SoCalActuary

Appleby - does this also apply to the lawyers? How about "Scalps Clients"?

First choice - ask the author, presumably the auditor. Second choice - make a guess. Here's mine: Benefit costs were not separately identified in the financial statement, because the benefit expenses were combined into other accounting entries (maybe payroll?) This sounds like a whitewash, to be corrected only if the auditor gets critical remarks during their peer review or by the users of the audit report.

Employee contributions do raise the level of recordkeeping. Church plans are exempt from some of the vesting rules, so I don't know without research whether the plan must now comply with all the vesting issues for contributory plans. Unfortunately, poorly funded plans for church groups have no PBGC protection. Thus, the plan participants need to understand that their retirement benefits are much like Social Security, in that their benefits depend on the good will of their congregation. Honest, plain talk to the plan sponsor about the underfunding is vital. Then the employees will need to understand what is at risk if they don't contribute.

"S-Corp" ?

Split the traditional IRA into two payments: After tax funds go to Roth IRA Pretax funds go to qualified plan. Nothing was intended about Roth to qualified plan.

You should also be aware of: Hewitt Mercer AON Milliman Hay Mellon (formerly Buck & Co.) In addition, there are strong regional firms to consider, depending on your location. However, a number of these firms have administrative recordkeeping services, as do the two you already mentioned.

If you are making a lump sum settlement under the QDRO, you are distributing a portion of the participant's accrued benefit, so you value the lump sum on the participant's age, the plan actuarial assumptions (including 417e), and then permanently reducing the accrued benefit by the annuity equivalent to the lump sum paid. At least, that's my suggested method. Others are welcome to disagree.

I would guess from your posting that you are trying to reduce current business income by the yet-unpaid future contributions for 15 years to the pension plan. In effect, you are posting a business liability for future expenses to justify lower current taxes. Then you wish to pay them from non-business sources when they become due. Short answer - not good tax planning, not good tax results.

The aount was so small, I didn't even worry about the estate issues, simply who pays the income tax. My answer was - let the executor decide based on the date received. It was intended as a simple practical way to discharge the obligation to issue 1099.

For non-actuaries, the Society of Actuaries maintains tables showing a range of mortality rates. Some of the tables are based on large volumes of actual experience validated by statisticians, others are constructed by reference to those actual results, and still others are extrapolated on trends previously observed. If you look for the tables thru the SOA, you are most likely to find if a table is an industry standard one or an individually derived table that must be defended by its user.

I have long experience working with lots of different doc's. So I don't sell on this practice. However, I encounter TPAs trained only in their way of doing things. For example, Paychex could not do a cross-tested DC until recently. So they base their fees on the plans they know how to administer. What they charge for the doc is subject to market forces. If the salesman can make it important to the client, then they will buy. If not, then it gets negotiated or the sale isn't made. Sometimes they build it into their takeover fees.

However, if you are changing, the new TPA or custodian would prefer to use their own document, especially when snap-on amendments are needed. The administration of the plan language is best done by those watching the plan in operation.

It is a much better play to have the after-tax funds roll into a Roth and the taxable amount roll into the qualified plan. It does require that you are eligible for a Roth.

If you report the income to the participant's SSN, then it is the duty of the executor of the estate to divide the income between the participant's taxes and the estate's taxes. If I were doing this, I would use the original 1099 SSN, as the only practical method.

In addition, you could use reasonable mortality tables for death benefit claims as used by insurance companies. You could also anticipate some policy expense charges in the current year. It seems reasonable that the expenses you would see in a UL policy ledger statement are plan expenses for providing the death benefit.

I suggest you go back to the source if possible. The SOA published the IA 71 and projection tables, so you might have a projection of the 1971 Individual Annuity Table to 1981. Can you also get the Annuity Purchase Rates used?

How was this sorted? By the sordid details or by the value of the proposed contingency fees?

Effen: the plans I see have the type of language given by the first post. The insured death benefit is only available if issued. As to discrimination in practice, your example is right on. If I find the insurance is not issued uniformly while doing the actuarial review, including the type of contracts used, then I advise of probable discrimination, risk of disqualification, and the need to correct the situation. Having said this, small plans rarely find attorneys who actually are willing to help participants who face discrimination in practice. But that's another subject for a different thread.

I appreciate your view of best practices. However, my experience is less efficient and sometimes less noble. I see cases where the insurance issues have not taken place timely, and thus I accept the position found in plan documents that show the death benefit based on the policies actually issued. Just my luck to work with less than perfect insurance agents

GBurns - Why do you think a QDRO is a forced action by one spouse against another? I have seen plenty of these where neither party objects, since the QDRO is simply instructing the plan to pay the alternate payee.

GBurns - think of a small plan where the death benefit is 100 x projected benefit. A new participant with a projected monthly benefit is $1,000 per month, justifying $100,000 of life insurance. However, it takes time for a new life policy to make it thru the process of application, underwriting and approval. If death occurs before the policy is approved, where does the new pension plan get $100,000? The insurance company won't pay it because there is too much risk of issuing a "death-bed" policy when the underwriter hasn't approved it. That is what is meant by unfunded death.

Initial communications to participants in many small plans are not what I call full & complete disclosure. But with that tangential note aside, the SPD needs to describe that the death benefit includes insurance if issued. Thus a participant would have to be aware that the insurance policy was written before the death benefit goes into effect. This is very important to protect the plan from unfunded and premature deaths before the policy can be issued. It also gives the employee more incentive to cooperate in the period while the policy is being underwritten.

From the original posting "The plan document says that the administrator may purchase life insurance in a non-disciminatory manner. The death benefit payable from the plan is based on the amount of life insurance in effect." To Kirk and mbozek: This is common to many small insured plans. If the policy was not purchased, then the death benefit does not include the insurance benefit.

You may have missed the point I was making. If the prior actuary's work is not used for the Schedule B, then it is irrelevant. The new actuary must make the decision. The new actuary does not have to accept any of the assumptions of the prior actuary, including interest and mortality rates. If the new actuary achieves the same cost with different assumptions, then the deduction would be valid. However, if the new actuary agrees to all the old assumptions, then the question is whether it was reasonable to include proposed new insurance issues in the cost of the plan. Generally, I don't assume the insurance costs are included unless the policy is in effect by the end of the year. If I do a beginning of year valuation, then I would personally find it reasonable to assume that policies will be issed. If I do end of year valuations, I have evidence of the reasonableness of the assumption.

You might look for guidance from IRS Pub 575 on income from pensions and annuities. The relevant guidance I found is below: "Disability Pensions If you retired on disability, you generally must include in income any disability pension you receive under a plan that is paid for by your employer. You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A until you reach minimum retirement age. Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not dis- abled. You may be entitled to a tax credit if you were from railroad retirement benefits. permanently and totally disabled when you re- tired. For information on this credit, see Publication 524. Beginning on the day after you reach minimum retire- ment age, payments you receive are taxable as a pension or annuity. Report the payments on Form 1040, lines 16a and 16b or on Form 1040A, lines 12a and 12b. Disability payments for injuries incurred as a direct result of a terrorist attack directed against the the United States United States (or its allies), are not included in income. For more information about payments to survivors on your benefits, of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks." Are you researching this to administer the plan and issue the 1099r forms? If so, then get a more validated legal opinion than this forum provides. For example, you should determine if the employee contributions constitute a payment by the employee in after-tax dollars for disability coverage. If so, you could reasonably interpret that the disability payments are tax free. If not, you must accept the taxation ruling of the 1099r issuer as presumptive proof of the taxation. I know 1099 can be issued incorrectly, but the burden of proof is on the taxpayer to correct it.