My 2 cents

In general, the higher-paid employees would be relatively unlikely to seek out a usurious loan from the plan, leaving the 12% rate primarily applying to those non-HCEs desperate enough to take out a plan loan (or otherwise discourage them from trying to do so). Figure that the higher-paid can qualify for reasonably priced commercial loans but the lower paid might not be able to. So the unfavorable rate would probably have the greatest adverse impact on non-highly compensated employees. If the non-HCEs are overcharged for borrowing from their accounts, wouldn't that, by itself, be problematic?

The grandfather rule would not countenance the continued use of earnings above the 401(a)(17) limit after the effective date for benefit accrual purposes. The grandfather rule would provide that any benefits already accrued when 401(a)(17) became applicable would be protected.

1. Don't think that it is required by law. Plans are required to offer QOSAs as an alternative to the QJSA but not to provide (by participant or surviving spouse election) a pre-retirement death benefit more generous than the plan's QPSA, but of course plans may choose to do so. 2. Not that such things ever happen, but on the odd chance that the SPD is stating something not to be actually found in the plan document, have you verified that the plan actually provides for a pre-retirement death benefit based on presumed election of a 75% contingent annuitant option? 3. Under what circumstances is it available? I cannot imagine any reason, given the death of the participant, for anyone ever willingly choosing a 50% joint form death benefit over a 75%. No indeterminate period in which the participant's benefit would be lowered by electing the form with the bigger death benefit. Is it left up to the surviving spouse? If so, any surviving spouse who chooses to stick with the 50% benefit instead of opting for the 75% is either mentally incompetent or did not understanding the choice.

Just to make sure, the plan is going to get an auditor's report to attach to the 5500, right? And out of curiosity, how are they going to reduce the number of participants from over 120 to below 100?

My paragraph had read: "I thought that the focus of the proposed regulations was to require such a rate group to pass the 70% ratio test, that the easier-to-pass coverage rates applicable to plans where the average benefits test was met were not available when the formula applicable to the HCE is not available to everyone who meets a truly nondiscriminatory classification, just specific, named individuals." Attempted clarifying rephrase: I thought that the focus of the proposed regulations was that if your plan specified people eligible for a given formula by name rather than by specifying an acceptable non-discriminatory classification, then you will not be permitted to demonstrate compliance with 401(a)(4) based on the more favorable percentages available to plans passing the average benefits test. In thinking about my opinions, please bear in mind that in this matter, I am primarily concerned about the tax expenditure associated with tax-favored treatment being given to plans whose primary purpose is to accumulate wealth on a tax-favored basis for the highly compensated owners. They don't need my tax dollars to provide themselves a comfortable retirement.

Never mind what the software allows - what do the applicable regulations allow?

I thought that the focus of the proposed regulations was to require such a rate group to pass the 70% ratio test, that the easier-to-pass coverage rates applicable to plans where the average benefits test was met were not available when the formula applicable to the HCE is not available to everyone who meets a truly nondiscriminatory classification, just specific, named individuals. If there are 18 other non-HCEs who are otherwise indistinguishable from N1 and N2, to pass 401(a)(4), shouldn't the other 16 also get the same (presumably more generous) formula as N1 and N2? Correcting by just giving the more generous formula to enough individuals to pass the easier average benefit test percentages is contrary to the goal of the benefit plans being non-discriminatory. At the very least, limiting the people dragged along to allow H1 to get the intended benefit is not in the spirit of the law.

"I am not going to set up a plan and make contributions for my employees unless over time the benefit of the tax-deferral for me on the money which I would otherwise just pay myself as I earn it outweighs the cost of putting money away for my employees." My suspicion is that this attitude is not what Congress had in mind when they decided to encourage the establishment and maintenance of retirement plans through favorable tax treatment (which is considered to be a large tax expenditure).

In my non-professional capacity as a taxpayer, I have a lot of difficulty getting upset at testing changes aimed at limiting the ability of HCE business owners to set up significant tax-favored savings for themselves while providing only pittances to their non-HCE employees. If they want to set up something truly non-discriminatory, by all means they should be able to do so, but if they are only interested in establishing plans that are essentially only for their own benefit, too bad if the rules are tightened up limiting such choices. As noted in one of the earlier posts, "I certainly understand the IRS attempt to curtail some of the things I have seen - the formulas in which the owner gets 'a gazillion %' in a DB/DC combo plan just because of the mathematics of the way things work out and the NHCEs get the gateway only." If it winds up forcing the termination of "a gazillion" plans (as observed by another poster above) that are only really helping the business owner and doing virtually nothing for anyone else, nothing much is lost. Let the sponsors either boost the amounts being contributed for the NHCEs so the plan(s) will pass a reasonably tight non-discrimination test or save for retirement on an after-tax basis. After all, the tax-favored treatment is intended to foster the creation of retirement security for rank-and-file employees.

There is an article from the International Foundation of Employee Benefits Plans on the Montanile case in today's BenefitsLink Retirement Plans Newsletter, also coming to the conclusion that the same analysis applied to subrogation rights would also apply in retirement plan overpayment situations. If the money is spent, then there is no recourse, whatever the circumstances of the overpayment. In the original post, I would not regard the "overpayment" as being one that in "good conscience" (to quote the latest post above) ought to be restored to the plan at all, at least not by the participant or the surviving spouse. The error was committed by the plan and left undisturbed for a sufficiently long period that the plan should be forced to absorb the extra cost, with no attempt to recover anything from the deceased participant or the surviving spouse. Trying to assess the extra costs against the participant/spouse is unconscionable. While none of the above comments seem to have consider it, calling what happened "unique" is, unfortunately, completely inappropriate! It happens all too often!

Why not a 1099-R? Wouldn't that be right whether the payments come from a qualified retirement plan or an unfunded non-qualified SERP?

They would be taking back from her as the participant's heir, from the estate or her inheritance. They should not be taking back from her the benefits she is entitled to under the plan as the beneficiary of a deceased participant. The amounts overpaid to the participant should not be considered to have been paid to her. Would it be necessary for the plan to establish that the estate proceeds were directly from the overpayment? Didn't the Supreme Court just rule (by not taking a lower court case?) that health insurance plans can only collect in a subrogation situation from proceeds directly received from a judgement or settlement, not from the individual's general assets? Wouldn't that apply in this kind of situation?

Thanks! I feel the plan is putting the surviving spouse at a "less than" state than she would be had the error not occurred. They are saying, if she would have gotten say $600/month, and we think she will live for another 10yrs, then she should repay $233/mth, so now, we will only pay her $366/mth. They go on to say that if she lives longer than the 10yrs (needed to repay the overpayment), the monthly amount will not be increased back to what they should be, i.e. $600 1. Unless they have determined that the $28K "overpayment" is equivalent to a life annuity to her of $233 per month, they obviously cannot continue collecting "reimbursements" after the "overpayment" has been recouped. 2. I continue to think that since SHE is not paid anything until after the death of the participant, SHE has received no overpayments and the plan has no right to go after HER for reimbursement, whatever the nature of the error. A QJSA is not a joint venture, with the participant and the joint annuitant being both held responsible for such issues. Prior to the death of the participant (assuming no QDRO), 100% of the amounts paid go to the participant and the joint annuitant has only an expectation of future payments.

I can remember that the IRS allows going from segment rates to a full yield curve or from using the segment rates for the month of the valuation date to the segment rates from a lookback month (but neither vice versa nor from one lookback month to another) without specific IRS approval. I was just wondering myself whether changing from market value to smoothed value had automatic approval (very doubtful) or from smoothed value to market value (just a tiny bit less doubtful) could be done without IRS approval. I am having trouble finding anything on point, but my suspicion is that the asset valuation method will probably have to stay where it is until the IRS does issue a list of automatic approval method changes. I would love to be pointed at something that would permit making such a change (one presumes that direct application under 2000-41, which is still in effect, is unlikely to be worth the cost or the effort).

Not a lawyer, but I'm voting for the plan having to try to get the money back from the estate (if from anyone). His wife, after all, received no overpayments (technically, she received no payments at all), so how can they try to collect anything from her? This sounds like one of those "we should try, but not too hard, to get the overpayments back" situations. Hasn't the IRS recently relaxed the circumstances under which plans have to really push for reimbursement of overpayments? The worst that the spouse should have to deal with is getting 50% (or whatever the continuation percentage was) of the amount that should have been paid all along. For example, if the monthly benefits had been $1,000 but should have been $920 each month, and the form was a 50% joint form, then the payments to the spouse should be $460 per month and not $500 per month. That is OK, but the spouse should not be treated as owing anything for the years of $80 per month overpayments.

Was there a time limit on that relief?

It is from the Section 415 100% of 3-year average compensation limit that governmental plans are exempt. Maybe that is what you were thinking about.

The point of the question is whether a plan can explicitly exclude recognition of compensation after the freeze date for purposes of the top-heavy minimum benefits (assuming that the top-heavy percentage stays above 60%). There had been some talk about possibly having to calculate the top-heavy minimum by multiplying the top-heavy service (ignoring any service after the year of the freeze) by the actual final average compensation (taking into account compensation even after the year of the freeze if the plan remains above 60%). Does anyone treat the top-heavy minimum benefit as being based on frozen service but recognize post-freeze compensation if a top-heavy plan is frozen and stays top-heavy?

In order to receive payments under the DB plan, is it not necessary for the participant to make a payment option election (with spousal consent if relevant)? If they elect annuity payments over a period of at least 10 years (or for a period of at least the participant's lifetime), then the monthly payments are unlikely to be eligible for rollover. Of course, it could depend if the plan somehow allows payments to start without a particular form of payment being elected, but if the arrangement is going to look like a regular series of periodic payments, it would probably not make them look eligible for rollover. Based on my non-lawyer understanding, if the participant elected a full lump sum, the entire amount can be rolled over to an IRA without any current issues (unless the participant has reached 70 1/2).

If you are "considered the plan administrator for certain functions", then you have probably already taken on some liability for which you could be personally held accountable.

Nobody has any opinions on this question? OK, granted item 2 is a bit far-fetched. No opinions on item 1?

No ID and not in a hurry to get one? That's crazy talk! How does the employer even pay them - in cash? If by check, how does the employee cash the check?

Is it permissible for a financial institution to require driver's licenses or other state-issued IDs only from the current state of residence? Wouldn't any ID, issued by the federal government or any state, suffice? Surely a driver's license or like ID from any state in the union must be sufficient under the Patriot Act! How happy is the sponsor with that financial institution? Sounds like there is sufficient cause to find a different institution to handle their plan's assets.

Is it not the case that top-heavy minimum benefits and top-heavy vesting are never required for a multiemployer plan, which, by definition, only covers employees covered by collective bargaining agreements under which retirement benefits were the subject of good-faith bargaining? Even if a multiemployer plan is part of the required aggregation group because someone who had been part of the bargaining unit had subsequently become a key employee and remains a participant in the multiemployer plan (say as an inactive participant with a deferred vested benefit), the multiemployer plan does not have to provide anyone with either top-heavy vesting or accruals. What would be accomplished by inclusion of top-heavy provisions that should explicitly deny top-heavy vesting or accruals to anyone because the plan only collectively-bargained people?

Lo and behold! The 2016 table from the Enrolled Actuaries Report is exactly the same as the 2015 table published by the IRS. If they weren't, somebody would have some explaining to do!