My 2 cents

The minimum basis under 417(e) is the table that the IRS publishes for that purpose for the stability period containing the benefit commencement date. While the IRS may gear that table to produce results similar to a mortality table with full generational (projected) mortality improvements, adjustments to the promulgated mortality table takes the plan's table out of being a 417(e) table. The IRS 417(e) table is required to be used as is when assessing the minimum lump sum under 417(e), and there should be no further mortality improvements assumed. Provided that the equivalence basis under the plan produces benefits at least as large as those required under 417(e) (for purposes of discussion here, assuming that plan benefits are not constrained by 415 limitations), you can always amend the assumptions as you please, provided that grandfathering is included to the extent necessary to prevent cutbacks.

Key point is that it is impossible for the AP to be paid anything and for the money to also remain in the plan. You know, can't have your cake and eat it too, right?

If you are talking about governmental defined benefit plans, there are some where the employee contributions are "picked up" and all contributions come from the employer (but the amounts that would, but for the pick up, have been paid by the employee are given the same treatment as under a plan where the mandatory employee contributions are actually withheld from the employee's pay). You know, non-forfeitable, minimum death benefits, etc.

I am not a lawyer, but: If properly structured, so that to the extent one or more primary beneficiaries predecease the participant there are others who step in to take their place, unless it violates the terms of the plan (somewhat unlikely) it ought to be acceptable. Do distinguish this from a situation where it is a beneficiary who designates someone to step in when the beneficiary dies after the death of the participant. That is not something that the plan is likely to permit. Example 1: If PB dies before the participant, then CB1 becomes entitled to 35% of the death benefit when the participant dies and CB2 becomes entitled to 65%. If the participant, in designating the beneficiary, puts in language making CCB1 entitled to 20% and CCB2 entitled to 45% if PB and CB2 both die before the participant, then I would expect the distribution of death benefits to be 35% to CB1, 20% to CCB1 and 40% to CCB2 upon the death of the participant after the death of PB and CB2. Why not? Example 2: Same details but CB2 survives the participant and PB and then dies, the designation of CCB1 and CCB2 by the participant would not, absent explicit plan language to the contrary, be relevant. It is also unclear that CB2 would be given the authority by the plan to designate his or her own beneficiaries. See other recent discussion thread.

I do not understand this statement. A hardship distribution inevitably consists of removing funds from the plan. It's a distribution, and whatever is paid is no longer in the plan and cannot be put back. Is someone confusing taking a loan with taking a hardship distribution?

Every plan I have ever seen either is utterly silent (alas!) or is quite clear that the beneficiary has to survive the participant. The language concerning default beneficiaries will often say "If the participant does not designate a beneficiary or if the beneficiary does not survive the participant..." or some such. It strikes me as the only reasonable approach. I cannot imagine a plan document preserving the beneficiary's interest if the beneficiary dies before the participant. No idea what court cases are out there, but I would say (again, not speaking as a lawyer) that any court case to the contrary would have necessarily been wrongly decided.

1. The old lump sum basis was NOT merely the 417(e) basis due to the 1% reduction in the 30-year Treasury rate, so the plan is probably not entitled to the free pass on the anti-cutback issues that it otherwise would have had for the PPA change. Not sure, with something other than a straight 417(e) basis, that you were entitled to just change away from the 30 year rate minus 1%. Are you still using that to calculate the grandfathering? 2. If you are required to tie the grandfathering to the applicable mortality table or else, no need for a 204(h) notice - nothing being reduced. 3. As a general rule, no grandfathering has been required when going from a straight 417(e) basis (old rules) to a straight 417(e) basis (new rules), but that does not apply when there is a special rule (other than 417(e) as is) that acts as a minimum for the lump sum.

Reminder: Just because the IRS says a plan is OK does not mean that individuals cannot litigate a point. The IRS does not have the authority to wipe out ERISA rights. Favorable DLs are well and good, but probably ought not be admissible as a defense against a litigated claim.

My vote is that the beneficiary has no rights to any of the benefits at all unless the beneficiary survives the participant. Being designated as beneficiary gives no rights with respect to the participant's benefits until after the participant has died. If there is no other beneficiary designation and no contingent beneficiary and the beneficiary died first, then it goes to the default beneficiary (assumed to be the participant's estate). I have no idea where the "others" are coming up with their opinions. Please do bear in mind, though, that I have never seen the plan and I am not a lawyer!

If the plan does not allow joint forms except with respect to a spouse, then the QDRO should not allow a joint option. If it allows a participant to choose a joint form with a non-spouse joint annuitant, it should allow the alternate payee to elect a joint form as well, otherwise not. This would not be a form contingent on three lives (assuming that the QDRO awards the alternate payee his or her benefits on a separate property basis). If it is separate property, it is no longer is contingent on the participant's life, just that of the alternate payee (and, if relevant, the life of the alternate payee's joint annuitant).

In my opinion, the expressed intent by the IRS in Notice 2015-49 to restrict allowing retirees to accelerate their distributions (based on a desire on the part of the IRS to disallow lump sum windows applicable to retirees in pay status) does not apply with respect to distributions related to certain payments remaining under certain and life or certain only payment options upon the death of the retiree. While Section 436 may prevent the beneficiary of a deceased participant from receiving a commuted value, Section 401(a)(9) (with the modifications related to Notice 2015-49) would not. Commutation of remaining certain payments upon the death of the participant has explicitly been permitted since the dawn of time, and all plans containing such provisions have routinely received favorable determination letters from the IRS. Many plans I have seen explicitly require the payment of a commuted value upon the death of a beneficiary receiving certain payments after the death of the participant. Further, A-14 (a)(5) of the IRS regulations explicitly permits the beneficiary under a joint and survivor annuity (without restriction to a spouse beneficiary) to elect a single sum payment in lieu of the survivor portion under that annuity upon the death of the annuitant. It would make no sense to me to allow the contingent annuitant under a 50% contingent annuity form to cash out the value of that 50% lifetime annuity and not to allow the beneficiary of a deceased participant entitled to 75 remaining monthly certain payments under a certain only or certain only form to do the same. I am having some difficulty finding the spousal exception for commutation to which you refer in the 401(a)(9) regulations. Please provide a cite if you want me to address that further. Thank you.

Nah, they only seem to be that way. Technically, the contributions under a 401(k) plan are considered to be employer contributions. Most defined benefit plans (including cash balance plans) are funded exclusively by employer contributions.

It is my understanding that the only limitation on commuting the value of the remaining payments occurs when the AFTAP is below 80%. The only time that commutation can occur is after the death of the participant (by the beneficiary's choice) or upon the death of the beneficiary (usually with no option to continue payments to the beneficiary's beneficiary, especially when the plan does not offer the beneficiary the ability to name a beneficiary). This cannot be swept in with the IRS's ban on offering a lump sum window to retirees. The situation is totally different, and the practice of commuting the remaining payments when the participant or beneficiary dies while payments remain under a certain and life option has been prevalent (if not universal) for decades.

Isn't there something in the rules about paying out non-spousal death benefits over a period not exceeding 5 years? If this doesn't fall under that part of the rules, then I presume that there would be no 401(a)(9) issues.

How can a plan offer a certain and life optional form of payment (or normal form of payment!) without having adequate language concerning who the beneficiary is and what happens if the beneficiary dies while certain payments remain? If there is "nothing on point in the plan", then rather than creating a policy statement, the committee should adopt an amendment putting something on point in the plan. Well, if it did, then that's something on point, isn't it? Then all the plan administrator has to do is make sure that the beneficiary is made aware of that provision and has the opportunity to name his or her beneficiary for any guaranteed payments due after the original beneficiary's death. There is, however, the problem with meeting the 401(a)(9) rules. If someone elects a 15 year certain and life form, dies 2 years after the payments started, and the beneficiary dies 2 years after that, are you permitted to continue making monthly payments for the remaining 11 years?

If you are saying that any contingencies in the identity of the beneficiary disappear upon the prior death of the participant, then I agree with you. Once the participant dies, I would expect the beneficiary in force as of the date of the participant's death to be locked in with respect to the entire package of death benefits. I don't think that there are any methods available in qualified defined benefit plans that would allow there to be any contingencies remaining in effect as to the beneficiary after the participant has died. Example: primary beneficiary is spouse, secondary/contingent beneficiary is child. If the participant survives the spouse, then the child is the beneficiary and receives any unpaid certain benefits. If the spouse survives the participant, then the only way any of the remaining death benefit gets to the child is by the spouse dying and the child inheriting from the spouse's estate. I don't think a mechanism exists within the plan for the certain payments after the death of the participant to go to the spouse until the spouse dies and then (if any payments remain) the remaining certain payments go directly to the child.

OK, I took a further look at the 401(a)(4) regulations concerning restructuring, and I agree that this does not appear to fall under the exceptions. Perhaps each piece, separately passing 410(b), can be tested based on having a uniform safe harbor formula within the piece. The salaried-only piece really and truly passes 410(b) on a stand-alone basis?

As noted, for 401(a)(4) purposes, it is my understanding that the plan's benefits are treated as safe harbor benefits only if (a) the formula(s) are all safe harbor formulas and (b) the plan provisions apply on a uniform basis (including benefits, rights, and features). A plan that provides benefits that are not uniform may still be able to pass 401(a)(4), but it would not be enough to wave one's hands over the plan, say "safe harbor" and be done with it.

Under those circumstances, there is no possible justification (absent an explicit plan provision) for paying the remaining certain payments to anyone other than the beneficiary's estate (assuming that the beneficiary is not the participant's estate - in that case, flip a coin). No ifs, ands or buts, the remaining payments no longer relate to the participant after the participant has died. A common approach for this in plan documents specifies that the beneficiary can elect, in lieu of receiving the remaining guaranteed periodic amounts, to be paid the commuted value of those amounts. A typical approach to the situation where the beneficiary dies while receiving the guaranteed payments would be to automatically pay the commuted value of the remaining guaranteed periodic payments to the beneficiary's estate. Commuted values are based on the plan's definition of lump-sum actuarial equivalence (usually the current rates applicable to the plan under IRC section 417(e)). Potential complication: Based on my understanding of the IRS regulations, if the plan's AFTAP is below 80% and the commuted value is over $5,000, paying the commuted value upon the death of the participant if the beneficiary wants a commuted value or upon the death of the beneficiary, could be restricted under Section 436 of the IRC.

Based on my recollection of the rules, I don't think that a plan with two separate groups, each of which has a single "safe harbor" formula applicable to only one of the two groups (i.e., the plan covers groups A and B, A participants get formula 1 and B participants get formula 2) is entitled to be treated as providing benefits under a safe harbor. To do that, all plan participants must be accruing benefits under the same benefit structure, unless Group A passes 410(b) on its own and Group B passes 410(b) on its own. Granted that the plan passes 410(b) when looking at both A and B, you would only get safe harbor treatment for Group A by itself and for Group B by itself if A by itself passed 410(b) and B by itself passed 410(b). If B contains all of the HCEs and only some of the non-HCEs, that might not be possible.

Accruals are not frozen until the plan's AFTAP is certified (or, if applicable, deemed) to have fallen below 60%. In my comments here, I am assuming that the plan year coincides with the calendar year. 1. What was last year's AFTAP? If below 70%, the plan would, absent an earlier AFTAP certification (range or otherwise) to the contrary, fall below 60% effective on April 1 of this year. Otherwise, the plan would only fall below 60% when this year's AFTAP is certified as being less (or, if no certification is made, on October 1). The benefit freeze is not retroactive to the start of the plan year, so there may well be current year accruals. 2. For a contribution this year to impact this year's AFTAP, it must be for last year. You don't get until October 1 for that - no contribution made after September 15th can be counted. 3. Out of curiosity, how did the plan have a large investment loss? In general, the markets have been fairly well behaved the past couple of years. 4. I may be misremembering this, but as I remember it, the target normal cost can only be cut to $0 due to the operation of IRC Section 436 if the plan provides that the freeze resulting from an AFTAP under 60% is permanent. If the plan provides for restoration of accruals (prospective or retroactive) after the AFTAP is certified as being greater than 60% (as most plans, I believe, do), then the target normal cost does not reflect what is expected to be a temporary freeze. If the plan does not provide for retroactive restoration of accruals, the funding target would take lost years into account, however. 5. Depending on the timing and the plan's provisions concerning accruals (i.e., a full year's accrual once 1,000 hours of service were credited for the year), an AFTAP certified below 60% might not impact the current year's accruals in any meaningful way.

Poor investment results caused by a lack of care in choosing the investments (as opposed to carefully chosen investments with poor actual results) sounds like a fiduciary failure to me. Fiduciaries are supposed to act prudently!

Not sure - do the 25-high limits apply to HCE-only plans? If they do, the fact that the plan would be less than 110% funded after virtually ANY distribution to the 1/3 partner would prevent unrestricted payment of greater than 12 times the monthly straight life annuity benefit otherwise payable. Set up escrow or parcel out the payment of the lump sum in single life annuity size bits or have the person elect a non-restricted distribution option. As long as it would be below IRC 415 limits, payment of the full benefit as a QJSA is always going to be permitted irrespective of funded status for an ongoing plan.

1. If you got "flimsy cardboard glasses" and tried to use them during the eclipse, please have someone read the second point below to you. 2. I just checked on eBay, and 10-packs of certified solar eclipse glasses are now below $20. I don't think the DOL would approve of spending plan assets on an "investment" that so obviously would not retain its value. I imagine most of the "market value" goes away immediately after the eclipse passes its local peak. Besides which, the big rate of return for inadequate solar eclipse glasses goes to the manufacturer, not the purchaser.

I always thought that the waivers were only supposed to be used for majority owners. How else can you prevent all of the other owners from coercing that 10% owner into giving his benefit away? If you own 50% or more, nobody else can make you waive the benefits unless you really are willing to do so.