mwyatt

Does anyone know the current status of the impending restatement of plan documents in the 1999 plan year? Has anyone heard any talk of extensions by the IRS and/or opening up of DL program post '98 approval? Time is running short if we're to redo all plans by 12/31/99 (I know that we all have laser printers in 1999 rather than daisywheel printers in 1985, but time is running short!) Seriously, has anyone have any insights as to when we can expect to start generating documents for ALL of our clients?

Timely point now that 1999 is here. What are peoples' thoughts on this issue? I have an Individual Aggregate plan with prior amortization bases due to CL FFL. First reading is that you would take outstanding balance as of 1/1/99 of each base and reamortize over remaining period (old) + 10 years. However, Committee reports does have language stating that plans whose methods don't generate bases should not establish any bases. Does this mean that no new bases established, but keep old bases, or do they all go away? Any thoughts on how to proceed?

I concur with the horizontal termination issue after looking at the regs. However, it appears that the only impact is the full vesting of accrued benefits as of the date of conversion. The regs don't provide for any further sanction or remedies other than vesting. Taken from RIA'S Pension and Benefits Expert (my apologies if I'm breaking any copyright laws here) "A horizontal partial termination affects current employees through the cessation or decrease in future benefit accruals. The remedy is to vest these employees in their then-accrued benefits. No additional plan contributions or damages are required, nor must the plan be disqualified. Other remedies may be available under the plan itself. 43 43 Gulf Pension Litigation In re, (1991, DC TX) 764 F.Supp. 1149, 13 EBC 1873, affd on other issue sub nom Borst v. Chevron Corp, (1994, CA5) 36 F3d 1308, 18 EBC 2217." The Employer could not currently get at the excess assets at conversion as the Plan has not yet terminated, so they stay in the plan for funding purposes. However, it also appears that no reallocation of the excess assets is required at conversion.

I went to the Retirement Plan Terminations site and read David Shipp's postings on this subject. Note that the Gray Book question specifically sited a defined benefit pension plan that did not provide for a lump sum option prior to termination. If your plan did provide for immediate lump sums prior to termination of the plan, I'm afraid that the Gray Book response is not of much help. My feeling if this is the case is that participants must be provided with a lump sum option at termination of the plan with the ultimate destination at their discretion. So I guess the question still stands, did your plan previously provide for lump sums prior to retirement at termination of employment?

One question surrounding your scenario: did your plan provide for lump sum distributions as an option prior to termination, and if yes, what were the restrictions on receipt?

I don't think there would be a reversion in the scenario you described as all you are doing is amending the benefit formula under the Plan, hence no termination. The only way a reversion could occur is if an Employer terminated the existing plan and then established a new cash balance plan (with some form of offset feature to account for accruals under the prior terminated plan).

The cash balance plan concept really is just another way of expressing the old career average unit credit formula (i.e., each year you earn an accrued benefit unit equal to x% of your pay for the plan year). New wrapper, same old plan. A switch to a career average plan for an existing older employee in a traditional "high 5" year plan should probably cause alarm on their part as they would most likely be stuck at their grandfathered accrued benefit for quite some time. Younger employees probably think that these plans are a better deal, but one thing is that everyone gets older. I'd like to see their thoughts on these plans 20 years from now. Any other thoughts?

It is our position that the QDRO distribution is treated as having been made to the doctor for IRC 415 purposes with respect to both the single and combined limitations. So no, I think that the QDRO cannot be "disappeared" for 415 purposes.

Our office signed up for RIA's Checkpoint service which allows you to access all of the material traditionally found in the RIA bound volumes over the Web. We originally replaced the paper volumes with their CD-ROM product, but recently switched to the Web service. You have full access to all their material pertaining to pension plans from any web browser (all you do is log in at the Web site to access). The service is a little pricy, but not too expensive when you take into account that you can eliminate your paper reference service (CCH, RIA, etc.) as all of that material is included in the Web service. One advantage is that the material is continually updated; another is that noone has to file the weekly updates. You also can access the material at work or home (or at a client's office for that matter) as the service is not bound to a physical address E-mail if you want to talk about this further (no I am not connected with RIA, just a user).

What (if anything) has anyone heard concerning the opening up of the determination letter process for GUST restatements for ongoing plans in the 1999 year?

Has anyone received their reenrollment forms for the cycle ending 12/98 yet?

I still think that you have a problem at normal retirement by counting the missed service in the accrual fraction (first off, the benefit at NRD is the "Normal Retirement Benefit", not the accrued benefit). How would you justify two employees at Normal Retirement having completed the required 25 YOS for the full benefit, but saying that one has a lesser benefit because of missed service (in fact he might have more service than the other employee). Let's say Employee A had 5 YOS, then left 5 years, came back, worked until 65 and completed an additional 25 YOS. Employee B started at age 40 and worked until 65, completing only 25 YOS and gets full benefit. I think you would have a real problem saying that Employee A at NRD would not get the full benefit.

I've often thought of this situation. Generally, I've seen most plans interpret the denominator as service to date plus expected future service from date of calculation to retirement date (which would lean in interpretation that yes, you do get some bonus accrual for stepping out and then returning to work). However, if you take the position that the missed service still stays in the denominator, how do you reconcile the benefit if the participant stays until retirement? Consider a benefit of 50% of average reduced by YoS less than 25 at NRD with service accrual. A participant starts employment at age 30, works full time until 40, leaves for 10 years, returns to work at 50, and stays until 65 (NRA). First, let's ignore the missing service in the denominator. At age 40 termination, his fraction is 10/35. At rehire at 50, this fraction balloons to 10/25 (good for him) but then continues increasing at traditional rate to 25/25 at age 65. Second, let's count all theoretical service from initial date of hire to retirement. At age 40 termination, his fraction is 10/35. So far so good. He returns at age 50, fraction is still 10/35. At age 64 his fraction is 24/35. At age 65, however, the fraction balloons to 1.0 (remember the normal retirement benefit takes over here and he does have the requisite 25 YoS in the NRB formula.) I know that either interpretation doesn't provide for equitable or orderly accrual. Any comments on this analysis? I guess that this is also a good reason for moving towards 133 1/3 accrual (i.e., recouch the benefit as 2% per YoS max 25). [This message has been edited by mwyatt (edited 10-04-98).] [This message has been edited by mwyatt (edited 10-04-98).]

Has anyone heard anything as to when the IRS will open up the submission of ongoing plans on restatement or when documents will be available for generation (i.e., Corbel?)

SBJPA '96 added the repeal of 415(e) effective with the year 2000 plan year. If you read the committee notes to the repeal, one key factor in their decision to repeal 415(e) was the excess distribution and accumulation excise tax under 4980A. A year later, TRA '97 repealed the 4980A excise taxes in entirety. My concern (as many others probably have) is having the main reason for repealing 415(e) itself repealed would lead one to believe that this issue will be revisited. Obviously, as an actuary dealing in the small plan market, the repeal would be great for many current and future clients. However, I can't think that this issue won't be looked at in the near future. I asked Jim Holland about this point at the 1998 EA meeting in passing and he said that at this point they are proceeding as if the repeal will stick (they only interpret the laws, not write them). Has anyone heard anything further on this or seen how the repeal will actually be implemented?