joel

A governmental DB Plan states that if the employee has less than 15 years of Credited Service a loan is taxable notwithstanding the fact that repayment is made monthly over 5 years. Is such a plan rule permitted? Please elaborate.

Is there a reason why you didn't include the Deferred Acceleration for Retirement Amount (DAR) available in the 457(B) plan for those that have not maximized their 457 contributions in prior years? As you know this is worth another $12,000 for 2003. However, one cannot take the age 50 catchup amount ($2,000) at the same time. So is it correct to say that your total of $31,000 should be increased by $10,000 for a total deferral of $41,000? Peace and Hope, Joel L. Frank

A public school teacher is 55 years of age and earns $81,000 per year. He has never made any elective deferrals. The employer offers three plans for elective deferrals---a 403(B), a 401(k) and a 457(B). What is the maximum elective deferral for 2003?

Oxford, NY state law governs 8 public employee retirement systems; 3 are statewide and 5 are New York Citywide. It is my understanding that a local NY state govenmental employer must belong to one of these 8 systems. A small town for example may not opt out of one of the 8 by establishing its own pension system. The days when this was allowed, I believe, are long gone. NYC being so large a local govenment was allowed to establish its own plans. In fact the the Teachers' Retirement System of the City of New York was established in 1917 prior to the establishment of the New York State Teachers' Retirement System. The law governing the 5 New York City plans may be located in the Administrative Code of the City of New York.

If one has already used the DAR with one plan he/she may not use it with a subsequent employer's plan.

On the website of the New York State Teachers' Retirement System as follows: ============================================== IRS Considers Change That Would End Lump Sum Beneficiary Payments The Internal Revenue Service (IRS) is considering a change that would prevent us and other pension systems from offering retirement options providing a beneficiary with a lump sum payment. STRS has joined with other pension administrators, lawyers, financial consultants and related organizations to voice opposition with this possible change. While it is unclear when to expect an IRS ruling on this matter, we will use this Web site, our Hotline (800-782-0289) and System publications to share information as it becomes available. You may also want to monitor the IRS Web site (www.irs.gov). In the meantime, System members who request estimates of their STRS retirement benefits will receive the following disclaimer: "IRS regulations may eliminate retirement options that provide a beneficiary with a lump sum payment upon the death of a retiree. As a result, although we may have provided estimated figures under these options, they may not be available to you at retirement." Updated 9/5/2002

I understand that the IRS is currently considering the elimination of lump-sum settlements to the beneficiaries of a retiree. Please bring me up to date? What types of plans will be affected? Peace, Joel L. Frank

That's exactly what I told him to do. Thanks, Joel

The largest DB voluntary conversion to a DC plan is taking place in Florida. www.myfrs.com

A cursory reading of my post reveals that the reason for the request for a refund is the overpayment of the pension over the 10 years of retirement. Assuming this overpayment is not in dispute, is there a federal statute of limitations? Or does the PD govern? Is the plan entitled to a refund after 20 years, 30 years or is it simply open ended. Can the plan collect the refund from the pensioner's estate if the overpayment is determined after the pensioner dies?

After being retired for 10 years and receiving a pension from a public employee retirement system the pensioner is informed that he owes $25,000 to the PERS. Accordingly, the PERS is reducing his pension over the next 96 months in order to collect the overpayment. Is there no statute of limitations?

The Hon. Max Baucus Chairman, Committee on Finance United State Senate Washington, DC Dear Senator Baucus: As you know the ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001, effective 1-1-02, permits different types of retirement plans to be rolled over from one to another so that an individual may consolidate all of his/her different types of plans under one retirement account.(401k, 403b, 401a, 457, and IRA) Situation: Employer has offered a 403b plan for 35 years but just began to offer a 457 and a 401k plan. In order, however, to rollover 403b funds to the 457 or 401k plan an employee must satisfy a distributable event listed under IRC sections 403(b)11 and 403(B)7. These triggering events are: death, disability, separation from service or attainment of age 59.5. These obstacles should be waived when an employee is desirous of effectuating a rollover distribution to another eligible retirement plan. The employee should not have to wait until age 59.5, or separation from service (death or disability are not too desirous)in order to consolidate his/her retirement accounts. A law to have these hindrances eliminated when an in-service employee wants to rollover 403b funds to another eligible plan enumerated under EGTRRA should be enacted by the Congress. Please advise. Peace, Joel L. Frank

It is interesting to note that prior to the late 1980s the primary Tiaa - Cref 403(B)1 annuity contract (the one that the employer helps to fund) only provided for lifetime annuitization even if the participating employer was agreeable to offering a lump-sum settlement. (The salary reduction 403b contracts always allowed for lump-sum settlements.) In the late 80s the leadership of Tiaa-Cref finally succumbed to pressure from some groups and granted the option of lump-sum settlements provided the participating employer's plan was amended to allow for such an option. Today there are numerous participating institutions (public and private) who have adopted plan amendments to give this option to their employees. In my view this never would have taken place if not for the enactment in 1974 of section 403(B)7 authorizing mutual funds as an alternative funding medium. Scotty, are you referring to the primary contract or the salary reduction one?

Are the rules different for Erisa 403b plans?

Does New Jersey law prevent a local public school district from sponsoring a 457 plan? Thanks, Joel L. Frank

How to locate TPAs that administer 457(B) gov't AND Top Hat 457(B) plans? Ms. Lowder said: "I am an independent consultant in the retirement plan markets for non-profit employers and am routinely being asked how to locate TPAs that administer 457(B) plans - preferably on a national basis." ----------------------------------------------------------------------------------- I believe Ms. Lowder is looking for some form of national directory of TPAs that administer 457(B) government and Top Hat 457(B) Plans. I don't believe her post was intended to be an invitation to TPAs to promulgate their availability.

Rather than paying retiring employees in cash, as is the current practice, for their accumulated sick and vacation days and other compensatory time Pinellas County of Florida is about to establish a 401(a) plan for the express purpose of sheltering these amounts from income tax. The employee will not have the option of receiving a cash payment. Is this permitted?

As many of you know the Florida Retirement System is offering to its 600,000 members a new participant directed Defined Contribution plan under Section 401(a). The following link provides a summary of the available investment options: http://www.myfrs.com/pdf/Invest_Fund_Summary.pdf How do these investment funds compare to other large participant directed DC plans?

It is a salary reduction 403b arrangement.

mbozek, No, I have not heard of this product.

Typically, the amount necessary to purchase service credit is calculated in such a way that the employee in effect receives some further growth of the invested assets. However, the rate of earnings assumed for this purpose varies greatly from one plan to another. And of course, there is a trade-off involved: in a defined benefit plan, you cannot typically invade capital once annuitization has occurred, but you also will not outlive your assets if you live longer than the mortality tables would indicate. As with so much in this area, the employee needs to consider carefully the financial aspects of his or her choices, not just the tax consequences. ---------------------------------------------------------------------------------- Carol-- The amount necessary (purchase price) is calculated solely to guarantee additional lifetime income to the pensioner. It is the plan sponsor, not the pensioner, that receives some further growth of the invested assets (purchase price) to the extent that the actual investment earnings exceed the Assumed Investment Return adopted by the plan's actuary.

Anyone using funds from a DC plan (IRAs, 457, 401k, 403b, etc) to purchase service credits from a DB plan must understand that if the DB plan compels lifetime annuitization he/she is transferring his/her title to the assets of the individual account plan to the DB plan in return for a lifetime income guarantee without any further growth of the invested assets and without any right to invade the capital beyond the monthly annuity payment.

Shelton....just to be sure...was the 403b first rolled over to an IRA or were the stock trades done inside of the 403b?

An IRA is allowed to be rolled over to a 401(a) plan. If it is a DC plan then the amount rolled over is simply credited to the participants individual account. If it is a DB plan then to what use is the IRA put if not to purchase allowable prior service credits? Additionally, 403b and 457 may be rolled over to 401(a) plans. But if the 403b/457 holder is desirous of using these accounts for the express purpose of purchasing allowable prior service credits from a governmental DB plan the transaction must be effectuated as a trustee-to-trustee transfer, not a rollover. Peace, Joel L. Frank

Appleby, I have made a 2nd revision. If you agree, you may want to revise/delete your relevant responses to me. Again, I thank you for your corrections and amplifications. Peace, Joel L. Frank