AndyH

LK, the cross testing rules have changed, and a target plan is really a cross tested plan, but targets are specifically exempted from the new rules under certain conditions. Exempted are safe harbor plans and non-safe harbor plans which have certain specified deviations. For details, see the final 401(a)(4) regulations issued 6/29/2001.

Merlin, I think you can do what you are proposing and she comes in 1/1/03, as long as the change is made before she has met the eligibility requirements.

J. Bringhurst, what they are saying is probably true, that the $10,000 account value is not protected. I was thinking that you'd have to protect that value, but perhaps not. I guess the annuity under this approach would provide whatever the annuity provides, with nothing protected except the availability of payments at times allowed under the terms of the plan, and under all forms allowed under the terms of the plan. It's just that there is no way the participant could surrender it on day 1 and receive $10,000, so I'd be pretty hot if it was me who was annuitized. I'd urge caution. It's common to threaten or allude to such a forced annuity purchase, but I'd be real careful if your bluff is called. Exhaust all other avenues first IMO.

Right. RTK, please explain that last statement.

But, to avoid a 411(d)(6) cutback, wouldn't you have to preserve the lump sum option, at least at retirement age? So it will cost more than $10,000 to get an annuity with a surrender value of $10,000, so there is an expense component to this. I'd guess you could charge the "expense" as a general expense rather than an earmarked expense, allocated to all participants, which happens to be 1. So I guess you end up having to look for an annuity with the lowest possible surrender charge. Kind of like a cat chasing it's tail.

Thanks, Ray, I'll look into that. Keith, terrific idea. Thanks for passing it along. p.s. from Lynchval's web site: "LVadminUser is designed so it can be run by employees with no knowledge of the intricacies of the pension plan"

We have competent pension actuaries who have designed our procedures. It's not the procedures that are the problem. It's the time involved to implement the procedures from start to finish compared to the amount billed. Does anybody make money doing benefit calcs at $100 or $150 each? And, Keith, thanks, that is the kind of feedback I was hoping for. We also have programs per client; we were looking for something more uniform. For example, I've seen a program that a very large company uses internally that appears to be comprehensive, but in that case too comprehensive. We have various programs that will do the calcs and the forms, but they are decentralized and case specific. We're thinking of broadening such a program (to add variables at each step), but first it seemed logical to see who may have already invented that wheel.

With responses like this I retract my question. I completely disagree. Do we still do actuarial valuations by hand? Do lawyers hand write wills, and never use templates, secretaries, and boilerplates? Better get a good eraser. And I never said anything about not having the appropriate person review, direct and supervise. Gee how we jump to conclusions. Efficiency and quality control are not mutually exclusive.

That would be lowering the level at which the work is done?

Can anybody point me to a stand-alone, reasonably priced (or free) retirement benefit calculation program, which would determine the accrued benefit and also do lump sum calculations as well as monthly options?. We're looking to standardize this process internally to lower the level at which this work can be done, by developing something, but first I thought I'd ask if such an animal already exists. Basically I'm looking for a user-friendly program that a clerk can run with some modest training, that could be adaptable to numerous plan designs. Maybe this is wishful thinking?

Not to beat a dead horse, Mike, but obviously that is a manditorily separate plan for 410(B). Some people eligible for deferral would not be benefitting for the profit sharing plan for 410(B), obviously. But, I do agree with your conclusion. I was just trying to say that not everyone else does. And I know that Ed Burrows did an Academy Alert in 1999 or so which touched upon this topic, and he referenced a 1999 PLR. But with a PLR as the primary authority, some would be more cautious.

Those are good points about 401(a)(4) and 410(B) having nothing to do with 404, but the point I was trying to make (as discussed in detail in the ERISA Outline Book-this isn't an issue I thought up) is that the 15% limit is based upon compensation of "beneficiaries under the stock bonus or profit sharing plan". The question is then who is such a person under 404? Since there is no definitive guidance (that I know of), would the 410(B) definition be a reasonable possible interpretation? I never meant to imply that it is the only interpretation. But I do know that some people do rely on such an interpretation; call it a conservative approach. And, thanks, I will absolutely stop by both booths.

Tom, thanks for the help with the cite. LWilson, check out the cite. It should be self explanatory. Tom and I went back and forth on this issue a few months ago. There is a good discussion of this matter in the ERISA Outline Book. The version I happen to have copied is the 1998 edition, page. 7.172 (Chapter 7-Taxation Rules). I think it basically says that in the case of somebody eligible to defer but not deferring, it is unclear if the person's comp is eligible to be used for the 15%, because it is unclear if he is a "beneficiary under the stock bonus or profit sharing plan". And I would extend this question to somebody treated as not benefitting for 410(B) per the cite Tom referenced. Mike, I just downloaded the ASPA brochure, and I'm looking forward to your session. Tom, I didn't see your mug shot this year??. I heard you did a great job last year.

I personally agree with Blinky but I don't think this is universally accepted. For one thing, in a safe harbor plan someone receiving only the top heavy minimum is treated as not benefitting for 410(B). Second, I'm not so sure about the "any portion of the plan" part. Again, I think I agree but I know many other people who do not. So, LWilson, I know for a fact that some people would not include the comp for the top heavy-only people.

If you can get old exams, they are worth looking at but won't be particularly helpful as a practice test because there aren't that many questions and they are all essay or short answer. The relevance of the the time factor is basically a function of how well you know the material, and how well you can organize your thoughts. Essay writing for 2 hours straight does little for practice except give you a real sore hand! Some day you'll be allowed to use a computer but for now its paper, pencil, and writer's cramp.

I would say the study time is at least double because the reading is brutal. It's hundreds of pages of prohibited transactions and then lots more of exemptions. But then you discover that all that reading is just a small portion of the material covered. But, I found the reading to be a great way to fall asleep. I think you'd find the material to be very helpful from an administrative perspective. It teaches you to look at things more globally. I think the C-4 exam was more consultant-oriented.

Do the reading but don't focus on the minutia (FAS publications). Just grasp the big picture of that stuff. If you are taking it in December, you have plenty of time! Make sure you focus on everything in the study guide. 95% of the test comes from that stuff.

Why would the document stipulate what limit can be used for funding purposes? I think I've typically seen the limits prorated for an end of year val. That certainly wouldn't be something addressed in the document. Clearly there are a couple of options, and it makes sense that such choice would be part of the funding method. I'm simply asking which if any options have been ruled out in the earlier discussions.

Is there a "final answer" to the original question that someone would be so kind as to summarize?

Megga dittos, RTK. I don't listen to Rush Limbaugh anymore, but I've always liked the phrase. Thanks for the help. Reid (we've never met but somebody important on these boards speaks highly of you personally), this is waaay out there.

Well, I suppose somebody invented the first 401(k). We'll have to come up with a name for this new animal. Now accepting nominations..... How about the anti-415, the 514 plan.

The point is moot anyway if this is some type of single payment scheme. Clearly the Trustee cannot discharge a Joint & Survivor Annuity obligation as a single payment to a participant. That would violate multiple provisions of law so if that's the idea then forget it. Just a couple of little problems like 411(d)(6), 417, et al even before getting to 415.

David, I don't think any part of the payment schedule you describe is available for rollover because the initial installments are part of a series of payments over more than 10 years. Only the residual balance could be rolloved over in my opinion, once the restriction is lifted.

rcline46, I disagree (or isn't that already apparent) regarding 401(a)(26) question but I've been away from the boards and don't have the time (or the reference materials) at the moment to argue the point. Maybe somebody can help out. I'm certain of my comments, however, so I don't want that interpretation to go unquestioned in the interim. Would you please clarify your comments about 415 and a life annuity/joint & 100% nonelection? I don't understand what you are suggesting. The life annuity 415 benefit is always payable in the same amount as a qjsa 100% j&s if the plan states that to be the normal form, so what is relevant about payments having started and the trustee doing something?

There was just a webcast a couple of days ago by ASPA, "Top Heavy under EGTRRA". It was scheduled for 7/23/2002. Anybody sit in on it? Was this stuff addressed?