david rigby

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?

For Robert, Need more facts. What type(s) of plans? How retroactive are you talking about? Are there any significant differences between the plans?

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).]