Andy the Actuary

This IMHO is not about documentation but about following a court order. I'm not an attorney but unsure of the legality of parties modifying a court order without due process. The QDRO should stipulate what is and is not available and since the lump sum option was not available at the time the QDRO was issued, it's likely it would need modification. I would rely upont an attorney and not a recordkeeper. Is this recordkeeper going to represent your client in court if this blows up?

Well, someone advised the Plan to invest in this contract. You might want to go back to this someone.

While I'm a propeller head, it seems to me the Client perjured himself by submitting false information on a 5500SF. Even if 2013 year is clean, you're not going to be able to prepare the 2013 5500SF without amending the 2012 5500SF. Would suggest you confer with legal counsel on this.

(1) Your question depends upon Plan design. Typically, there is no change in the monthly payment (and the plan wins). In some plans, however, the monthly payment to the participant "pops up" to the life only amount prior to any reduction. The "pop up" feature may be forever or may be available only if the beneficiary dies prior to attaining a certain age. (2) It is not a given that the contingent annuity option causes a reduction in benefit from the life only form. Again, plan design. Some plans offer a free joint & survivor annuity; most plans charges via a reduction in pension. Whether or not no reduction could also depend upon whether or not beneficiary is spouse or non-spouse. (3) Independent of plan design, if spouse predeceases participant, then if participant is a female, remarriage occurs within 24 months; if participant is male, then he moves in the with women he's been flirting with each morning at Starbucks.

My understanding is the 436 limits apply on a plan by plan basis. Thus, if a Plan sponsor maintains two DB plans -- one that is 55% funded and the other 98% funded, there should be no problem distributing lump sums to NHCEs under the 98% funded plan. Interesting that 401(a)(4) and 415, among other code sections do aggregate. Thus, it would seem that your proposition smells okay so long as you're careful about grants of past service in the new plan and apart from the expense of maintaining two plans. However, what you would be proposing is clearly a subterfuge and the IRS might not take kindly to your action. As always, check with legal counsel.

Facts were stated. Pleasant situation became a distress situation. Had the Plan been making annuity payments directly, PBGC would reduce payments. Assume this is a given. So what does PBGC do if insured annuity purchased or lump sum distributed?

What about 4044(a) allocation priorities regarding benefits that have been in payout for fewer than 3 years?

A professional with 4 employees wants to terminate the calendar year DB plan as of 12/31/2014. The professional's benefit say for the sake of argument yields a lump sum of $1.5 million after taking 415 into consideration. Plan assets would fall about $150,000 short. The professional wants to distribute benefits in the first 6 months of 2015 and while IRS D-Letter approval will be sought, the professional does not want to wait for approval to make distributions. On the other hand, the professional would want within reason to maximize the distribution. I'm considering the following. Of course, distribute the employees their full benefits. Distribute the remaining assets (except say for $1 to keep the trust open) to the professional and the professional and spouse would execute a benefits waiver. We do not want to fund the plan 100% at this point to avoid the unanticipated possibility that the IRS may disagree with the lump sum calculation. Once IRS approval is received, calculate the total lump sum at the new distribution date as the lesser of the lump sum at original distribution and lump sum at new distribution date using the then present age and interest rates. In this way, we ensure that the professional does not derive any unforeseen benefit from the delay. Note: the benefits waiver is still in effect. Have the professional fund the difference between the "lesser" just determined and the amount of original distribution, and then distribute this amount to the professional. Since the waiver is in effect, the professional can contribute any amount up to 415 so the fact that the Plan does not provide for this mish mash should make no difference. Any comments?

Change the facts, change the answer. (1). Net from benefit distributions or (2). Report as other income. Again, wouldn't expect to pose a problem either way.

Let's say a year ago a Plan purchases an annuity contract from a life insurance company for a monthly pension that exceeds the PBGC guaranteed benefit. Now, the Plan is terminating in a distress situation and the PBGC takes over. How or does the PBGC work with the insurer to reduce benefits and receive compensation?

Two choices with same end result to the plan come to mind: (1) Report as distribution and show as other income; or (2) Revisionist approach -- there was no transaction. It's hard to envision this would have create an unresolvable issue.

Agree with E-Guy about the IRS. They are very forgiving if history of compliant filing.

If not, if the client has documentation of when they filed, that should suffice. In prior years when IRS was mailing out an approved 5558, they would correct the extension date if I erred. Likely, the IRS may have noted the correct extension date. Guess is this will not be an material issue.

IRC 404(a)(7)©(iii) (iii) Limitation In the case of employer contributions to 1 or more defined contribution plans— (I) if such contributions do not exceed 6 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries under such plans, this paragraph shall not apply to such contributions or to employer contributions to the defined benefit plans to which this paragraph would otherwise apply by reason of contributions to the defined contribution plans

Suppose you amend it and re-submit, which presumably you'd need to have the 5500 resigned? Then, in two weeks you find another typo. Then, next year you find another typo.

Kristina, I thank you for your efforts. This suggests all is hunky and dory!

Kevin, thank you!

I submitted the 5500-SF of the seaon on Friday, September 5 via EFAST2. As of this posting, the IRS/DOL still have not released the attachments and the 5500-SF that can be viewed on the website is unsigned, undated. I do not recall this delay in prior years. Obviously, the review is to ensure the attachments do not contain profanity, pornography, political, racial, or other writing or images that do not pertain to the filing. Seems to me this can all be covered in the agreement. (1) Is this delay unusual or now the norm? (2) More important, when the IRS/DOL releases the form, will it show as signing date the form was submitted (i.e., September 5) or the IRS/DOL release date. If the later, then this could pose problems if submitting forms towards the October 15 deadline.

Not to be negative, but sometime near the n-th hour of September 15 or thereafter. If felt no reason to hold up the show as long as good-faith compliance follwed. I've already had my clients do whatever opting they needed to in good faith. I used an election similar to what was used to opt out of MAP-21.

Critical is that non-key emloyee get TH minimum. I recall the joy of having clients whose DB plan stated the DC plan would provide the TH minimum and whose DC plan stated the DB plan would provide the TH minimum. Just because a plan pawns off the responsibility to provide the TH minimum does relieve them from the obligation to satisfy the requirement if there is no other plan. The question certainly would not have arisen had there been no other plans.

Guess is that participant is claiming a benefit now.

Okay, so the Plan Sponsor has nada. If the records exist, the easiest way may be to look at the trust statement, if there was such an animal, and anyone remembers who the custodian was at that time. If only one lump sum was paid and no other benefits, then the 5500 or 5500-R might show it. The Plan Sponsor may have had his accountant prepare a 1099-R. Hey, it was only 27 years ago!

I last saw this back in 2003.

I got a better idea than David's. Don't! Be careful what you wish for.

Agree. No contribution is being made so deductibility should not be an issue. It would seem this allocation is no different from an allocation of forfeitures. If it were simply forfeitures being allocated, it's likely this question wouldn't not have been asked.