My 2 cents

My vote is that he stays in but accrues no additional service until/unless works 1,000 hours in a year. Remember - NRA is based on 5th anniversary of entry, not completion of 5 years of service.

It's a cash balance plan, which is a defined benefit plan. It could be that a 4% pay credit for a 50 year old rank and file employee is only enough to accrue a 0.25% of pay monthly benefit at retirement age. Perhaps the plan's interest credit rate is stingy (one-year Treasury rate?). Meaningful, for a defined benefit plan, would presumably be measured in terms of the periodic benefits that would accrue and not the hypothetical contributions to the hypothetical cash balance account. Of course, the original post lost me at "...reduced the rank and file participants pay credit...", which sounds to me like blatant discrimination in favor of the highly compensated employees.

The participant, having separated from service, was treated as having reached his or her Required Beginning Date with respect to the plan. I wonder if it is implied that, having reached the Required Beginning Date, future RMDs must be paid. There is nothing in the law, regulations, or plan document addressing unreaching one's Required Beginning Date, is there? There would have to be something like that to relieve the participant of being paid RMDs as a result of reemployment. I suspect it would not be acceptable.

Not that much involved with controlled group issues, but husband owns one company, wife owns another unrelated company, and there are minor children = controlled group. Ownership of each company is imputed to the minor children. Do I have that right?

Not sure if this is in the context of 403(b) plans. I don't work with 403(b) plans. My experience is with defined benefit plans. Expected or not, working 1,000 hours in an eligibility computation period as defined in the plan is and has always been the magic word that makes the person eligible for the plan (unless in an excluded status, and ERISA plans cannot use "part-time employee" as an excludible status). Sounds as though Ms. Bailey-Fund was misquoted or there is something key in the context that is not being mentioned. Eligibility is not subjective - expectations that the person will not work 1,000 hours are irrelevant (at least under plans subject to ERISA).

I hope that the objective for both the law professor and the original poster is that the original poster will apply diligence and learn something meaningful! I have some concerns with the implications of the final phrase of the original post.

Based on my understanding, the net effect on the liability of going from the mandated 2016 417(e) table to the mandated 2017 417(e) table should be a very small increase (something like 0.2%). Is that what you are seeing?

Just wondering - should physicians own liquor stores? Strikes me as somewhat incongruous in the same sort of way that an orthopedist owning a skateboard park is incongruous.

Trying to guess what is going on here. Are you sure you mean 401(a)(26) and not 401(a)(4) or 410 testing or something like that? 401(a)(26) just looks at the percentage of employees who are earning meaningful benefits, without regard to whether this person's benefit is better than that person's. I don't think that 401(a)(26) testing involves accrual percentages, especially on an accrued to date basis. If you mean 401(a)(26), perhaps the 4% cash balance pay credit is too small for too many people to result in enough people earning an accrued benefit at retirement age as large as 0.5% of this year's compensation (an accrual big enough to provide 0.5% as a periodic benefit at retirement age being the threshold for meaningful accruals).

The IRS says the following with respect to the compliance questions on one of their websites: "The IRS added compliance questions to Forms 5500, 5500-SF, 5500-EZ and Schedules H, I and R. The IRS has decided that filers should not answer these questions for the 2015 and the 2016 plan years when completing the forms:" That includes the new paid preparer information and the other compliance-related information. So it's the 2017 year filing, at the earliest (generally due beginning mid-2018). For those so inclined, that allows that much more time for retiring early. The url is https://www.irs.gov/retirement-plans/irs-compliance-questions-on-the-2015-and-2016-form-5500-series-returns.

I suspect that the issue arises because the sponsor just does not want to use the word "blackout".

My understanding (imperfect as it may be) would be that the Health Care Spending Account can be used for any eligible expenses, including those excluded by the employee's health insurance and any coinsurance or deductible amounts (just not for payment of coverage premiums). If one is covered by a high deductible health plan, there would be an expectation of higher uncovered expenses, making a HCSA more relevant, but I don't think that there is any necessary connection between being covered by an employer health insurance plan and being able to make salary reduction contributions to an HCSA that can be used to reimburse the employee for non-covered medical expenditures. Consider the situation where the employee is covered under the employee's spouse's plan but maintains an HCSA at work. No issue, right? I am entirely ignorant, however, as to what ACA has to say on the subject.

Don't know, but wouldn't the requirement be to communicate that there is a period during which no changes can be made to the account, without regard to the specific words that are used? Requiring the use of "blackout" without also requiring a more detailed explanation makes as little sense as treating a suitable description of the period during which investment changes cannot be made, without also saying "blackout", as defective.

I am not aware of any kind of restrictions under normal circumstances on the trustees of a plan choosing to invest in a regular old mutual fund, whether or not some of the mutual fund's investments involve parties in interest of the plan. Example - is there any need for a pension plan to investigate whether 0.7% of a [famous name investment company] mid cap growth mutual fund is invested in a member of the pension plan's controlled group? I don't think so. The fiduciary obligations concerning the selection of that mid cap fund would consist of checking on the quality of the mid cap fund's underlying investments and whether it is properly diversified, but I don't think that if one of the companies invested in was a party in interest that would disqualify the plan from investing in that fund. Isn't that the question here?

...17,515,345, 17,515,346, 17,515,347... Everyone's been too busy with the election. Maybe someone will get to it tomorrow.

When the plan is giving 7% of pay to one division and nothing to the others, why should it be able to pass? Sounds like a raw deal. What are the chances that most of the HCEs are getting nothing? The people from the other divisions, when they are no longer able to work, will be able to subsist on their memories.

To the extent that the plan is being taken over by the PBGC, the participants LOSE the right to elect cash, and it could be that the 4044 value of an account is less than the current account balance. To the extent that participants must elect away from annuities in a standard termination, it is at least possible that the present value of a benefit taken as an annuity, deferred for thirty years based on accumulations at 1-year Treasury rates, would be less than the current account balance. And then there are cash balance plans that don't even allow lump sums above a certain low amount. Death benefits greater than the standard QPSA are not protected and can be amended out without violating 411. So the termination value could well exclude the present value of non-QPSA death benefits.

Even if the plan has no possibility of forfeiture due to death before commencement, doesn't 417(e) permit full discounting for interest and mortality in the calculation of the amount payable as a lump sum? Thinking of it another way, since all plans (including cash balance plans) are able, if they so provide, to charge the participant 100% of the cost of the pre-retirement death benefit coverage, wouldn't any pre-retirement death benefits offered without such cost be an employer subsidy that does not have to be factored in when calculating the lump sum payable?

If the plan is terminating, then all benefits must be distributed as either lump sums or through the purchase of annuities. a. Payment of a lump sum: Isn't it a standard element of cash balance plan design that the lump sum cannot be less than the account balance? b. Purchase of annuities: This can be more complicated, since the participant can choose between an immediate annuity payable as a QJSA or a deferred annuity with the various retirement options preserved. Consider the following questions if a deferred annuity is purchased: Must the annuity preserve the right, presumably inherent in most (but not all!) cash balance plans, to cash out at any time after separation from service? Must the annuity preserve the right, presumably inherent in most (but not all!) cash balance plans to provide, as a pre-retirement death benefit, a cash payment equal to the cash balance? How does the interest credit rate compare to the discount rate underlying the annuity purchase cost? It is possible that the interest to be credited on the cash balance will be lower than the underlying discount rate, so that the longer the benefit is deferred, the lower the anticipated cash balance would be relative to the anticipated annuity reserve at retirement age. This could have greater significance if the plan does not generally allow participants to cash out the cash balance at benefit commencement (rare, but there are such plans). In general, cash balances will grow at interest only while annuity reserves will grow at interest plus mortality (although taking into account anticipated pre-commencement death benefits). Overall, one would not expect the plan termination liability to be less than the current total of the account balances, but perhaps there are odd provisions or unusual demographics that could lead to such a result. I would be surprised to account that, though.

As noted above, we never work with valuation dates other than the first day of the plan year so I wouldn't know. Is that automatic approval still in effect (for those who do use end of year valuation dates)?

Based on an assumption that filing requirements for Schedules SB are exactly the same for plans with end of year valuation dates as they are for plans with beginning of year valuation dates (haven't had to deal with a valuation as of a date later than the first day of the plan year in many, many years), the answer is yes if the effective date of the plan termination is in 2016, no if it is in 2015 or earlier. Schedules SB are only not needed for plan years beginning after the effective date of plan termination. This is NOT affected by the timing of the termination distribution.

Probably more of a plan qualification issue than a corporate tax issue. The individual's taxes could be impacted, though.

Not at all sure that if the long-ago effective date changed (staying within 1956) from one year's 5500 to the next that anyone would notice. In my wildest dreams, I could not imagine the IRS demanding that decades of 5500 filings be amended for something as meaningless as that. I would assume that the plan document has it right. At this point, what difference could it possibly make? What did the most recent document that got a favorable determination letter show for effective date?

I do not practice in that area, but if you can get the DOL behind you, they could be a formidable ally. How about checking with a federal or state prosecutor? It sounds like criminal fraud (with a side of perjury) to me.

Fair point, but as long as the excluded class is reasonable it shouldn't be a problem. Obviously, you wouldn't define the excluded class as "non-citizens" or "French Canadian", but if you can put them in a class that meets bona fide businnes criteria or job classification it is not an issue. We don't know the setting here, but using "visiting professor" rather than "J-Visa Employee" should do the trick. In order to do that, you cannot have a problem with excluding "visiting professors" who are US citizens (assuming that excluding visiting professors would succeed in excluding the entire group of people you wanted to exclude).