eeyore

Yes, WEP can apply to a governmental DC plan. I assume you are familiar with the rules if the governmental employee only participates in a DB plan. If there are two or more plans, the WEP applies to the primary plan, almost always the DB plan. In this case, the DC plan is ignored. However, if the employee only has a DC plan, the WEP rules apply to this. Once the employee takes a distribution, the balance in the DC plan is converted under the WEP rules to an equivalent annuity, and this is used to determine the WEP offset. Note: if the employee does a rollover from the governmental DC plan, that counts as a distribution for the purposes of the WEP. Employees should think carefully about this. If they don't need to take distributions to cover living expenses, they may be better off leaving all the funds in the governmental DC plan, since this will delay the application of the WEP offset.

I'm not an attorney, but the ERISA sections dealing with fiduciary issues are generally not applicable to governmental plans. This question may fall under NJ law, if that concept is not an oxymoron. (Mandatory Sopranos reference.) Are investment choices in this plan set by statute? If not, is there a NJ statute governing the duties of fiduciaries? If trustees weren't sued about this by participants in 2008/2009, they can probably sleep soundly.

Andy, 13th checks, in my experience, are most often granted by the legislature, city council, or other governing body without regard to an "excess earnings" calculation. For example, if a plan has no automatic COLA, a 13th check may be granted from time to time. (Think of this as an alternative to granting an ad hoc COLA.) When granted, the governing body is aware that they are creating an additional liability, but they believe the plan is strong enough to justify this move. The amount of the 13th check is usually equal to one monthly payment, but it could be determined using some other approach, reflecting service, years retired, or other variables. The "excess earnings" approach is used in some plans to determine the COLA as opposed to a 13th check. I've seen a survey saying there are 5 statewide retirement systems using this approach. These can be more sophisticated, involving cumulative earnings in excess of some amount over the assumed return, rather than just looking at the excess over the assumed return. I think "excess earnings COLAs" are all flawed, and I always tried to discourage their use. The upshot is that the two things--"excess earnings concept" and 13th checks--are logically independent although they were both used in Detroit. There are plans that use the excess earnings approach to determine a COLA, but that don't grant a 13th check; and there are plans that grant 13th checks without considering the earnings.

Some states do have bodies that maintain lists of all the governmental plans in the state. For example, there are the Texas Pension Review Board and the Florida Department of Management Services. Also keep in mind that many states have a single state-wide plan that covers most or all municipalities and school districts.

I think you are getting the old run around, though it may be due to internal red tape as opposed to animus. You should press Boeing to provide you with two estimates: (i) if commenced by you December 1 (assuming your husband hasn't died before then), and (ii) if your ex-husband dies next week and yoyu start benefits on December 1. This is information they should be willing to give you. You might find the amounts are not very different, but then I haven't seen this QDRO or the plan terms. If pressing them doesn't work, you will need an attorney to do it for you.

There are a few state and local governmental plans that still treat member contributions as after tax. I've seen this in some public school districts. More importantly, even in plans that treat member contributions as pre-tax under IRC 414(h)(2), all contributions made prior to ~1983 are after tax. Therefore, the original poster has to get a breakdown between pre-tax and post-tax contributions from the plan administrator. (The ~1983 date is whenever the plan adopted treatment under 414(h)(2).)

CM = Census Mortality. This was a table based on the 1990 US Census. (To verify, qx at 37 = .001969.) I wouldn't use it for a pension valuation, although I haven't compared the q's with a more standard table to see how different it is. It's a unisex table for one thing. The original research is here: http://www.cdc.gov/nchs/data/lifetables/life89_1_1.pdf. The life table is on page 12 of the document (labeled as page 6).

As noted above, there are legal/regulatory issues you will need to consider. However, if your goal is to reduce costs by encouraging employees to work longer, I want to caution you that this may not work. Presumably, there are already some employees working beyond 55/30. In my expereince, it has been difficult to construct realistic retirement patterns under the new design that would offset the cost for those already working longer careers. Keep in mind that your proposed sweetener is a fairly mild incentive, and won't change behavior significantly.

Andy: I think you misunderstood the form of payment. If the formula produces $1,000 life annuity, then option will be adjusted, say to $970 or conceivably to $1,030, depending on the ages. Then this amount would be payable while both parties are alive. Upon the first death, the amount paid would be reduced to fraction X amount that had been paid. This is a perfectly reasonable option, especially when the fraction is 2/3 or 75%, on the grounds that living expenses for the survivor will reduce upon the death of one member of the couple, but generally they won't go to half. I saw a lot of plans where this form of benefit was offered as an option, but was never the qualified J&S form. At 50%, it is as you described (but with an adjustment for the ages), and at 100%, it is identical with a standard J&100%S.

I've seen some large governmental plans allow the recipient to voluntarily suspend payments, but it strikes me as very bad public policy. Is she able to work? If so, she could return to work and the benefit might be suspended due to that fact, depending on plan language. But of course then she wouldn't qualify foir assistance because of her employment income. Catch 22.

You need an attorney for this. I would not be surprised if you do owe this to her. Under the divorce agreement, your ex was suppose to get $400 from each of your retirement checks. That isn't happening; you are presumabley getting the full benefit, including that $400/month. Most divorces and DROs that I have seen make the participant liable to pay the ex if the plan does not pay her. I am an actuary, not an attorney, but I think you should be prepared for bad news. And yes, I understand that it is frustrating since your ex and her attorney have dithered arounbd for years.

The test is more complicated than just FICA pay, but for an employee with a typical non-governmental job, FICA is what you want. Therefore, the test is on the full $30,000 in your example. My source is an old Social Security Handbook (circa 2003). This won't have changed, however. The earnings test, with minor exceptions and exceptions for certain governemental cases, is based on "wages for employment covered by Social Security". This in turn is defined as including amounts deferred under a 401(k) plan.

So in 9 days, we learn the answer to Life, the Universe, and Everything!

I'm confused. How does anyone take a "loan" from a DB plan? Was that a typo?

GFOA has some material that might be helpful for a newbie to this field. Then there is the Governmental Plans Answer Book, edited by Carol Calhoun, the moderator for this board.

I assume you mean retirees can come back and continue to draw the retirement benefit. Many governmental plans permit them to come back if the benefit is suspended. Assuming you are interested in cases where the retiree continues to receive the retirement benefit, practice with regard to reemploying retirees varies enormously. There is certainly nothing that can be considered typical. Some plans forbid it entirely, some permit it but only on a part-time or temporary basis. Some plans require the employee to have been retired for some period of time (e.g., a year), to ensure that the original retirement was legitimate. Some plans cap the employee's pay in reemployment. In some cases, the employer must contribute to the plan on behalf of the employee, even though the employee does not earn additional benefits due to the reemployment. It's also worth noting that this is a political hot potato, with charges of double dipping being made against retirees who do this. Any proposed changes should be studied by an actuary.

Is this a governmental plan? Most that I have seen do provide a minimum lump-sum at death based on the difference between (a) the balance of the member's contribution account at retirement, and (b) the sum of the payments made. But all these plans have explicit language to this effect somewhere in their ordinances/statutes.

Ah, yes, I recall Sec. 4971A. My Dad was probably the lowest-paid person ever to pay that tax. (Having grown up in the depression, he deferred every nickel he could, and he worked for a large company with lots of plans with high limits--stock, thrift/savings, profit sharing, all in addition to a DB. Time was.)

The current benefit can be considered the sum of (i) a life annuity of $5,000 payable to H, and (ii) a deferred contingent annuity of $5,000 payable to W after H's death. If you use the separate interest approach, two things will be different than under the approach suggested by both Scott and the OP: a) H will receive a larger benefit , because half the value of the contingent survivor benefit will go to H, as well as half the value of the life annuity payable while H is alive. Instead of receiving $2,500, he would receive something more. (How much more? Depends on the assumptions and the ages, but it might reasonbly be 5-10% more.) b) W would also receive more than $2,500--at least if H and W are the same age, and ignoring the possible use of different mortality tables for H and W--because she would also receive half the value of the $5,000 deferred benefit in her lifetime income. (This larger benefit replaces half the value of the extra $2,500 she would have received after H's death.) So a separate interest approach does have some attractive features. However, I'm in agreement with Scott that most plans prohibit changing the payment form elected by the retiree, and if that's the case, then I would point that out to the attorney and suggest the same approach Scott did.

I concluded the answer was Yes when I did some research on this about a year ago. However, I'm not in the office so I can't give you a cite. My recollection is that nothing precluded it.

Section 401(a) of the Internal Revenue Code is the chief section that allows for all sorts of retirement plans sponsored by corporations, governments, charitable organizations, etc. The plans include defined benefit retirement plans, cash balance plans, profit sharing plans, etc. Section 403(b) is another section that allows only certain sponsors (in health or education) to offer certain annuity plans. A FICA / Social Security Alternative Plan can be set up under either under Section 401(a) or 403(b), or for that matter, it could be set up under Section 457, another Internal Revenue Code section allowing for certain plans maintained by governments and non-profits. A FICA / Social Security Alternative Plan is a plan that is usually set up by government employers which are not covered under Social Security, usually for part-times or support personnel who aren't covered by the employers main retirement plan. For example, teachers and most school personnel in Texas belong to a statewide Teacher Retirement System, and Texas school districts do not participate in Social Security. The school district, however, might put part-timers like crossing guards who are not eligible for the Teacher Retirement System into a FICA / Social Security Alternative Plan. So Section 401(a) plans encompass many different kinds of plans and sponsors, while the FICA / Social Security Alternative Plan is just one very minor subcategory.

My strong view is that purchasing the service is permissible in this situation. Note the following provision of 415(n)(3): Such term [Permissive Service Credit] may include service credit for periods for which there is no performance of service, and, notwithstanding clause (ii), may include service credited in order to provide an increased benefit for service credit which a participant is receiving under the plan. The stuff after the "(ii)" is the important part. By purchasing service, he is effectively increasing his benefit by 20% for the same 15 years of service. Besides, I think the second reading is the natural one, and your point about air time is bang on. I am not an attorney, but I can pretend to be one on this message board.

It sounds like Jay and AndyH both believe the relief under Section 415 for a QJSA is limited to cases in which the J&S benefit is subsidized. I disagree. The relief applies to all QJSA distributions, whether the plan subsidizes these or determines them as actuarially equivalent to the life only form. In answer to Sieve's question, the only time you don't get the relief for a J&S distribution is when the option is not a QJSA, which usually means the joint annuitant is not the spouse.

Yes, the mortality table for Section 415 was changed by WRERA 2008. Here's a quote from the Joint Committee's report: Interest Rate Assumption for Determination of Lump Sum Distributions (Act sec. 302 and Code sec. 415(b)(2)(E)) The Act amended the interest and mortality table used in calculating the minimum value of certain optional forms of benefit, such as lump sums. The provision clarifies that the mortality table required to be used in calculating the minimum value of optional forms of benefit is also used in adjusting benefits and limits for purposes of applying the Code section 415 limitation on benefits that may be provided under a defined benefit plan. This clarification of the required mortality table is effective for years beginning after December 31, 2008. However, a plan may elect to use the new mortality table for years beginning after December 31, 2007, and before January 1, 2009, or for any portion of such a year.

Could this be a governemental plan? OP's statement that "plan does not normally allow for lump sum payments other than employee contributions with interest to terminated participants" makes that seem likely, IMO. If it is governmental, then of course the requirement to offer an immediate annuity does not apply.