My 2 cents

The IRS has already eliminated most determination letter applications and also the Gray Book (a staple at the Enrolled Actuaries Meeting). Much of this stems from Congress, in its infinite wisdom, choosing to increasingly defund the IRS. Don't worry about the PBGC having to make do with less - statutory premium increases are a way to increase federal revenues to offset any spending increases elsewhere.

The different starting point is a function of the year of birth, not the year of the table. For example, look at someone born in 1965. SSNRA would be in 2032, so the 35-year average last year would take into account the actual wage bases from 1998-2015 plus the 2015 wage base as an assumption for each of 2016-2032. Looking at it this year, the 2016 wage base being the same as the 2015 wage base, while the number of assumed wage bases would be one lower than last year (i.e., for 2017-2032 instead of 2016-2032) and the number of actual wage bases one higher (i.e., for 1998-2016 instead of 1998-2015), the 35-year average would come out the same as it did last year because this year's actual 2016 wage base is the same as last year's estimated 2016 wage base and all of the subsequent wage bases are assumed to be the same as they were last year (except this year, they are all assumed to be the same as the 2016 wage base while last year they were all assumed to be the same as the 2015 wage base).

If the wage base didn't change, wouldn't the 2016 table automatically be exactly the same as the 2015 table (assuming you are not looking for a covered comp table based on future wage base increases, and the IRS never has anything to do with them)? So just use last year's covered comp table as is.

If not rolled over, wouldn't the mandatory withholding be 30% instead of 20%?

As in: To my friend Tom - 100%, to my friend Dick - 100%, to my friend Harry - 100%? With no contingency being implied? Four possible solutions: 1. Interpret the designation in a way that adds up to 100%. Give Tom, Dick and Harry each 33 1/3% 2. Determine that the beneficiary designation was not valid since it purported to give more than 100% of the benefit to the beneficiaries. Fall back on the plan's default beneficiary provisions. 3. Obtain an agreement from all those designated on the beneficiary form concerning the allocation of what is available as a plan death benefit. 4. Throw up your hands and file an interpleader. Unless you don't mind paying out the benefits multiple times, if the beneficiary form does not present a clean way to pay it out once, you cannot respect the demand for 100%. If you do, then the others will each file a claim for 100%, and how could you defend the decision to pay it all to Tom?

A very tight reading of EGTRRA shows that if a plan is hard-frozen (so that no further benefits accrue for any plan participants, necessarily resulting in there being no key employees benefiting under the plan), no further service need be recognized for top-heavy minimum benefit purposes. Many practitioners have been operating under the idea that the intent behind the EGTRRA changes was to permit even top-heavy plans to adopt hard freezes. In accordance with the language of EGTRRA, subsequent plan restatements have talked about years of service not counting if no key employee benefits. Would either of the following be considered unacceptable? If not, why not? 1. A non-frozen plan that is top-heavy is amended as of a current date to freeze accruals (service and average compensation), explicitly stating in the amendment that neither credited service nor compensation after the end of the plan year containing the freeze date will be recognized in determining any individual's top-heavy minimum benefit. 2. A previously hard-frozen top-heavy plan adopts an amendment explicitly recognizing compensation increases (but not service) between the original freeze date and the end of the plan year containing the new amendment's effective date, solely for purposes of determination as of that date of each non-key employee's top-heavy minimum benefit (either in formal recognition of legal necessity or to render the issue moot), and explicitly provides that compensation after the end of that plan year would not be taken into account in the determination of any participant's top-heavy minimum benefit. Assume for this that Section 436 would not prevent the adoption of such an amendment.

We just had a client go through a rather painful VCP. One of the issues what the plan's failure to offer annuity payments as an option going back to the early 2000's. This agent's idea of a correction was to send letters to the all the effected people offering them a chance to pay back their benefits (once again some paid out over 10 years ago) and then they could request a distribution in the form of an annuity. Her boss quickly killed that idea. Theoretically, it would have been a legitimate approach to correcting the error. However, the chances that people would choose to avail themselves of the "opportunity" for the correction (especially those who would now have the chance to pay back a lump sum they received a decade and a half ago, with interest) would be very low indeed. It would just irritate them. Then you would have a whole bunch of prior participants who (a) had not been offered an option that should have been offered but which they would probably not have taken and who (b) are now irritated.

Agreed that no lecture about defined benefit plan design is needed if the situation will be resolved in a way that does not involve the defined benefit plan. If it is decided to use the defined benefit plan to resolve the situation, then the plan sponsor needs to consider appropriate ways to do so and the resulting consequences. The pension plan assets are not corporate funds to be dealt with according to the sponsor's wishes.

Consider the death benefit that would result from the amendment to be a benefit liberalization, not an experience loss. Even if the death benefit amendment is set up to only apply to this one individual, it will result in plan costs going up (a valuable death benefit versus the participant's benefits under the plan being entirely forfeited). Let this be an occasion for the sponsor to think about whether it is just and right to not provide death benefits under the defined benefit plan when the participant is not survived by a spouse. Sure, the law does not mandate it, but many plans do provide death benefits commensurate with the QPSA in the event of the death before benefit commencement of an unmarried participant. If the sponsor's conclusion is "Yes, but...", then perhaps the sponsor could provide something to the heirs of the "beloved" non-married participant from corporate assets and leave the plan as it is, but the sponsor may recognize from the current situation that they are not comfortable with denying any plan death benefits when there is no surviving spouse.

1. How much money is at stake? It could be cheaper and easier to just give in. 2. Anybody like to predict what the IRS would do in response to a refusal to grant the vesting specified for 2009 and 2010 based on an assertion that the relevant statute of limitations has expired? The IRS position is likely to be that failure to recognize that a partial termination had occurred is an operational failure. I don't remember there being a statute of limitations with respect to operational failures. Don't some VCP corrections involve having to go back for years and years? 3. The question is not whether the IRS could issue an unfavorable letter, but (I suppose) whether the sponsor could get it overturned in tax court. See #1 above in deciding how aggressively to not give in. 4. Does the agent's assessment of the prior pattern of termination as being a partial termination appear to be valid? If not, consider trying to get it bumped up to a higher level within the IRS.

NHCE or not, it would be inappropriate for a plan sponsor to adopt a death benefit for an unmarried deceased participant without providing the same death benefit for every single similarly situated participant in the future. Things are just not done that way! Also, with respect to the original post, does anyone else agree with me that Son#1 cutting out Son#2 based on Son#1's assessment that Son#2 is "unworthy" represents abuse of authority as a Power of Attorney? Aren't the POAs supposed to exercise their authority on what is virtually a fiduciary basis?

If Wife A has no rights under the plan, why should her children? K2retire's comments point out that if the participant had any coherent thoughts on the matter, there should have been a beneficiary designation submitted (at some time during the 20+ years of marriage). Assuming that Wife B remained willing to forego her legal entitlement to the plan benefits (as evidenced by the presumably voluntary signature of the pre-nup), she would have consented. Idle, random thought - try to imagine the Prince asking Cinderella to sign a pre-nup!

I am presuming that "optional" means "optional - for now" and so "skip it" would mean "skip it - for now". The IRS promises revised instructions in the future (presumably for when completion is not optional).

Looking at some regs today, I was amused by the way that it was indicated that the participant's spouse did not waive anything in a pre-nup - it was the participant's fiancee! Agreed that Wife B may find it convenient to waive her rights in accordance with the pre-nup to avoid costly and unpleasant litigation, but it is clear that in the absence of either a QDRO or a spousal waiver specifically in favor of Wife A or her children, Wife A has no rights with respect to the participant's plan benefits! How would Wife A's children assert any rights with respect to the participant's benefits? One also wonders whether 20+ years of marriage to Wife B ought to render the pre-nup void. Was there no sunset provision in the pre-nup? If not, shouldn't there have been? Wife B was married to the deceased longer than Wife A. That, by itself, ought to count for something.

I don't work on defined contribution plans, but somehow, it does not look like a rights and features issue to me. If the matches pass testing, that should be good enough.

No QDRO? Without one, wife A is out of the picture. If the intention is to give the money to someone other than wife B, how could nothing have been done to lock it in? Everyone slept (a la Sleeping Beauty) for the last hundred years? No beneficiary designation, no post-marriage waiver (agree that problem with pre-nup is that wife B's entitlement, absent a waiver as wife B, is automatic upon the celebration of the marriage), nothing? The lack of any sort of follow-up to what was intended to happen is where the problem lies. If it was intended that someone besides wife B receive the balance in the event of the participant's death, how could they all have failed to establish that wife B waived any rights to the pre-marriage balance and to name the intended beneficiary?

Based on my understanding: Basic premium - count each plan participant, without regard to vesting. Participants whose benefits are fully guaranteed by an insurance company (who are being paid directly from plan assets, no actual annuity purchase having occurred) and participants with no chance of earning plan benefits (i.e., became participants immediately before a permanent plan freeze so accrued nothing before the freeze) need not be included. Variable-rate premium - add up the premium liabilities (excludes any non-vested accrued benefits) and compare to assets. If an insurance company had issued guarantees but no annuity purchase had taken place, count both the assets that the insurance company would never let go (to back the guarantees issued) and the liability (on a statue-mandated basis, not on what it would cost to buy the relevant annuities). Only ignore assets and liabilities to the extent that annuities have actually been purchased (disregarding any possibility of future dividends).

Is "a drinking problem" when one runs out of something to drink?

They plan to adjust what they pay him in 2016 down because there were 27 pay periods in 2015? Wow, I don't think I ever heard of anything chintzier than that in my entire life!

This may be somewhat naive, but why doesn't your client just go out and find an IRA custodian/investment firm combination (why are they even separate?) who would present no legal problems? Who needs an IRA custodian and investment firm who can't work together smoothly?

Pardon the attitude (and some of the following may be wrong, since I do not work on 401(k) plans), but... As if they would just amend the plan to let some nobody in early! If the newly employed employee was described as not an HCE, was it mere ignorance or an outright lie? Wouldn't it be more correct to say "the new employee is the spouse of a Key Employee" than "the new employee is a spouse of a Key Employee"? Even Key Employees are only entitled to one spouse at a time. May one presume that the Key Employee in question is also an HCE? If not an HCE, then the spouse would also not be an HCE, and there would have been no violation. And did the amendment state that it does not apply to HCEs? If the spouse was not eligible to enter by the terms of the amendment, the spouse should be given back his or her salary reduction amounts, and the matching contributions (no ifs, ands, or buts) completely forfeited. The 2015 W-2 (which is unlikely to have been issued yet) should reflect the correct figures for taxable income. If that is all done, why would there be a reportable failure?

The shut-down of the FIRE system was discussed here back at the end of November and the first few days of December. The IRS was apparently saying that no paper filings would be accepted and that the solution is to file before the shut-down (that people only became aware of when it was mentioned here for the first time on November 30th). So Tom, I guess your summary is pretty much on target (especially item 3)!

Legally married same sex couple? Recognized everywhere for all purposes (with the possible exception, apparently, of Alabama, now that clerks' names don't have to appear on the licenses in Kentucky!)

If the interim amendment is pretty much required as is, why would you submit it as proposed and not signed?

The safe harbor and unsafe harbor numbers are used for non-discrimination rate group testing. If the actual values are better than the safe harbor, you are safe. If worse than the non-safe harbor, you are in trouble. Unless the midpoint disguises what would appear problematical under a facts-and-circumstances analysis (and anything between sh and nsh is subject to a facts-and circumstances analysis by the IRS), use of the midpoint is probably OK.