david rigby

In our office, we usually interpolate all such issues on the basis of completed years and months. However, I believe this is ultimately an admininistrative decision; just be consistent once you make it. It is pretty easy to defend your practice to anybody when you do it based on something pretty close to "exact". For that reason, I do not recommend using "age next birthday" or "age last birthday". Note also that it may be OK to have different handling of service, because that is usually defined more precisely in the Plan. For example, service might be based on plan years, which in turn are based on the 1000-hour rule, even though you might calculate an early retirement reduction or optional form conversion based on age and months.

Larry is correct, and he has hit the major points. If you have any specific ideas or concepts that you would like feedback on, just post. One other thing to consider might be whether there are areas outside the qualified plan arena where you can help with the employee relations issue for older EES.

I'm confused about this. My understanding of the IRC 414 regs is that it is impossible to "convert" a DB plan into a DC plan. That is, the regs state that such an action is equivalent to a plan termination. The PBGC will treat it as a termination of the DB plan. If you try to do this, you will end up with a new DC plan which has a different plan number from the DB plan. Therefore it is a NEW plan. If you terminate a DB plan, then a DC replacement plan can accept a Direct Rollover from the DB plan, but this requries the participant to have had all options with respect to receipt of that first. And if this happens, there is NO J&S requirement on that rollover amount, since the EE (and spouse) have already had that option and declined it (I guess that is the reference to "anti-cutback issues"). To summarize, this is two separate actions: terminate the DB plan, and create/modify a DC plan to serve as a replacement. They can be co-ordinated with respect to timing and communication, but they are distinct actions.

I generally agree with Wessex. Almost all plans in our office use the annual stability period. There is great variation in the choice of lookback period, but it averages 2 months. Personally, I believe that 3 months should be the minimum, in order to give you sufficient lead time in doing lump sum calculations, but that choice may present a problem with the regs.

I think the answer is no. But I suggest you look on the 401k Message Board. Going back about the last 6 months, there are a few different discussion threads on the topic of administrative fees.

Are you trying to sell universal life? If so, you have come to the wrong venue! Group term life is a (usually) a very efficient method of providing coverage to EEs who are still employed. You state, "Today, the price of term goes down, but so does likelihood of a benefit being payable when it is truly needed." The last part of your statement is the reason for the first part of your statement. (Duh.) The answer to your last question is multi-faceted, but the short response is: money, and no need to change. Employers usually don't consider it their job to provide cash value insurance or paid up coverage, so why should they pay a cent more Does that make sense?

Chris, I don't think that is the position of the IRS, and I agree with them. A qualified plan must have a sponsor. The trust cannot fill that role. Once a sponsor ceases to exist, then the plan should be liquidated, or some other organization must agree to assume sponsorship. Generally, the IRS says that you can have a "wasting trust" for up to 12 months, which means that you have one year to find all participants and pay them out. The participant is not really the deciding factor here, although this does predate the Direct Rollover/20% withholding requirements passed in 1992. I'm not sure the revenue agent was correct in claiming that the plan should be disqualified (maybe) but the response you got (distribute all remaining account balances and file a final 5500) seems quite reasonable to me.

Actually, a cash balance plan has a ficticious account that "accrues" at a rate given in the plan, usually involving an interest credit and a service credit. But the plan still should have a DB accrued benefit underlying the account balance. The PV of that is tested for T-H, with the possibility that the account balance is also a minimum to that PV. Gary, I'm curious. Most T-H plans are small, usually under 50 lives (although we have one in this office with about 200 actives). Do you have a situation where a sponsor is adopting (or considering) a CB plan and is also likely to be top heavy? (So far, I have not seen any CB plans of small employers.)

This seems to be a question for a different Message Board. Perhaps you would get more response that way.

Since a cash balance plan is a DB plan, then the DB plan minimum would apply. No special T-H handling for cash balance plans. I would look to the plan's definition of Accrued Benefit. The T-H regs in 1.416 Q&A T-26 state that no actuarial assumptions are mandated for testing the present value of accrued benefits. "The assumptions must be reasonable..." In our office, we often define this in the plan document, using 5% and the 1983 GAM. Note that unisex mortality is not required here. Q&A T-25 thru T-28 are worth rereading.

In addition to reading the document (always good advice), consider amending the document if it does not seem to be as flexible as you desire.

My understanding is that govt. plans are exempt from IRC sections 401(a)(11) and 417. Also exmept from sec. 411. My conclusion is that they are exempt from the lump sum minimums under 417(e). BYW, because they are also exempt from 411(d)(6), it may be possible for such a plan to modify its lump sum definition so that the amounts are decreased. However, as Carol Calhoun reminds us often, there may be applicable state statute(s) that could affect either or both of these issues. I'm curious, if the Plan is terminating, is the sponsor filing with the IRS for a determination letter?

I don't know where to get a summary either. However, if you look on the What's New page of BenefitsLink, you will find a link to some information, although it may be brief.

Yes. No, other than the current 415 regs.

Plan sponsor dissolved business in 1997 and decided to terminate DB plan. Standard terminaton. Now that we finally have all IRS and PBGC approvals, we are proceeding with distribution of final benefit amounts. But the custodian of the funds does not do 1099's. Neither do we (actuary). Since there is no longer a corporate entity (I think), who is repsonsible for the 1099's and IRS reporting? Stupid question, since the sponsor is responsible. (The plan is self-trusteed.) The practical question is what suggestion can I give the former owner of the company to get the tax forms done?

Dave is correct. In fact, I think the procedure for doing just what you ask is supposed to be outlined (briefly, not detailed) in the SPD, including the address.

Correct. However, I think the IRS permits a "wasting trust" for up to a year, thus allowing the trust/administrator 12 months to find everybody and make payment. You say that you have searched for the IRS position thru research services. Have you also called the IRS and asked? Seems like an issue on which they would have a well-defined policy.

Sorry that I do not have regs. handy. "Hour of Service" is defined in ERISA sections 202 and 203, and in IRC section 410(a)(3)©. Probably good to start with DOL and IRS regs on those cites.

1. go to the Govt. Plan Message Board. Click it. 2. Click on the "Introduction" link just before the messages begin. 3. Scroll down and see info on Carol Calhoun, who is the moderator of this message board. 4. Go to her "Employee Benefits Legal Resource Site" 5. Explore, taking note especially of the "checklist" of differences between government plans and other (ERISA-covered) plans, since church plans and govt. plans have very similar (but not identical) special handling. Carol is a very valuable resource to the users of these boards. Her website is great, and it's free. [This message has been edited by pax (edited 04-29-99).]

I'm with Wessex on this one. Only other possibility that comes to mind is whether there might be any special disability provisions that apply. Not likely, since most such provisions require some waiting period (such as five months), but thought I would ask anyway. I still don't see any facts that give rise to the question of whether his (or her) benefit is affected by the payment of the 4 weeks of vacation pay.

I'm not sure I agree with Dave. Since the hours worked are irrelevant to the comp he receives, then the regs say you credit 40 hours per week (I think). But, can the plan define the service to credit more, using actual hours if more than 40? Not sure. Certainly would be an opportunity for abuse. The usefulness of such a provision may be doubtful.

Try a search of this website or these Message Boards. Also you might try a search of the IRS website. I think you can find a link from BenefitsLink: go to the What's New page and click on "Links" at the top of the page.

The regulatory cite is part of the definition of a "safe harbor" plan design of a DB plan. Safe harbor is a concept created so that the plan is not required to prove, by some other means, that it is non-discriminatory. In other words, the safe harbor design requriements ARE the test of non-discriminiation. See 1.401(a)(4)-3(f) for special rules, including subsection (4) for discussion on Early Ret. windows, and also in 1.401(a)(4)-4(d). Contributory DB plans are discussed in reg. 1.401(a)(4)-6. Another help help may be to search this website, or the Message Boards, for references to "Early Retirement Windows".

Normally, the retiree form of benefit will not change, so that plan should probably purchase an annuity from a licensed commercial insurance company. Plan could be amended to permit retiree the lump sum option, but, if so, the retiree gets to make the choice of payment form. Don't know about rollover issue. Good question.

This sounds like an issue of personnel practices, not an issue of plan design or ERISA requriements. Of course, it is important to maintain consistency in such practices. This may boil down to: what is the definition of "retirement date"? what is proper and sufficient notice for an employee to make to retire? However, if EE was 49 and Early Retirement eligibility is at least age 55, I'm not sure how the accrued vacation time, no matter how it is paid, would have any significant bearing on the benefit. He was not eligible for Early Retirement, so HER benefit will be determined under the death benefit provisions of the plan. Probably need some more facts about the plan provisions. Also, has anyone checked the summary plan description?