SoCalActuary

If the intent is to start new accruals only under the 401k plan, then a DB freeze is fine. Then you get to charge for (pay for) two plans. If the intent is to migrate the funds from a guaranteed obligation of the employer subject to funding rules, then termination is effectively the intermediate step. The funds can then be transferred into the DC plan.

No. A defined benefit plan must be terminated with all its attendant duties. Cash balance is just a formula.

I believe you have a duty of consistency here. Otherwise, you are intentionally misleading the PBGC. One solution is to show the payables as part of the expected benefit payments for the year, but keep the current liability for the participants to include the amounts not yet paid.

Did you also have a gateway issue for 401a4?

Why be creative? That's the way the system is intended to work. Unless those two employees become 50% owners, the employer has a liability for the benefits. Either the owner has the funds to fix the problem, involving contributions to the plan that may take more than one year, or the owner declares distress termination and hopes to avoid the liability.

AndyH did a nice job of parody on 07-28. ASPPPPPPA apparently has registered their concerns. Gooooood for the industry because 07-28 is a problem.

But watch out for any DC plan contributions. Even if they are below 6%, you might lose the 150% range.

There are lots of perfectly acceptable methods to earmark specific benefits to specific people within a plan. It simply results in a non-safe-harbor plan that must be administered more carefully. As mentioned above, discrimination in favor of any group of NHCEs is something the IRS will not stop. Of course, it may result in work-place discrimination subject to EEOC issues, such as targeting only those who play golf with the boss, or a specific ethnic group, or those without health claims, etc. But that issue is much more contentious then ERISA compliance.

The principle behind the age-weighted plan or the old target-benefit money purchase plans allows a DC plan to avoid the uniform gateway for cross-testing. You should read a summary of these rules, which have been with us for a few years now, in any of the current references like Pension Answer Book or Sal Tripodi's materials. If you really want to get into this, go to a specialized program such as the Larry Deutsch Non-Discrimination Symposium.

Very good question - and you should be able to get a clear answer from the author of the proposal. But remember also that the gateway does not apply if the plan is "primarily DB in nature" where the benefit accrual rates for the majority of NHCEs is higher in the DB than in the DC. In addition, the plans can avoid the gateway if benefits are smoothly increasing in the DC based on age or service. The 5% DC only gateway or the 7.5% DB gateway get all the attention, but the rules are more flexible than that simple approach.

Sorry, Carol, but I disagree. If the combo plans are used in a floor-offset arrangement, then I would expect the profit-sharing plan to have a uniform allocation formula. But that is the exception. But if each plan can pass 410(b) separately, then each plan can be general-tested under 401(a)(4) separately with non-uniform benefit provisions. The only restriction is that only one of the plans can use imputed disparity for testing. Even if the plans are aggregated for testing purposes, each can have a non-uniform benefit formula. But the combined total of the two plans must pass each of the 410(b), 401(a)(26) and 401(a)(4) testing rules. To WSP: Engage the services of a competent actuary who has done this work before. If you believe that the plans are abusive, be prepared to have technical explanations to back it up, because the authors of the proposed plans should be prepared to back up their work. If you are over your head on the technical issues, either pass on the assignment or bring in someone to make you competent to judge the issues.

I understand that you must give this option for anyone non-vested or partially vested. But you do not have to give this option to a fully vested participant.

I will repeat my point of view: 1. Contact the plan sponsor to explain your problem face-to-face. 2. If they do not cooperate, report the fraudulent return to the IRS. 3. If they cooperate, redo the work for the year in question, but working with them directly, not thru the TPA. 4. If they refuse to pay for your services, then you should sue them and the TPA. 5. You should also report the TPA to the local DA, the Better Business Bureau, and any organization that the TPA belongs to. This may include state licensing boards such as CPA, Insurance Dept., ICFP, etc. This is best done by sending a press release announcing your filing of a civil lawsuit against the party.

The plan sponsor is the beneficiary of use of his name. Lawyers call it a "taking" of something of value. He has no evidence where the forged signature came from, just that it was used by the client.

The IRS has a tip line for reporting suspected fraud. I have used it in the past and have heard that it was effective. They will not tell you the outcome of their work. However, if a criminal case arises, you can choose to be available as a witness. In addition, the beneficiary of the forged documents is the plan sponsor. You should request a meeting with that party and explain your issue. Bring a good lawyer or other reliable witness with you. Since the plan sponsor has never been your client, you have no obligation to maintain their confidentiality. If you choose to do business with the plan sponsor, you could perform the work for the missed year and file it currently. Get paid directly, and not thru the dubious "agent" for your services, namely the TPA. If the plan sponsor just pushes you off, then you need to sue them. You should also report this to IRS Examinations branch, aka Jim Holland.

For administrative reasons, the plan sponsor of a large plan would want to eliminate participants with small benefits. We have some who allow lump sum payments for amounts above the $5,000 deminimus level. The best design we see has a limit of $15,000 on voluntary lump sums. If the plan provides a higher benefit, then no such option is available. This policy allows us to reduce participant count and eliminate recordkeeping issues. It does come with a price, in that lump sums must be paid at the IRS's "market rate" on 417e assumptions. But with smaller amounts, that lump sum subsidy is balanced against no future PBGC premiums, and no per-participant charges for administrative services. It also eliminates the "lost participant" headaches later.

It would be sarcastic to ask how you intend to drop someone's accrued benefit. But you could look to the vesting provision. What room do you have to drop someone with only one year of vesting credit? Of course this fails if you granted vesting service from hire in the two corporations.

The example works fine, so long as the $500,000 payroll covers all the people getting an employer allocation in the DC plan. Watch out for those excluded from the DC plan by a last day requirement,

We try to use language that refers to the current year values as published. This is not an amendment from the perspective of the plan sponsor, and I would not try to force the current liability to be measured on three year old 415/401(a)(17) limits.

There is a substantial volume of additional law on lump sum distributions and underfunded plans. One of the restrictions in found in 1.401(a)(4). If you can, find the presentation made by Joan Gucciardi at the ASPPPPPPA session which gives a better view of the subject.

The company will "no" go out of business. Did you mean "not" or "now"? If the company does not stick around, then pay off the pension liability to the extent funded. If the company does continue, will it be able to afford the pension liability? If a benefit is paid as a J&S form to the beneficiary, since HCE benefits are restricted, then the company will have time to pay off its liability. But the stockholders will have to have the willpower to complete the job. There are some economic scenarios where the company would not wish to pay off the liability, so a broad perspective is needed for all the tax effects. For example, if the company does not have a tax liability for an extended period of time, funding the plan will produce taxable benefits without deductible contributions. The stockholders need to negotiate which is better, a healthy stock value or a pension account.

One could argue that active lives have not incurred a distributable event at plan termination - after all they're still working - and therefore the plan needs to be amended to provide a lump sum ,for example, at plan term ?? I don't understand that argument. At plan termination, how do you dispose of the benefits if you don't have a distributable event? Force annuity contracts on actives? I don't see that on plans I work for.

Here are some excellent references, courtesy of Rich Groszkiewicz at the COPA PPA seminar last Friday. For future events see collegeofpensionactuaries.org. Daily Treasury Yield Curve Rates http://www.treas.gov/offices/domestic-fina...ate/yield.shtml Daily Treasury Real Yield Curve Rates http://www.treas.gov/offices/domestic-fina...eal_yield.shtml http://www.treas.gov/offices/domestic-fina...ieldmethod.html We are still waiting for Treasury to determine the corporate yield curve for PPA.

My understanding from Judy Miller of Senate staff was that all cash balance plans would go to three year vesting. This was a trade-off politically, "because these plans are for the 'mobile' workforce, they should vest sooner."

Add the good faith language under PPA. Corbel, among others, has a sample amendment. We use it for terminating plans already.