david rigby

No. The involuntary cash-out limit is $3500. Recently the law was changed permitting employers to amend their plans to raise this limit to $5000, but the old limit still applies until the plan is actually amended. However, there may be something else going on here. I suggest you obtain some more facts (not rumors) and post them here for further advice.

This topic has been discussed here not long ago. I suggest that you go back to the Message Board screen. Search all message boards for such terms as "missing participants" and "locate".

Rod, That seems like an onerous request from the IRS. There may be room for negotiation. Ask; offer to do the top 5 and the bottom 5 (of the top 100). Explain the time and expense involved. See what the response is. With respect to the MEA calc, you should probably be prepared to calculate the DB portion (at least) two ways; the first is the method in the regs, and the second is (probably) based on actuarial principles. If the EE contributes (after-tax), don't forget to net this out. Good luck. Let us know how it continues.

Since payment was made in 1999, has the 20% really gone to the IRS? Even if withholding has already been paid to IRS, there has probably not been any reporting yet; that would not usually happen until the end of the year. If the plan will have other amounts of withholding during 1999, perhaps the sponsor can "net" the amounts remitted to IRS withholding account. Keep carefull records. It looks to me like the sponsor made a mistake in not allowing the participant to make an election. Are we still within the 60 days? The entire payment should be reversed (including the participant repaying the plan). Not sure if there is a problem with any interest earned on the 80%. Anyone see a problem?

Julia, I am an actuary in NC. We have a number of hospital clients, and some others who are prospective clients. I would be interested in sharing information with you. If you are interested, email me from the icon on this message. [This message has been edited by pax (edited 04-14-99).]

Usually the deaths you find are those who are not in pay status, such as vested terms with a deferred benefit. If you get a "hit" on a person in pay status, you should verify immediately. Stopping the payment w/o verifying seems like asking for trouble. I also suggest you search this website, especially the Message Boards, for more. I recall a similar discussion a few months ago.

I agree with the posting by David Dye. Definitely not eligible for any special tax treatment as if it were from a qualified plan, unless there are facts not in evidence. But let me suggest that the employer may have known it was the wrong form, but that was the only one they had, and they just neglected to type over the "R". Was the form prepared manually? If so, this may be what happened. Not sure if you really must, but it might be worth asking the ER for a letter documenting that it was (inadvertently) the wrong form. Like chicken soup, it couldn't hurt.

No single correct answer. It depends on a large number of factors, including 1. how much notice the EE gave the company of retirement, 2. how complex the plan is (such as whether the plan includes special benefits or minimums from a prior plan), 3. how conscientious the company is in processsing the paperwork, 4. how quickly the EE and spouse review the paperwork and decide on the form of payment, 5. how the first check is being paid (if using a trustee, how much lead time is needed before the check is cut). I am an actuary. In my firm, we have a group of employees who are specialists at doing the calculations of all the benefits. But each one gets reviewed by the actuary assigned to the case. Of course, we put a higher priority on those that are retiring, but a substantial percentage of these don't get to us more than 2 weeks before the retirement date, and quite a few are received in our office after the retirement date, often because the EE decided at the last minute to retire.

I don't know that particular table, but the test of "reasonableness" is the result. That is, are the results you get from using it (such as normal cost, 412 contribution, 404 contribution, etc.) significantly different from the results you would get by using a mortality table that is generally considered "reasonable"? (Yes "significant" is also a word subject to interpretation.) The answer you get to that question depends on several factors, such as how well funded a plan is, the funding method, the other actuarial assumptions, the plan design, and (especially) the demographics of the situation. A good way to start this analysis is to look at the ratio of annuity values at two different ages: immediate annuity at retirement age, and a deferred annuity at the average current age. The ratio is defined as the annuity of the table in question, divided by the annuity of the 1983 GAM, of course using the same interest rate. Look at this ratio for males and females. Then use common sense to evaluate how significant the difference is. Example, the ratio of the annuity value at age 65 between the 1983 table and the 1994 table is 1.062 for males and 1.008 for females. Thus, the significance of the 1994 table is much less for a female population than for a male population. A warning: if you are asking the question because you are trying to "manage" the resulting contribution, you should also use common sense as to the appropriateness of that action, especially if the ratios discussed above are more than 10% off (that is, less than 90% or more than 110%). That 10% differential is my personal threshold, although I prefer a 5% or less; not a magic number. Another important point is that the entire package of actuarial assumptions is being evaluated for reasonableness, not necessarily only one. If you have a set of assumptions which is "individually reasonable" except for the mortality assumption, then look at the output not the input. Barnet Berin wrote a pretty good book on actuarial funding methods a few years ago, "The Fundamentals of Pension Mathematics", published by the Society of Actuaries in 1989. The first question at the end of the first chapter is extremely interesting, where he ignores all assumptions (such as interest rate, turnover, mortality, etc.) and proves that ALL funding methods produce the same contribution for a given set of data. Thus, it is the application of the various actuarial assumptions that produce variations on contribution levels. The funding methods merely modify the incidence of the annual costs. This message has been edited by pax (edited 04-06-99).] [This message has been edited by pax (edited 04-07-99).]

Does the church pay income taxes? My understanding is that IRC 404 lets limits on the amount a plan sponsor may deduct in the determination of taxable income. To me, that means that a non-profit organization is not subject to any 404 limit.

Generally, this is dependent on the plan provisions. It is fairly common to have such provisions for disability, whether the plan is a defined benefit type or a defined contribution type. However, it is not required by any federal law. I suggest you check the summary plan description for the specific plan provisions. If you have more specific questions, just post.

One other method is to left it float in a limited fashion, such as prescribing 3 particular days that it could be taken. For example, if you don't already have a holiday for Memorial Day or Veterans Day or President's Day, etc, then you could allow the extra day to be taken on any one of those, subject to some appropriate advance notice.

Don't forget to include the trustee in documenting the change.

As i understand the Q, the sponsor need not adopt the GATT changes for determining the minimum lump sum until the 2000 plan year (or am I off by a year?). Note that this is a change to the minimum specified in IRC sec. 417; the sponsor can always be more generous. However, if it is a new plan (hallelujah), then I think the GATT minimum should be included in the plan from its effective date. Since we are dealing with minimums, the interest and mortality basis in your lump sum definition can be anything you want (non-discriminatory) as long as the minimum amount is included. Note that as age increases, the GATT lump sum gets closer to the old PBGC definition. In fact, in some cases I have seen lately, the GATT amount is higher, usually at about age 64+.

1. Go to the What's New page of this website. 2. Click on the "Links by Topic". 3. Explore. If you cannot find what you need, I suggest you email the webmaster (Dave Baker) and either ask his help in locating what you need, or request a link. Also, there are numerous messages on the Message Boards; use the search capability. Some messages contain their own links to specific items. The IRS home page is www.irs.ustreas.gov. Be aware that "old" regs and rulings are probably not on the IRS website, but might be posted by some private website. If you are looking for recent IRS or DOL releases, you can probably get them from a website or can get the link from this website. In my office, we have a CD-Rom from BNA, hooked up to our office network. It is great, to be able to look up a reg or other cite with just a few clicks. It may be that the most valuable resource in the benefits field is the BenefitsLink website.

I'm confused. If the amount is over 3500/5000, then the sponsor cannot distribute it without the permission of the participant. If this is a DB plan, then I agree with above message: there does not seem to be a way to do a partial distribution, unless the plan had/has EE contributions. Also, be wary of rollovers and excise tax requirements (Sorry I cannot remember if the 10% early distribution excise tax is waived for disability. Even so, need to check to see how disability is defined/determined.)

I don't know, but I would like to know more about the two cases cited. Is there a link or other reference of discussion? Thanks.

I think that the Code specifically prohibits the AP from electing a J&S form of benefit (or perhaps the prohibition is when the contingent beneficiary is the new spouse of the AP). Also note that when a payee (participant or AP) properly elects a benefit such as a life annuity with a ten-year certain period, then the payee can name a beneficiary. In fact, the Plan does not care who that is since the certain period is guaranteed. Because of the guarantee, that beneficiary can name a beneficiary, unless the plan specifies otherwise.

Larry is correct. I believe the IRS regs. Sec. 1.414 discuss the various alternative definitions of comp that do not require testing. For example, using W-2 comp is deemed to be a non-discriminatory definition.

Gary, I keep handy all the original issues of various mortality table, so that when the client asks, I am able to give a valid answer as to the source or time of the data, etc. But I am not aware of an online source of these. For example, the UP84 table was originally published by the Conference of Actuaries (in 1975 I think), the GAM-83 table was published by the Society of Actuaries in 1983, etc. I am unable to remember details of source data, so I don't try, just look it up if I need it. The articles that accompany a table are sometimes lengthy, which is good because there is excellent detail about the history of the data, usually some discussion about the most recent table, other information which indicates the need for the new table, etc. In my opinion, mortality tables are one of the most important research tasks that is undertaken by the actuarial profession on a regular basis. If you read one of these articles, you will understand the care and importance that is necessary, and the substantial analysis that is done before a table is published. The articles accompanying the 1994 UP tables are an excellent example of this point. BTW, if you click on the "profile" icon on a message, you may find out more information about someone, including an email address. My profile, includes my email address.

A plan defines three things: the "applicable mortality table", and two items related to the interest rate. 1. The stablilty period; month, quarter, or year; 2. The lookback period; the first, second, third, fourth, or fifth month prior to the beginning of the stability period. Example, if the stability period is the (calendar) plan year, the lookback period is the rate in effect for the month of December, November, October, September, or August prededing the year. A new (proposed I think) reg. permits the use of averaging; for example, the lookback period could be defined as the average of the rates for the second and third months preceding the stability period. Note that the 30-year Treasury rate is the average for the month, not the rate in effect at the end of the month. Generally, the rate is not officially announced until about a week after the end of the month, so that using an early lookback period allows the plan sponsor to be able to make lump sum calculations in advance of the actual desired payment date.

No, and I don't think so. A qualified plan is permitted to define "compensation". Many plans use W-2, and many others add in deferred items such as 401(k) contributions, but the choice of definition is up to the plan sponsor. For example, we have a plan in our office that defines compensation as W-2, but not to exceed $40,000. However, if the plan is negotiated, the definition is (at least theoretically) part of that negotiation.

Another thorough answer from Carol. But let me be specific about one item she mentioned, that of avoiding adverse consequences to participants (her last paragraph). When a paticipant terminates employment and receives a distribution, there is often a desire to rollover that to an IRA. An IRA is supposed accept money only from a qualified plan. Therefore, the participants will certainly want the plan to be qualified.

Let's not make this harder than necessary. For this actuary, the date of contribution for the Schedule B is based on whatever source of information I get. If the plan sponsor gives me the date and amount, that is what I use. This is preferable because it affords the opportunity to check the bank/trustee statement to confirm that the actual deposit is what is expected. Some plan sponsors do not specify such information, instead preferring to let me read it from the trustee statement. If that amount is not what I expect, then I call to confirm. If the posting date is later than the due date, or different than expected, I call to confirm. Note that sometimes this reveals a mistake of posting, such as the trustee posting a company contribution to a DB plan account when it should have gone to the DC plan account, or vice versa, or a similar mistake with a benefit payment. The telephone is quite valuable in such cases. As far as the Q about due dates, normally a contribution is made FOR a particular plan year. It may also be noted as for a particular tax year. If a sponsor mails the contribution on September 15 (calendar year plan), obviously it will not be posted by the trustee on that date, but I record it as having been made on time. When the plan year and the sponsor fiscal year do not coincide, it is a good idea to educate the sponsor about the importance of: 1. making the contribution at least a little ahead of its final due date, and calling you (the consultant) at that time to let you know, and 2. designating the plan year that each contribution applies to. If the sponsor has a history of "pushing the envelope" on due dates, careful communication is advisable. This may (but not necessarily) give both the sponsor and the consultant some flexibility with regard to which tax year a contribution is deductible. Communication with the auditor (if applicable) is a good thing also.

Go back to the Message Boards screen. There is a message board specifically devoted to governmental plans. Try posting your question there.