david rigby

truth is always a good approach. don't make up some excuse that you think the IRS might accept.

the refunds are distributions from the plan. the T-H test is performed using the 12/31/98 balances.

Just a thought: If you do business with one or more banks (that is, if the bank is your client for any purpose), they may not appreciate that action on your part. Not a criticism of banks or credit unions. Merely a political perspective. I've seen it.

Apparently I misread the original question. I would use a strict reading of the plan language if possible. Just as important is past history. That is, what administrative interpretations have been applied in the past? Hard to believe this has not come up before. If this is a "takeover" where the TPA or actuary or administrator has changed and has not seen this situation before, then don't assume it has never happened. Better course of action would be to request several sample calcs from plan sponsor and/or prior administrative firm. If that does not help, my interpretation has been to use the 3 (or five or whatever) years that are included in the definition. Then if the use of the fractional year will increase the FAP, then use it. But remember this is just my administrative interpretation. [This message has been edited by david rigby (edited 08-18-1999).]

Interesting. Many plans modify the defintion of FAP if the participant has less than the number that usually goes in the denominator, such averaging actual pay over actual service. Does that apply here?

There was a discussion thread on this topic a few weeks ago, although I don't remember which board, and I don't think it had to do with a statute of limitations. My perspective is that you cannot be faulted for trying to correct a mistake. But before you do so, a substantial amount of fact gathering is in order. For example, was this limited to one individual or might it be a systematic error that caused benefit payments to be incorrect for others as well. If the latter, you will want to identify as many as possible, and even identify the magnitude (and direction) of the error. Many more related issues. I suggest a search on the message boards to see if some bright soul has listed other items for you. Sorry, I don't have an answer on the statute of limitations issue, except to assume that it is probably a state issue, and may vary be state.

My understanding is that, if the plan provides the greater of (1) additional accruals, or (2) the actuarial equivalent of the NRD benefit, then the plan is exempt from the DOL requirement to notify participants of the "suspension" or "forfeiture" of benefits. Hmm, I wonder what would happen to Social Security if the federal govenrment were required to follow its own rules.

Assume you mean the federal law. That is contained in IRC 401(a)(9). Not sure if there are any additional state laws that are applicable. This website has a link to the Internal Revenue Code. Try: http://www.benefitslink.com/library/Internal_Revenue_Code/ Also, look for a link to the IRS regs. Try: http://www.access.gpo.gov/nara/cfr/cfr-table-search.html If these hyperlinks don't work, go to benefitslink.com/whatsnew.shtml, and start browsing. Also, do a search from the main Message Board menu for such terms as "minimum required distribution" or "70-1/2", etc. [This message has been edited by CVCalhoun (edited 08-12-1999).]

Many issues here, most of which I don't know. How much is in the plan (that is, assets)? Can the plan be amended to increase the benefit to "use up", at least partially, the excess? How old is the EE? Does he need to receive income from this benefit? If not, then distributing the benefit, using a direct rollover to his IRA will let it continue to grow tax-deferred. But cannot pay out more than the IRC 415 limit. Plan may not need to be terminated. If EE severs employment (whatever that means here), then he could be eligible for a distribution. If so, then the plan may have paid all its benefit requirements. That is, the plan will have "matured" not terminated. The sale of a company with an overfunded DB plan has been done before, but if there is room to use up any of the assets under the 415 limits, then that seems like a better first step. Is the tax bracket relevant?

Another issue is that the Plan should have (written) procedures about how it will handle a QDRO. For example, it is especially important that the Employer be able to review any DRO that claims to be a QDRO. The point is to establish as soon as possible that the requirements for "qualified" status are met, or if not, where the DRO falls short. This is for the protection of the Plan, primarily. Also, it is not up to the employer to "warn" the EE about a QDRO; it is up to his attorney.

Not sure about the details but I think there is a provision in at least one of the current proposed "pension reform bills" in Congress that addresses this issue.

Actually, there are also some threads discussing this topic on other message boards. I suggest you do your search on all boards.

another point might be to look at the trust agreement. I had a trustee tell me recently that they (bank) have a policy that they will not serve as trustee for any plan that is not qualified. they extended this such that a qualified plan in process of terminating must apply for IRS determination letter or the trustee would resign. The issue of timing is the original question though. Our firm (actuaries and consultants) always recommend waiting to pay until the IRS letter has been received. Also, every attorney or auditor I have ever talked to has agreed with this position. Recently, we had a client terminate a DB plan and decided not to file with the IRS. We put our recommendation in writing and insisted on a written "hold harmless" letter from them.

good question Kip. but the anwswer is probably very simple: the state court issues a valid order that attaches (and explains if necessary) the foreign order. However, it seems unprofessional and unlikely that any judge (other than one who is extremely lazy) would ever do that.

QDRO should already address this. If EE has not remarried, then he does not need spousal consent (there is no spouse!) unless the QDRO specifically states otherwise. If EE has remarried, then spousal consent is required. But note that the QDRO should already specify what (and when) the ex-spouse gets, so that whatever is left would be subject to the spousal consent rules. If the DRO does not specify as above, then it may not actually be a QDRO, or it may be vague and leave room for interpretation.

probably no legal "statute of limitations" but I think jlf presents a good point, which is why I think the precedent issue is so important. In a former life, I have had some plan administrative responsibility and seen situations: 1. where the time period in question was so long that no one wanted to "go after" the excess amount paid, and the company did not want to upset anyone so no change was made. 2. Other situations may have been so short that the overpayment was not worth worrying about, as long as future payments were the corrected amount. Every situation must be evaluated on its own facts, and any relevant precedent is then factored into what the solution is.

Excuse my ignorance, but could you be a bit more specific in describing the merger situation?

Yes. the DRO should tell you what to do, not ask you to help decide what to do.

I think that richard has adequately stated the alternatives. However, I disagree with his analysis of number 6. I contend that such a claim by the retiree in very likely. Keith makes a good point by referring to the plan document. However, in my experience, most documents do not contain any provision that anticipates this. Thus, it becomes a task that the "pension committee" must evaluate. The most significant issue to consider becomes a precedent. Before taking any action, it would be prudent to see if it has happened before, even if no action was taken. [This message has been edited by pax (edited 07-29-99).]

Partialy agree with Kip Kraus. It seems unusual for a DRO to mention other plans (especially if terminated) but there is no reason that the DRO cannot use any other plans in the determination of the amount or percent to be assigned to AP. However, I also see no reason for the DRO to even mention such prior plans, even if used in the determination. That seems equivalent to including your internal notes and workpapers in your final document. Why not do the calculation, have it agreed to by the judge and/or other party, and put it in the DRO. The plan sponsor does not care what justification may have been used to arrive at the amount or percent of the award, as long as it meets the requirements of a QDRO. BTW, I have seen a few QDRO's that award 100% to the AP. Probably a good guess that there was some behind the scenes negotiation (and horse trading) going on.

the insurance can be an investment of the trust. usually is. that means that the cash surrender value of the policy is part of the trust. but it might also mean that the value of the policy(ies) will be included in the participant values, prorated in some fashion. The answer, as is usually the case, depends on the plan provisions.

I have also used PBI in a prior life. They have a service of comparing public death records with a plan's database, looking for "matches". The service was reasonable in price and performance. But I have no experience with them searching for missing participants.

In general, there are some commercial locator services that could be utilized, or the internet, or using current employees to help. Since you have so many, you should expect that some cost will be involved. Perhaps you could consider awarding a "bounty" to current employees, based on the cost of using some outside service. There have been some discussion threads on this topic in the last several months. Perhaps you can find them by using the "search" function.

Normally, the tax year is not the relevant issue in dermining the ER contribution and match for the plan year.

Not sure what you mean by a "QDRO that a participant undergoes". Not aware of any exception to the QDRO rules for non-resident aliens. The answer seems to be that the plan sponsor has the same responsibilities as in the case of any other QDRO: 1. Make sure the DRO is a QDRO. 2. Abide by the terms of the QDRO.