My 2 cents

What is the difference between a farm and underused rural land? Development plans! Farms don't appreciate DRAMATICALLY (at least until they stop being farms).

How or why would an IRA be escheated to the state? If it was escheated to the state, how could it possibly represent a distribution of any sort, let alone a distribution to be reported on a 1099? Surely an IRA escheated to the state could not possibly be an event taxable to the owner or the owner's estate, to whom the proceeds were not, after all, paid!

1. Why would anyone invest pension plan assets in a farm? 2. It would be a prohibited transaction for an investment to be made in order to benefit any party in interest. Why is this so hard to understand? No, it isn't "your money" when it is being held in a qualified pension plan. 3. If he (excuse the expression, which is not intended that way) bought the farm, wouldn't that also be a prohibited transaction? Plan assets should not be sold to parties in interest.

A sympathetic haiku: Piles of dirty clothes A whole week's worth of laundry The same as last week

May be a fair exchange if the accounts are up over $30,000 but excessive if they are not. Why not charge the 15bps?

Remember that for NO purposes of funding would you value any benefits ever using the 417(e) segment rates! In calculating a PVAB for funding with any expected lump sums, you always use the funding segment rates to calculate the expected lump sums. The 417(e) mortality must be used to value the expected lump sums, but whether that results in a higher or lower funding target depending on whether the covered group is primarily male or primarily female. Given the IRS's "substitution rule", the requirement in PPA to explicitly fund for expected lump sums when available under the plan has but little effect on the funding (unless the plan's lump sum basis reflects a second set of rates or 417(e), whichever is higher). Take a look at the asset performance. 2013 was a pretty good year for some investments. While the MAP-21 rates have slipped further, there is still a chance that 90% of the 2014 required contribution is less than 100% of the 2013.

Not a lawyer here, but wouldn't the plan administrator have a fiduciary obligation to you that must transcend any personal or professional relationship being maintained with Ex? If the plan administrator is exercising favoritism against you and in favor of Ex, would it not be possible for you to seek compensation from the plan administrator personally for failing to satisfy the fiduciary obligations? Any lawyers out there?

Australia? Why Australia? Just curious - why would they want, in particular, to invest in Australian real estate? Did they perform some sort of analysis indicating that Australian real estate has the highest potential for growth of any available investment? Do they have inside information that the parcel in question contains a huge quantity of opals? Aren't there US-based international real estate investment funds, offering good value, growth potential and diversification?

Defined benefit plans often contain provisions saying that benefits worth less than $5,000 "shall" be cashed out. Remember - the sponsor cannot be permitted any discretion for such things! As Yoda should have said, "Do. Or do not. There is no maybe."

It is my understanding (for what that is worth) that if the plan has grown to 100+ participants, the valuation date must be changed to the first day of the plan year, so no application, no fee, it just happens. Otherwise, pending any new IRS procedures specifying automatic approval situations (could happen!), to change the valuation date to the first day of the plan year for a plan with less than 100 participants requires explicit application (with fee) to the IRS under 2000-41. In the introduction to the question in question 5 of the 2012 Gray Book, it is observed that Rev Proc 2000-40 no longer applies to single employer plans (and the question goes on to ask when one can expect approval and when not). 2014 Gray Book question 1 says that the valuation date remains the same for a small plan from year to year unless "the sponsor obtains approval for a change". That question was focused on a small plan with a 7/1-6/30 plan year that used the first day of the plan year as its valuation date and then changed to a calendar plan year. Unless approval is obtained, the valuation date would stay at July 1 each year (ugh!).

I may be showing my ignorance, but where on the Schedule H (you are talking about Form 5500 Schedule H, aren't you?) does it ask anything about the trust? The old 5500 Schedule P used to require that information (and it was used for statute of limitations purposes), but that schedule is long gone.

Are there any software vendors out there who are NOT already doing whatever will be necessary to handle the structure of the new base table/projection scale? Many can probably handle it already. Don't see any reason to delay implementation for that. Even if the IRS comes out with multiple sets of rates (i.e., blue collar rates, white collar rates), which would be difficult to implement in practice, their structure will be essentially the same so additional programming (beyond providing for a choice of tables/projection scales from a system library) should not be necessary. Those with home-grown valuation systems had better get cracking! I think most practitioners expect the new basis to be mandatory for 2016 valuations. Even if it is not mandatory for 2016, at least some actuaries will want to use the new tables for some calculations other than those mandated for minimum funding. Which is not necessarily the same as saying that longevity should be considered a monotonically increasing function. The possibility of future pandemics, the effects of ecological degredation, the difficulty of finding enough money for effective research and/or healthcare, the persistence of unhealthy lifestyles (i.e., the "obesity epidemic"), and inherent biological limitations could all provide pushback against the trends of the past century.

"I didn't know I was a trustee!" sounds like as good an excuse as Steve Martin's old excuse "I forgot" (as in "I forgot that robbing banks was against the law"). How could a trust document be considered valid if it is not signed by everyone who was to be a trustee? Or are we talking about the kind of husband who says to his wife "Don't bother to read it. Just sign here"?

In that case it makes a lot of sense to me that the action taken to correct the error involves going back and changing the form to have you as joint annuitant retroactive to the annuity starting date. If she was already the ex-spouse and there was no QDRO requiring her to be treated as the spouse for the Qualified Joint and Survivor Annuity (QJSA), then the original set-up was defective. You, as the spouse at the time that payments started, would have to have signed off to the contrary for it to not be set up as a QJSA with you as the joint annuitant. Therefore, the monthly benefits going back to 2006 would have been a little lower. Are they going to report on this year's 1099-R tax reporting form your income from the annuity net of the amount you had to repay? You paid taxes on the higher-than-they-should-have-been monthly payments all of these years, so it would only be fair that the repayment will serve as an offset to the otherwise taxable income being paid this year. Ask explicitly about this.

Just to make the situation clearer in my mind, in what order did the following events take place: Divorce Benefit Commencement (described in the original post as 2006) Issuance of QDRO Barring unusual circumstances, if the benefits commenced under a joint annuity naming the person to whom the participant was then married, establishing that spouse as the joint annuiant, it would be very unusual for the ex-spouse to be displaced as the joint annuitant by a court order related to a subsequent divorce. Most plans would treat the form of payment elected by the participant to be irrevocable and the joint annuitant's rights to survivor benefits under the form of payment elected to be fully vested as of the date payments began. Court orders in conjunction with a later divorce attempting to deprive her of those rights would usually be rejected by the plan administrator as not meeting the requirements for a QDRO.

As indicated above, once the payments have begun, the identity of the person to be the joint annuitant is almost invariably locked in. Death of the joint annuitant or divorce would not change it. Perhaps, still subject to the survival of the originally designated joint annuity, arrangements can be made to divert the payments to someone else, but if the divorce was after the benefits commenced the survivor benefits would essentially belong to the original joint annuitant. It is even questionable whether the original joint annuitant could waive her interest in return for a greater assignment of marital assets, since that might violate the plan's prohibition against anticipation or alienation of benefits. Did the divorce take place before or after payments began?

Not a lawyer, but giving my thoughts anyway. If there is something unheard of here, it is not that a QDRO is accepted after a significant amount of time has passed. It is that the plan is permitting changes to be made to an annuity benefit after payments have begun. Normally, the annuity form and the identity of the joint annuitant are considered to be irrevocable once payments have begun. Divorce almost never takes away from the ex-spouse the status as the joint annuitant under a participant's retirement benefit once payments have begun with the ex-spouse identified as the joint annuitant. It must be the case that the only way that this plan will permit such a change is to rework the benefit back to the date payments started and revise the monthly benefits accordingly. The dollar amount of annuity payable under a joint form takes the ages of the participant and the joint annuitant into account. The younger the joint annuitant is relative to the participant, the smaller the appropriate monthly benefit. Using representative numbers pulled out of thin air, if the participant's benefit as a straight life annuity would be $1,000 per month and the participant retires under a joint form with a spouse the same age, the monthly benefit under the joint form might be $950 per month. If the participant retires under a joint form with a spouse 8 years younger, the monthly benefit under the joint form might be only $920 per month. I would expect from the fact that they are asking for money back that you are younger than the ex-wife. In that case, not only do they want $1,400 to be returned, but the amount payable every month thereafter will also be lower.

I was saying that the Funding Target, in any event, would reflect the assumption that X% of the people who are expected to grow into eligibility for the early retirement subsidy will elect to retire early and take the subsidy, certainly to the extent that it was being assumed that the participant would take a life annuity or a QJSA. The handling of any assumed lump sums would depend on the plan provisions (i.e., whether it would be based on the subsidized early retirement benefit or just on the deferred accrued benefit). Valuation software would presumably be able to value the anticipated lump sums in accordance with the plan provisions either way, as needed.

...and be able to defer the gratification that comes from receiving an immediate lump sum in favor of a slower but more valuable payout. Smart, to understand the difference in value, and at the same time wise, to be able to choose the more valuable option despite the strong tug of human nature. That said, if someone has worked the 25 or 30 years it takes to qualify for the subsidized benefit, why shouldn't they be entitled, if they take a lump sum, to the present value of the subsidy? They earned it. We aren't talking about having to pay the value of the subsidy to anyone who has not qualified for it. Perhaps you should be forced to pay the value of the subsidy because otherwise you are shortchanging the person electing the lump sum. On some reasonable basis, all benefit options ought to have roughly the same value, and clearly, the full value of the subsidy is passed along to anyone receiving a straight life annuity or any sort of joint annuity. If there is much of a subsidy, isn't the enrolled actuary most of the time going to be making sure that it is suitably reflected in the Funding Target in any event (i.e., assuming that 80% will retire immediately upon satisfaction of the 30-and-out provision)? So the employer is "paying for it" whatever option the participant winds up electing.

If the funding target and assets (as of the valuation date in 2012) were both $0, wouldn't that be treated as 100% for all purposes?

Just remember that it is different than it was until the mid-80s. Up until then everything taken out was a return of basis until the basis was gone. Since then, you have to prorate the basis. I think (not that I know) that you can now roll over the amount that is a return of basis, but it might make the IRA taxation more complicated.

I thought that in a defined benefit plan, the cash to the participant is measured against the full value of the plan benefits, and the return of basis is allocated on a purely prorata basis (unless accounted for separately for pre-1986 and post-1986). So that it would not be the case that the first $X dollars of cash paid would be return of basis when only part of the benefit is being distributed. Is this not so?

Of course, whether to just value the accrued benefit or compare the accrued benefit value to the otherwise payable benefit value requires that the plan provisions call for it. My point is that the plan provisions should have to call for it. Based, however, on the fact that tightening up the non-discrimination rules and the integration rules did not relieve us of having to deal with top-heavy rules, I would not hold my breath waiting for such a requirement to eliminate the relative value rules!

As always, only stating my opinions: 1. Other than service prior to age 18 or minimum hours requirements under the plan, no service within the controlled group may be excluded for vesting purposes. 2. It is permissible to exclude from benefit accruals any service prior to plan entry. It is generally also permissible to count service prior to plan entry for benefit accrual purposes. 3. If you are talking about a calendar year cash balance plan, the line of least resistance is to use the year's W-2 earnings to determine the year's pay credit for anyone entitled to one. It is more work to have to segregate earnings during a year into portions prior to plan entry and portions after entry, but either approach would seem to be acceptable (depending on the plan provisions,of course). I don't see a plan that has eligibility requirements but which does not exclude service prior to entry for benefit accrual purposes as "complicated" at all. 4. If an individual has not become a plan participant on or before the last day of the prior plan year, even if they are accruing benefits pending plan entry, you would not count them for PBGC premium purposes (and those benefits would not, under any circumstances, be considered vested - you could amend the plan prior to their actual plan entry to freeze entry, in which case they would never come in and never receive any benefits, and there is no 411 protection of "accruals" for people who are not plan participants).

If the plan's AFTAP is below 80%, restrictions would apply to all participants with respect to election of the lump sum option. Otherwise (and this is my understanding of the IRS position), barring an explicit plan provision to the contrary (and, as many times as I have seen the usual 25-high payment restrictions, I have never seen a plan provision to the contrary), the plan MUST allow a participant subject to the 25-high restrictions to elect a lump sum if the plan offers a lump sum. What is true is that if the participant makes such an election, either the participant must establish sufficient security to permit clawback efforts to succeed OR the plan must parcel the lump sum out bit by bit. The limitation would be based on the immediate straight life annuity offered by the plan. All qualified defined benefit plans, as a condition of qualification, must provide a sufficiently detailed actuarial equivalence basis to make all necessary determinations concerning actuarial equivalence unambiguous. If the plan allows election of lump sums prior to early retirement age, it must specify what the basis is for an immediate QJSA (no spousal waiver in favor of an immediate lump sum being valid unless there is the opportunity to elect an immediate QJSA). If a 25-high participant elects a lump sum, and does not set up security himself or herself, then the plan holds his or her lump sum proceeds as a form of security. The money, on or after the benefit start date, belongs to that participant until and unless there is a bona fide clawback situation (which can only occur if the plan is terminated without sufficient funds for the non-HCEs, and not always even then). The participant, otherwise eligible to elect a lump sum, cannot be denied that choice. Incidentally, my opinion (for what that is worth) is that all qualified defined benefit plans that allow participants eligible for a subsidized early retirement benefit to elect a lump sum should be forced to calculate that lump sum as the greater of the lump sum equivalent of the accrued benefit (i.e., the value of the deferred benefit payable at normal retirement age) and the lump sum equivalent of the immediate normal form benefit otherwise payable (i.e., whatever the life annuity payable immediately would be, the lump sum should never be allowed to have a lower value based on 417(e) interest and mortality factors). I cannot see there being any legitimate justification for paying any less than the full value of the annuity benefit otherwise payable, given that the participant has met all requirements for receipt of the plan's subsidy (including separation from service and election of an immediate benefit).