My 2 cents

Point taken. However, my comments, while referring only to gold, would apply equally well to any other "investment" that would just sit there being a lump (or, if one is talking about mercury, a pool). $500,000 worth of gold, $500,000 worth of platinum, $500,000 worth of anything that just sits there until you sell it - what difference would it make? I do consider these comments and questions to be important, and these matters would have to be resolved satisfactorily for the participant to be able to make sure that the desired investment would be acceptable.

If the stock market falls 50%, it would adversely affect the entire economy. Jobs would be lost, spending would drop, companies would close, etc.. If the price of gold falls 50%, who, besides those holding gold, would be impacted? Would jobs be lost, companies fail, etc.? Gold, by itself, may be used by some investors as a hedge against economic dislocation due to political instability or heightened inflation, but what value is there to the economy of people investing in gold? Investment in gold does not encourage any sort of economic growth. In fact, money invested in gold is not available for productive economic use. "Who does it well?" Isn't gold as much of a commodity as a commodity can be? How can one player in the gold marketplace do it better than anyone else? Or worse (unless their "management fees" are higher than the competition, but in truth, how does one "manage" gold?)?

I think the point may have been that the IRS seems to be using the old name for the forms and not the correct new names. How long has it been Form 5500 Schedule SB and not Schedule B? It is at least a few years since Schedule SSA was the name of that form. Shouldn't the IRS late filing penalty notices at least use the correct form names?

Isn't it the case that once the participant has died with no designated beneficiary under the circumstances described, the money belongs in the estate (just paperwork to get it there)? Clearly, nobody associated with the spoonsor or the plan has any say as to how the estate is to be distributed. Not a matter of a Section 411 cutback. Once the participant has died, everything is fixed. The plan says the money goes to the estate and federal law (outside of taxation issues) has no bearing on what happens thereafter. The state laws govern, there would be no ERISA preemption etc. Still don't know why the money going to Gloria is problematic. How would things be different if Dave had named Gloria as his beneficiary under the plan? The effect should be the same. No beneficiary = money goes to estate, no will = estate goes to Gloria. Did Dave die penniless other than the 401(k) account? Presumably anything else that was Dave's is now hers. Who else has a legitimate claim to anything here?

Instead of asking "Who is Sylvia?", one wonders "Who is Gloria?" that the state laws would make her the sole beneficiary of the intestate deceased Dave's estate? State intestate laws do not usually give inheritance rights to unrelated live-in friends, do they? Why would the employer care, in the least, if it all goes to Gloria (let alone why would the employer want to position itself for almost certain litigation by trying to take any after-the-fact steps obviously intended to cut Gloria out, especially given the fact that Dave is NOT survived by a spouse and that Dave took no steps to arrange for the money to go to anyone else)? If there had been any children, the state intestate laws would have directed the estate to provide most or all of the estate to them, not Gloria. The plan should just pay the 401(k) balance to the estate and the employer would then be able to wash its hands of what appears (at least by implication) to be a sordid situation.

Thanks! Now I can refer to it by calling it "the new law" instead of the awkward* "piece of legislation passed by the House and Senate, which the President is expected to sign". I can remember HR 5021 but not The Highway and Transportation Funding Act of 2014 (HTFA 2014?). May I still call it HR 5021? *Or should the word "awkward" be inside the quotes? Just asking because the law clearly allows electing out of recognition in 2013 but does not appear to permit doing so for 2014.

On the first point, since in many instances the purpose behind overpaying for the prior year is to bring up this year's AFTAP, we have no clients who have signed standing elections to add all excess contributions to the PFB. This point is moot for those sponsors who have not yet finished paying for the 2013 plan year - if there is sufficient reason, the amount still owed for 2013 can almost certainly be reduced by revising the 2013 valuation. I am hoping that when the bill has been signed, the signing will be reported in the daily BenefitsLink email.

Just wondering about a couple aspects of this bill: 1. Apparently, plan sponsors and their actuaries are going to have to consider what to do about 2013 plan years. It will be possible to defer recognition to 2014 and let the existing 2013 valuations stand or (especially if there are good reasons) revise the 2013 valuation once all of the various rates etc. have been promulgated. Such revisions could possibly eliminate anticipated funding deficiencies or retroactively negate missed quarterly contributions, although the percentage impact on 2013 Funding Targets is fairly small. Many plans will not derive a sufficient benefit from HR 5021 for the 2013 plan year (especially if the minimum required contribution as originally calculated has been met) to make revising the 2013 valuation worth while. 2. Apparently, any valuations already issued for 2014 will have to be revised. One can only presume now that the IRS will find a way to keep that from causing any qualification issues (i.e., plans that have been operating as limited under Section 436 of the code will be able to stop operating as limited, with no consequences for having administered the plan by not permitting full lump sums). It was a bit easier when MAP-21 was enacted in mid-2012 because the sponsor could avoid some awkwardness by electing to defer recognition of MAP-21 for funding and/or benefit limitations to 2013. This law does not seem to permit any such flexibility for the current plan year (whether intentionally or not). 3. The law appears to provide that the newly increased discount rates cannot be used to permit plans sponsored by companies in bankruptcy to pay accelerated benefits (that is, the certification of an AFTAP of 100% or more for that purpose cannot take the boosted segment rates under HR 5021 into account), although it appears that the HR 5021 rates can be used for that purpose during the 2014 plan year. Do people agree? Is it agreed that the MAP-21 rates can continue to be used to exempt plans sponsored by companies in bankruptcy from the limitations even after the 2014 plan year? 4. Contributions for many 2013 plan years will have to have been paid as early as mid-September, and 5500s, even with extensions, will have to be filed as early as mid-October. Do you think the IRS will issue sufficient guidance in time or should people be handling HR 5021 on a reasonable basis and hoping for the best? What do people think about these things?

Is this a defined benefit plan question? Assuming that it is, it is my understanding that the availability of an early retirement benefit upon attainment of a given age and completion of a given period of service is protected as part of the accrued benefit. It is my understanding that if a defined benefit plan specifies that an active participant may retire upon completion of 25 years of service and receive an unreduced benefit, then if the plan is terminated, the ability of an active participant to grow into that unreduced benefit must be protected. That is, if an active participant has completed 16 years at the time the plan is terminated, elects a deferred annuity as the termination distribution, and continues to work for the employer for 9 more years, the annuity (which provides 16 years' worth of benefit accruals) must provide that payments can then commence, without reduction. It is my understanding that ancillary benefits (such as disability benefits) may be safely deleted by amendment (with respect to participants not yet disabled).

I don't see how overspending to buy an annuity is an improvement over taking the reversion and getting to keep what is left after taxes. Of course, if a J&S annuity is more in line with financial plans or needs, it makes sense to do that. It isn't as though one can spend extra on an annuity and then turn around later and cash the annuity out for more than the lump sum would have been.

It is my recollection that a qualified ERISA plan could adopt such an amendment but five years would have to have elapsed after the amendment before the plan termination for the excess to be payable to the sponsor. As I recall, potential allocations of excess assets are not considered protected as part of the accrued benefit. The excess assets, by definition, are those assets remaining after the entirety of the accrued benefits have been paid out. I don't really know how a non-qualified plan would have to treat excess assets, but I would be surprised if the rules concerning reversions to the sponsor are more stringent than those applicable to qualified plans. Perhaps there would not be a five year waiting period before the revised provision could be followed. As must always be asked, what does the plan currently say? Does it say that any assets left over after paying all benefits must be allocated entirely among the participants?

Isn't the breakpoint for being an HCE/not being an HCE something like $115K? How could someone earning $80K per year who is not an owner (non-profit's don't have owners, do they?) come close to being considered an HCE? They did get rid of that ridiculous rule that said that if nobody met the benchmark for being an HCE then you pick the highest-paid officer, didn't they?

Don't really know the multiemployer rules well at all, but if the situation was sufficiently dire, isn't there some mechanism for cutting back some of the benefits? If so, would they be able to cut benefit amounts to people already retired, especially if they had retired early, to the same extent that they could cut potential benefits to non-retired participants?

To what extent would it matter if a frozen one-person plan was unfrozen to use up overfunding?

Yes, of course. When I talked about having to file a Schedule SB, in my mind (if nowhere else) it was clear that all relevant attachments (required or otherwise) would be included!

Not a lawyer but just want to point out two things: 1. Assuming that the joint annuitant is the participant's spouse (granted, that might not be so), the QJSA would have to be paid in the absence of a valid election to the contrary. So if the benefit is being paid as a QJSA, you don't even need a good election establishing that the benefit is to be paid as a QJSA to justify paying the benefit in that form. The court appointed guardian's saying "start paying it now" would have been enough. 2. The person who made the election was a court-appointed guardian. Assuming that there was proper documentation presented to the plan administrator, the plan administrator's following the guardian's direction is entirely justifiable. It is pretty much a certainty that following the direction of the guardian cannot be challenged (at least absent active fraud in obtaining the guardianship or in using that authority, and even then the plan administrator could probably succeed in standing fast on the election that had been made). At the time the election was made, the guardian had the unquestionable authority to make the election and the plan administrator need not go through contortions to undo the election (possibly unless compelled to do so by the court that had granted the authority). Of course, if the sponsor feels that an injustice has been done and that whatever steps that are needed to undo the election should be taken, that's a different story. Then see what an ERISA counsel thinks. But if the plan administrator wants to keep the benefit in the form as elected, that is probably the end of it.

Even if you did, there would still be some excise tax, just not as much. Is there any reason to not amend the plan to soak up all the excess so it becomes part of the benefit distribution?

Are you filing a 5500-SF or a 5500? If the former, I don't think you need anything beyond the SF and the Schedule SBA. If the latter, then besides the SB you need a Schedule I and, I think a Schedule R, maybe more

Please note that I don't work on individual or business tax calculations. This is my understanding of how things would work. If I understand your A is less than B is less than C discussion, is there any reason not to amend the plan to increase benefits enough to make the 417(e) value equal the assets? The amendment would not result in the plan benefit exceeding the 415 limit. Watch out for the 10 years of participation rule in particular, however. If the benefit is not changed, it should be clear that the payment in excess of the plan benefit is not a benefit payment, it is a reversion to the sponsor. That piece cannot be rolled over to an IRA because it is not part of the benefit distribution. It would have to be reportable on the employer's taxes, and a reversion excise tax might be due, as well as the reversion being treated as taxable income to the employer. Whether to put it into the personal account or the business account would have to be decided on the practices being followed. I would suspect that putting it into the business account would be the sounder choice.

What I was trying to say: Even if arrived at arbitrarily, if there is a written basis (consistent with the plan document) for objectively determining what each person will get, that would be definitely determinable and not a matter of employer discretion (once reduced to something that is part of the overall written plan documentation). Whether that basis will pass muster under the non-discrimination and coverage rules may need to be considered.

Only considering rules applicable to defined benefit plans, since how else could there be any underfunding at all? It depends on the way benefits are to be distributed. Any kind of lifetime payout would not be subject to restriction (as long as no annuities are purchased), only payouts more rapid than under a straight life annuity. Assuming that the AFTAP is at least 80%, nothing beyond the usual security set-up should be required. Does the plan have any language limiting the 25-high restrictions to situations where discrimination in favor of HCEs could be an issue or is the language the standard language? Is it worth seeking a PLR?

Get back to work!

Salaried vs hourly would appear to be an objective basis. An attempt to write into the plan that the distinction is between hourly and salaried and NOT have it defined based on the method actually used to determine compensation (i.e., 40 hrs/wk = salaried, less than 40 hrs/wk = hourly instead of hourly = people paid $X for each hour worked, salaried = people paid $Y per pay period irrespective of the number of hours actually worked) could appear to be a subterfuge and might not fare well on audit. Listing employees by name in subgroups (even having a separate subgroup for each employee) is also objective, although it would probably preclude use of the average benefits test since there would be no discernable rational basis for the distinction. Not saying that everyone has to be treated the same (not that that is a bad idea!) but that the determination as to who gets what has to be (to use an old phrase) definitely determinable based on the provisions of the plan. The IRS has enormous, complicated rules for determining whether disparate treatment under a plan is acceptable or not, but no real discretion may be reserved to the employer within the plan document (which must provide all distinctions on an objective basis).

Hasn't the IRS essentially prohibited any sort of employer discretion with respect to the administration of pension plans? This goes back many years. Plans used to condition the availability of lump sums on employer approval, but that is absolutely unacceptable now. They are allowed or they are not allowed and the employer can have no control over who can take a lump sum and who cannot (except through unconditional plan provisions like "no greater than $10,000). Leaving anything up to the discretion of the sponsor virtually guarantees that it will be handled in a discriminatory way and is thus barred by the IRS.

Part time status and being able to complete 1000 hours of service per year are not mutually exclusive. Many part time employees would, for all purposes of compliance testing, be non-excludable. I would be concerned about passing coverage on the separate groups, especially if there aren't enough part-time employees who are HCEs.