Perhaps that can be a memo to file stating the administrative practice that will then be placed in a formal amendment.

The issue is a bit different. I believe it is the "definitely determinable" requirement that requires plan to include a definition in the plan. It is IRC 417(e) that states a plan must use a minimum for its definition of a lump sum actuarial equivalent. GATT has changed the definition of this minimum in 417(e). The plan must include this minimum its definition if it uses another method for determining actuarial equivalence. For example, a plan could define the lump sum using the UP84 mortality table and 2% interest. In all likelihood this will produce a greater amount than the GATT minimum, but the plan's defintion (that is, the langauge in the document) will be inadequate unless it also includes the GATT defintion and specifies that will be a minimum.

Yep.

What does the plan say? Sorry to be so blunt, but that is very often the first question to ask? Also, what type of plan is this? May be very easy to deal with this in a DC plan (assuming no J&S language) but not so easy in a DB plan. A great many (DB) plans contain language such that once a benefit begins, its form cannot be altered by the participant or the plan sponsor.

Assuming the plans have been amended to increase the involuntary cash-out limit from $3500 to $5000, the limit applies to each plan. Don't know of any requirement to add the amounts from multiple plans together. [This message has been edited by pax (edited 10-10-1999).]

Just a thought: Suppose the marital status has changed? 1. If EE was married at the original date and is still married, then a valid spousal election was (one hopes) done then? 2. If EE was married at the original date, and the spouse is now deceased? 3. If EE was married at the original date and is now divorced? (Assume no QDRO.) 4. If EE was married at the original date and the spouse is now deceased? 5. If EE was not married at original date and is now married? (Assume the 12-month marriage rule is either not applicable or has been satisfied.) [This message has been edited by pax (edited 10-07-1999).]

I'm looking for a website that may contain historical information on Moody's Aa bond yield rates. Any suggestions?

depends on what the sponsor does with the benefits and assets under the plan. A DB plan termination means that the trust will be liquidated. The plan has already promised the payment of an accrued benefit, probably commencing at normal retirement age. The plan should also be frozen at the time of amending it for termination, so that no additional benfits accrue and no additional employees become participants. Depending on what the current plan provisions are, the sponsor could purchase annuities (thru the trust) to pay the accrued benefits. Alternatively, the plan could provide the participants the alternative to receive the value of the accrued benefit in the form of a lump sum. Note that under this scenario, the participant gets to make the decision (with spouse approval) if the amount is greater than $5000). The participant also gets to decide on whether to receive a direct payment (minus the required 20% federal withholding), or a direct rollover to an IRA or another qualified plan. I think the applicable tax issues are the same as when any participant receives a lump sum distribution: - tax is deferred on any amounts deferred into an IRA, - amounts not (timely) placed in an IRA or other qualifed plan are subject to income taxation and possible 10% penalty if under age 59-1/2. Others can probably enhance this response.

That is what I would do. The plan was terminated by amendment. Do another amendment to cancel the termination. Caution: the termination probably also awarded 100% vesting. Your second amendment cannot reverse this.

i think there was a discussion on this topic several months ago. Try a search. I think the gist is that this type of transaction (either direction) does not work because the plans are "qualified" under different laws. Not aware of any treaties that might automatically recognize qualified status from another country, but you would need competent legal advice for that.

I think the 1099 with $0 withholding is correct from the EE's perspective. But you still have the problem with the IRS that the trustee failed to do proper withholding. You probably need some good advice from a tax lawyer to build your case. Is it possible to ask the IRS anonymously what they think the solution is?

Is this a 1999 transaction? if so, nothing has been reported to IRS, and (at least theoretically) it can be corrected. Is the participant aware of the problem? If the distribution is still liquid, then ask to have it reversed. It might be OK to reverse only the 20% withholding, but I would reverse the entire thing if possible and then do it right.

I assume you are talking about the 30-year treasury rate for 417(e) minimum lump sum. The lookback month is the month itself. The publication date is (typically) about 7-10 days after the end of the month. For example, for a calendar year plan, the lookback month can be August, September, October, November, or December. Form a practical perspective, you usually want some advance notice of the rate so it makes sense to choose a lookback month as far back as you can stand (but beware of the regs at initial adoption).

Not sure about that definition. You can however, exclude HCEs, if that helps achieve your goal.

John, I would appreciate it if you would post this message as a reply to the original thread. I'm not competent enough to understand without seeing (or at least referencing) the entire discussion. Thanks

Yes the plan can be more generous, but watch out for non-dsicrimination issues. That is, if you go back a few days just to pick up an HCE, you might have a problem. Actually, sometimes, what is the "event" may be easy to identify but when may not be. In such cases, picking a date for 100% vesting at the beginning of the time period will usually cover it. But if your "when" is readily identifiable, going back before that may not be a good idea because you may have set a precedent which has no real basis in fact.

Assuming that the distribution was in cash, because this happened in 1999, it can be reversed and corrected. I recommend that, if the proceeds are still liquid.

I don't agree with Larry M that it is easy and practical to define NRD and NRA. It is just the opposite, at least in a DB plan which pays benefits monthly. The first paragraph of Dowist's reply is the correct summary of NRA and NRD. I suggest a practical handling of this proposed plan change: change the NRD only for those commence participation after the change is adopted. We have changed NRD in many DB plans from 65, to "65 and fifth anniversary", where it applies to new participants.