david rigby

Unlikely that the ins. co. has the needed files, but no harm in asking. Not sure about the "trustee" part of your question, but my gut feeling is that the ins. co. would not take that role unless they agreed to in the purchase of annuities, and that is not likely unless the annuities were purchased "en masse" as part of a group annuity (i.e. not individual annuities). If the original plan sponsor still exists, no harm in asking for help, but don't be surprised if no one knows where the files are. Is there an SPD? If so, can it be used to answer the question about how a benefit was calculated? Any idea who the consultant was? If so, ask. Keep a record of all requests and the results.

Sounds like the ER is giving "investment advice". If you think that puts the ER at risk, and I do, then be careful.

I stand corrected (I think). Do you meet the conditions necessary to establish a bonafide QSLOB?

If you mean the $10K limit, there is really no good reason that this should be exceeded. Seems like some improvements may be needed in the payroll system. If you mean the 402(g) limit, subject to subsection (8), that might be a bit more difficult.

It depends. The language you quoted is "old" and was common prior to 1988. The age limitation was eliminated in 1987 (I think the statute was OBRA 87), effective with the first plan year beginning in 1988. So, in most cases, that portion of the sentence you quoted is no longer valid in a qualified plan. However, there is an exception. The particular IRC section that no longer permits the age exclusion is IRC 411. Certain plans are exempt from that section, including governmental plans. I have seen a couple of such plans recently that do have a maximum age provision. [This message has been edited by pax (edited 02-03-99).]

No, with respect to the benefits (account) already in existence.

Yes. I am taking the position that the base is established without regard to the funding method and that the amortization period is defined as 20 years from original date. The Code does not discuss funding methods here but clearly identifies the amortization period.

I believe the reference to 414(h) is for governmental plans only. We use it for several hospital plans where the hospital is owned by the county government.

My local AAA office offers the types of items you mention. Perhaps you can arrange some volume discount program; perhaps you can subsidize their membership.

Not sure. Is there a 415 problem there?

I receive a yearly publication from the Society of Actuaries titled "Statistics for Pension Actuaries". It is indispensable; I use it every day. It contains pages of historical CPI information. It may also be online at the SOA website, not sure. Check it out. www.soa.org

The above limitation is contained in IRC 401(l) (subsection lowercase L). I believe this section defines a "safe harbor". If you can pass a general test under the 401(a)(4) regs, then you can use some other integration formula.

I don't think citizenship is the important factor. Is it U.S. income?

Correct. But watch out for top-heavy minimums.

I think the answer to both questions is Yes. check IRS regs. under 1.414(s).

Not sure of all the facts. If this is a DB plan that is terminated(ing), then the PBGC has a Missing Participants Program. Does not apply to other plans. If this is a DB plan that is not terminating, then what is the big deal? Just leave it as a vested terminated participant. If you have done the required notice about the vested benefit, then the ball is in his court to come back to the plan when he reaches retirement age. By the way, I suggest that your communcation to the vested terminated EE state that and state that it is his repsonsibility to keep you informed of his address. Also, do not destroy any paperwork that documents this benefit or its effective date. If this is a DC plan that is terminated (ing), then you need to do some more searching, using such sources as commercial locater services. See PBGC regs on plan above for their suggestions on possible sources of information. (By the way, you should probably have the money invested in a separate account while you are doing the seaching.) I don't know how you could have an outstanding check for this since you cannot write the check until the participant makes an election on a Direct Rollover (unless not more than $200.) If this is a DC plan that is not terminating, then what is the big deal? Do a search if you want, but if you cannot find him, just leave it in the account. There have been other discussions about sources of information. Try doing a search on the Message Boards, using key words such as "missing" or similar. [This message has been edited by pax (edited 01-29-99).]

No QSLOB. That requires a minimum of 50.

No problem. I spoke to Rowland Cross of the IRS yesterday and asked this question. He stated that since the referenced comment is not in the Code, it will not be applied as a statutory exception to the requirement to establish a base. Therefore, the continued use of the base, and its switch from 10-year to 20-year amortization, is required even for aggregate method. He did seem to be open to other possibilities, but was not planning on taking a poll at the EA meeting, for example. If you have an opinion, he was interested in hearing from you. My opinion is that for larger plans, it (using a 20-year amortization vs. having no base) won't make much difference in the resulting contribution, but that it could in smaller plans, especially if funded with the IA method. [This message has been edited by pax (edited 01-29-99).]

Since it's Friday, I can't think straight; need to think about that some, although it does not seem correct. But, it is my experience that you cannot buy a deferred annuity for small amounts. That is, no insurance co. wants to deal with that. Is that a correct impression? If not, under what conditions would it happen? Would the ins. co. do so only if there are $X dollars (total) involved, for example? If you cannot buy a deferred annuity, then the only alternative is an immediate annuity, possibly in J&S form. That can easily make your monthly benefit very small. If that is the case, it may be one more incentive to the participant to elect a single payment (either lump sum or direct rollover). If I were offered: 1. lump sum of $10,000, (assume the deferred annuity of $300 per month starting in 30 years is unavailable on the open market), or 2. an immediate annuity of $20 per month, I probably would not have any interest in alternative 2. [This message has been edited by pax (edited 01-15-99).]

As an aside, MMBest, that is usually the point to a cash balance conversion. It provides a mechanism for "using up" some excess, either indefinitely, or temporarily as a precursor to freezing the plan. That is, sometimes a cash balance plan is used as a bridge from a traditional DB environment to a DC environment. Personal opinion: It can be good or bad. Much depends on the company demographics, philosophy of management, and the future of the plan sponsor. In many cases, the cash balance approach is done simply to cut current costs, without any analysis or regard for the underlying philosophy about the level of benefits and what the plan sponsor wants.

Oversimplified, if a DB plan is terminated, the plan must provide the accrued benefit in some form, such as the purchase of a paid up annuity or a lump sum. Receipt of a lump sum, if over $3500 (now $5000), requires approval of the EE (and spouse). Once the lump sum is properly chosen, then the participant has the right to do a "direct rollover" to any qualified plan in which he is a participant (and assuming that plan will accept a rollover) or to his own IRA. Note that a rollover to the spouse's plan, or to the spouse's IRA is not permitted. I think that rollover to any 403(B) plan is not permitted but not sure if that has been changed. Help anyone? If the sponsoring ER is replacing the DB plan with a DC plan, then the DC plan can be an available option to accept such rollover, but it is still the EE's choice. The ER, or the mechanics of the plan termination, canNOT require the participant to do any particular action, except when the lump sum is below the mandatory cashout limit of the plan. It is my understanding that your Q2 would be a violation of the rules as summarized above. Do you have legal review of this?

No one answer. Try: 1. other EEs, 2. phone book, 3. relatives in phone book, 4. internet search, 5. Social Security Administration, 6. IRS, 7. private locator services, 8. another organization that might have address, such as college alumni records, 9. forwarding address at phone company, etc. If this is a termination of a DB plan, then PBGC has a procedure (Missing Participant Program).

Don't think so. Yes he is HCE. But the plan still has to do ADP test since there are other EES, assuming that some of these are actually eligible to participate in the plan.

Question related to comment from Tom Poje: If EE can opt out but is still counted for 410(B) purposes, what does this mean for the W-2? That is, as implied under David Shipp comment, and as we know, the usual reason for an opt-out is to be able to make an IRA contribution. Does an opt-out accomplish that? Does the ER complete the W-2 check-box appropriately to reflect that? Does revocability have any bearing on this issue? Sorry for asking questions I should already know. If there is already a discussion on this, please let me know. Thanks.

If you include ERISA qualified plans in that waiver, you will probably set yourself up for trouble, especially if you are dealing with full time EEs. The examples of your proposal that I have seen usually involve P-T employees. Example, a bank hires data entry workers who work 2-3 hours per day. In exchange for more cash (such as an extra 25 cents per hour), the EE waives all benefits. This is not a problem for the qualified plans because the EE never gets close to 1000 hours in a year.