david rigby

There have been a few discussion threads on this topic in the past few months. Try doing a search on this Message Board.

this seems to be a situation in which a DB/MP combination does not make sense. If the DB contribution is expected to be around (or above) 25% then having a PS plan might be better.

my perspective is that having "extra" definitions in a document is not a bad thing. I see 2 advantages: 1. It helps you because it keeps most of your documents similar. 2. It helps the plan sponsor because it makes modifications easier when the inevitable law changes come along.

Usually non-qualified deferrals are not compensation because they are not taxable. My understanding is that amounts deferred in a non-qualified plan are not permitted to be included in the definition or benefit determination of a qualified plan. Simply, different kinds of money.

the point of the above response is that, although family aggregation has been eliminated, family attribution has not.

I am an actuary terminating a DB plan of a county-owned hospital. The assets do not appear to be sufficient to pay the lump sum value on the definition of actuarial equivalent currently in the plan (pre-GATT, PBGC basis). In addition, the assets may not be sufficient even using the GATT basis (say about 6% interest rate). It has been proposed that the plan be amended to adopt the GATT mortality table and whatever interest rate that will make the plan sufficient. Anyone seen this? Do you believe that it is permissible under the IRC, since the plan is exempt from IRC 411 and 417? If so, might there be any concern that state laws could come into this gap (that is, the 411 and 417 exemption)? My perspective is that the plan could be amended to do this. However, the terms of the document contain "vanilla" language about "no amendment will reduce the vested benefit of a participant determined as of the later of the date such amendment is adopted, or the date such amendment becomes effective". This causes me to be concerned that the proposed action may be OK under the IRC but violate the plan itself. Any other advice? Thanks

A minor point to note is that a QDRO specifies what (% or $) is assigned to the alternate payee. It does not specify the benefit to the participant.

Dowist is correct. However, from your second message, it appears that the investment company that holds the money may not be the trustee. If the company is the trustee, then the company is repsonsible for notifying participants about their options with respect to a direct rollover. It sounds as if the investment manager is trying to wash their hands of the whole thing. Also don't forget that various filings and forms are still required. For example, if an EE elects not to have a direct rollover, then there is a required 20% federal withholding (might also be some state withholding), and the trustee should also make sure that the IRS receives that. Then the EE should receive a 1099 form at the end of the year. etc. etc., etc.

Not sure what type of plan you are discussing. If you mean a DB plan, the normal form of payment will be some form of annuity, but the plan termination will usually give rise to all participants (other than those already retired) having an option of receiving the plan's promised annuity or a lump sum. A rollover to qualified IRA will avoid the 10% excise tax as well as defer regular taxation. If you mean a DC plan, the normal form is usually (but not always) a lump sum so that will likely be the only form of payment available upon plan termination. In order to answer your question more precisely, we may need more facts.

In a prior life, I was a benefits manager for a utility company with 20K employees. There was a personnel policy that service would be bridged (for seniority purposes) when an EE had been rehired for 5 years, even if the break was several years in length. This policy got incorporated into the qualified DB plan, and other benefit isssues such as vacation schedule, etc. Otherwise I can't help you directly, but perhaps the Message Boards can. There have been some discussion threads on this topic in the past. I suggest that you search the Message Boards for such words as "bridge" or "bridging" or "rehire" etc. You might also try searching the entire BenefitsLink site. Go to the whatsnew page, explore and search. Good luck. [This message has been edited by david rigby (edited 08-25-1999).]

I believe that the comp in current year is irrelevant. The amendments to the process of determining HCEs was for the purpose of identifying HCEs at the beginning of the plan year, so use the prior year comp. the only exception is that a 5% owner in the prior year OR the current year is an HCE.

does the company exist anymore? if so, call the personnel dept. they may not help, but you have to ask first to find out. Was the company acquired by another organization? if so, call them. can you identify a current or former EA from a prior Schedule B filing? identify a current or former plan adminstrator from a prior 5500 or PBGC filing? once you get one or two names, this might be a process of networking. keep notes. let us know if you have any success.

Gary, not sure I understand your question. The Form SSA is not open to public inspection. What are you trying to accomplish?

No. Distributions from a qualified plan are based on the ocurrence of an event: retirement, termination of employment, death, disability. There is no authorization to make a payment "'because the participant wants to". Nor does the participant have the right to choose who (or what) acts as trustee.

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.