Young Curmudgeon

So the distinction is which is the normal form? Mine is J&S 50%, the optional form is the J&S 100%, hence I need the QOSA?

A plan already offers a 100% J&S and a 50% J&S annuity. Do I still need to add the QOSA 75%? 417(g) indicates my applicable percentage for a 100% J&S is a 50% QOSA.

I'm taking over a plan that requires 2,080 hours for a full year of credited service, and gives 1/12th credit for 173 hours if the 2,080 threshhold isn't met. Is this legal? I thought the maximum hours for credit could only be 1,000.

If a corrective lump sum payment for missed installments throws a participant into a much higher tax bracket, would the concept of making the participant whole require the employer to provide additional remediation for the added tax burden?

I think you're off the hook for a controlled group. I don't have the reg. in front of me, I've attached some wording from the Vogel Fertilizer case below, but for a controlled group, wouldn't you need to establish 80% common control with 5 or less owners? Section 1561(a) of the Internal Revenue Code of 1954 limits a "controlled group of corporations" to a single surtax exemption. Section 1563(a)(2) provides that a "controlled group of corporations" includes a "brother-sister controlled group," defined as "[t]wo or more corporations if 5 or fewer persons . . . own . . . stock possessing (A) at least 80 percent of the total combined voting power . . . or at least 80 percent of the total value . . . of each corporation, and (B) more than 50 percent of the total combined voting power . . . or more than 50 percent of the total value . . . of each corporation . . ., taking into account the stock ownership of each such person only to the extent such stock ownership is identical with respect to each such corporation." An implementing Treasury Regulation interprets the statutory term "brother-sister controlled group" to mean two or more corporations if the same five or fewer persons own "singly or in combination" the two prescribed percentages of voting power or total value. One shareholder, Vogel, owned 77.49% of the outstanding stock of respondent Vogel Fertilizer Co. Another shareholder, Crain, owned the remaining 22.51%. Vogel also owned 87.5% of the voting power in Vogel Popcorn Co. and 90.66-93.42% of the value of its stock. Crain owned no stock in Vogel Popcorn. Respondent claimed refunds for taxes paid in certain tax years for which it did not claim a full surtax exemption, asserting that respondent and Vogel Popcorn ed., Supp. III). Now members of a controlled and respondent was therefore entitled to a full surtax exemption for each taxable year. When the Internal Revenue Service disallowed the refund claims, respondent filed suit for refund in the Court of Claims, which held that respondent was entitled to a refund. ASG is another matter. You'll have to combine the plans for testing if you have either a CG or an ASG.

I failed to mention that this enhancement would only apply to one department in the company.

I have a plan that wants to add a provision that would add years of credit for benefit accrual, vesting and participation in the event of involuntary termination under certain circumstances. The benefit could result in a person with two years participation, receiving a seven years participation benefit and instantly becoming vested. The entire arrangement seems problematic. I see issues with benefits rights and features discrmination and I think it may be impossible to get this to pass the 411(b)-1 accrued benefit requirements. Even if we could pass a general test, is there a way around the 411(b)-1 issue?

Does anyone know what the current hot issues for the IRS? Do they still generally audit plan years where a plan merger took place?

Need more information to determine CG status. What are the common ownership percentages by individual?

The problem seems to have resolved itself. When "they" were asked for a code section to back up this mysterious rule, none could be provided.

I am being told that the specific provisions in my document may be ignored and give one division an ancilliary benefit that is only provided to another division. The documents are written by division and provide different formulas and retirement provisions. One division intended to match another's benefit, but failed to modify their document. Now we have people saying it's o.k. to use that other divisions benefits under "the one plan rule". Is this even a real concept? Is there a code citation that backs up using another benefit structure simply because the two divisions have the same parent company?

The pension plan has failed to provide notices to particpants in the past. A VCP is being pondered to correct the defect. When correcting this type of defect, is there a limit (or IRS rule of thumb) on how many years back we need to go find people impacted? The plan has been around for decades and some records no longer exist.

Yes, it's the same plan. The sponsor wants to retroactively amend the plan to the BOY, but since there seems to be a notice needed, I'm advising against it. Hence the request by the sponsor for the measure of "significant".

A plan is changing from "high 5" to "high 5 in the last ten." There are definitely people who will end up with lower accruals because of this at NRA (we are preserving the existing accrued benefits). The "powers that be" are wanting to avoid the 204(h) notice and are requesting some citation defining "significant" in reference to "signficant reduction". In the Q&A from the final regs 54.4980F-1: A8.(b) addresses "Application for determining signifcant reduction in the rate of future benefit accrual" it reads ..."the determination of whether an amendment provides for a significant reduction in the rate of future benefit accrual is made by comparing the amount of the annual benefit commencing at NRA, under the terms of the plan as amended with the amount of the annual benefit commencing at NRA under the terms prior to the amendment." I interpret this as a "yes" or "no" test and if it's less with the amendment than without, you need the notice. Is there some other measure? Code citation?

If only I were king. Sadly I'm not and the finance dept, CFO and many others want to know "why" we choose such a rate. Such is the life of a compliance drone in a big corporation.

Nobody on the "correction of defects" board had an opinion, so let's try the DB crowd... We are correcting some missed minimum distributions for a DB plan and sending in the VCP. The instructions indicate to make missed payments with an additional payment for "loss of use" of the money. Has anyone seen guidance for DB plans on what rate to use in this situation? Is it the plan stated actuarial equivalence, the trust asset rate, or maybe some other "reasonable" fixed income index? Do you think it would be the greater of the three? Is anyone familiar with an internal IRS document that may shed some light? Thank you for any input!

A participant in pay status returns to active service. Their benefit payments are stopped, but no notice is provided. Conversely, there are also people who returned and their payments weren't stopped. The document states that benefits will cease upon returning to active employment. For the participant who's benefits were stopped without receiving a notice, it seems that this is a victimless error and having reinstated payments upon separation would be correction enough. For the participant who continued to receive payments, the plan would seem to have no recourse and the employer would need to make up the difference? I can't find anything that addresses "failure to provide a suspension of benefit notice." Any ideas?

Can I switch from a high 5 career average to a "high 5 in the last ten years" average if I preserve the accrued benefits in place. Does anyone know a cite that backs this up?

I'm not really feeling like researching this much, but even if you aren't a controlled group, since they both collect their money from a corporation they own, it smells like a Managment Services ASG regardless. From what you've disclosed, this arrangement just seems like a way to sidestep some rules. Can you share some more details about what each entity actually does?

This is really very simple. If the employee separated service on the 21st, and was issued their final compensation, they are not employed and don't get a contribution. There is no basis for saying they were still employed without some documentation to that effect. If by some fluke, the employer paid them for holidays after that date, you might be able to argue that they were still employed during the office closure.

Since we are on this topic, I have a situation (DB this time) where QPSA information was not adequately conveyed. Is there some statute of limitations on how many years we need to go back? This plan has been around a looooong time. My understanding is that if the spouse died first, we are in the clear, but if the participant died, we owe the spouse the full J&S benefit regardless of past payments. Correct?

Thanks Ak, the bells are now all chiming in my head.

I don't see how that works. You will have an NHC in your 401(a)4 test not receiving a gateway contribution.

We are correcting some missed minimum distributions for a DB plan and sending in the VCP. The instructions indicate to make missed payments with an additional payment for "loss of use" of the money. Has anyone seen guidance for DB plans on what rate to use in this situation? Is it the plan stated actuarial equivalence, the trust asset rate, or maybe some other "reasonable" fixed income index? Is anyone familiar with an internal IRS document that may shed some light? Thank you for any input!