david rigby

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.

I'm not sure about your use of the terms "extinguish" and "fulfill". How about "replace"? The solution here is to analyze the source of the severance "liability". For example, if it arises in a union contract based on a "plant closing" (or similar action), then the terms of that collective bargaining agreement will apply. Now suppose the plan sponsor realizes that the cost of this can be handled more easily under the qualified DB plan (rather than using corporate cash). In that case, perhaps the plan can be amended to provide this benefit; however, the sponsor may be required (under the terms of the CBA) to negotiate any change to the DB plan. Likely the sponsor will want to do so to make sure that the union accepts the pension plan as the vehicle for providing the benefit as replacement for the provisions in the CBA.

Often the board resolution and/or plan amendment address (or should) the issue of applying for a letter. Therefore, the advice is "read your document".

Another possibility might be to amend the DB plan to include the severance benefits. This may require some negotiation if a union contract is involved or might include some creative design approach. The advantage of this approach might be to avoid the plan termination, and hence the excise tax. Don't forget to check for discrimination issues before amending.

I like the idea of encouraging beneficiaries to notify in the event of death. It can be very beneficial to the sponsor because it usually means that you get to stop the monthly payments timely, or change to the spouse, as the case may be. Recovering "excess" monthly payments is a hassle to be avoided if possible.

You may have a benefit from this plan. If he named others as beneficiary(s) before you were married, that might automatically be voided by your marriage. I suggest you contact the Personnel or Human Resources representative and inquire.

I believe that the only Pre-tax contributions permitted to a DB plan are under IRC 414(h), and apply to govt. entities. W/r/t DC plans, contributions under 401(k) and 403(B) are pre-tax.

If there is more than one plan in a T-H aggregation group, then the first thing to do is read the documents to determine which plan is responsible for the T-H accrual.

You can't be faulted for trying to correct a mistake. Because of the time involved, I suggest a thorough analysis of what happened, and if possible, why. The purpose is not to point fingers but to identify facts. Also, it is possible that a mistake was not made, or that the amount paid was thought to be correct because someone simply did not have all the correct information. Only after you are satisfied that the facts are all in should you consider an additional payment. It would be prudent to have the plan's administrative committee review all information and make a formal decision. The primary purpose of this is to make sure the process is well documented. It would also be appropriate to get legal advice (competent ERISA attorney) as to who should get any such payment. The amount of any payment should be determined as of the original date of payment, and then adjusted by some reasonable interest rate. Again, the committee is probably the appropriate vehicle for determining what is a reasonable rate of interest.

The issue of Partial Termination is driven by facts and circumstances more than by statute or by regulation. Issues about vesting are contained in statute and regulations for IRC Sec 411. There is also a fair amount of court cases, not all of which will be applicable to most situations. Let me present some thoughts. (I am an actuary, not an attorney. It is recommended that competent ERISA legal counsel review your situation.) Reportable Event: A significant reduction in the number of active participants during a plan year. For this purpose, a significant reduction is defined as: · a 20% reduction from the beginning of the current plan year, or · a 25% reduction from the beginning of the prior plan year. The reduction need not be from a single event. This Plan experienced a 29% reduction in active participants during 1998 (26 out of 90). Thus, the Plan has experienced a Reportable Event under rules of the Pension Benefit Guaranty Corporation (PBGC). Please note that I am assuming your "90 participants" means "90 active participants". If not, you should do the above arithmetic using only the actives. However, the Plan may meet one of the conditions under which reporting is waived. PBGC regulation § 4043 and the instructions to PBGC Form 10 indicate that the reporting of this event is waived if the plan has less than $1 million in unfunded vested benefits. Partial Termination A "partial termination" is an event (or series of events) which causes a significant reduction in active participants. A partial termination usually occurs when a group of participants is eliminated from the plan, either by plan amendment or by involuntary termination of employment. The IRS examines the facts and circumstances of a particular event to determine whether a partial termination has occurred. · Significant reduction in participation. When a group of participants is involuntarily eliminated from the plan, a partial termination occurs if the reduction in participants is significant. The IRS focuses on the percentage of participants, not the number of participants, eliminated from the plan to determine if the reduction is significant. The IRS defines "significant" to be more than 20% of the participants. The IRS discusses this issue in several Revenue Rulings, all of which involved terminations of more than 50% of the participants. Where the reduction is under 50%, but over 20%, the IRS may be willing to consider mitigating facts and circumstances. If an employer believes there are circumstances that should not lead to a partial termination, then the employer can seek an IRS determination letter on the partial termination if it is unwilling to accelerate vesting after a reduction involving more than 20% of the participants. Alternatively, the plan sponsor can amend the plan to award 100% vesting to the affected participants, thus making the question moot. · Litigation. The courts have generally followed the guidelines established by the IRS, looking to whether the percentage of participants terminated from the plan is significant. · Involuntary termination required. To be considered a partial termination, the termination of participation in the plan must be involuntary, either by plan amendment or other employer-initiated action (such as, firing, layoff, or plant closing). The IRS presumes all terminations are involuntary unless the employer shows otherwise. The consequence of a partial termination is to award 100% vesting to affected participants. Some affected participants may already be 100% vested. (Only the vesting is affected, not the amount of the accrued benefits.) Conclusion You must make your own conclusion. If a partial termination has occurred, in order to avoid any ambiguity, you may wish to consider of a Plan amendment to award 100% vesting to affected participants who terminated employment during 1998. Such amendment might be: · targeted to all 1998 terminations, without regard to location or reason for severance, or · restricted to the facility closing, or · restricted to involuntary terminations, or · some combination of the above. Of course, this should be subject to review by your legal counsel. Other The same issue of a partial termination may also apply to any other qualified plan that covers the same employees. However, each plan must be evaluated on its own if the plan covers other employees. [This message has been edited by pax (edited 07-09-99).] Also, check your plan document (and collective bargaining agreement if relevant) to make sure there are no other provisions that would apply in the event of a layoff. Such "plant closing" enhancements might affect the amount of the benefit; the vesting is affected by the partial termination. [This message has been edited by pax (edited 07-11-99).]

There have been several discussion threads on this topic in the past few months. You will probably find some useful information if you do a search on all the Message Boards, probably using such words/phrases as "404" "404 limit", "deductible limit", etc. (without the quote marks of course). Good luck.

I agree with comment about amend rather than terminate. Seems that provisions deemed too "generous" is hardly a reason to terminate.