AndyH

DB plan is cancelling life insurance, allowing for purchase by participants. Son of participant is interested in purchasing policy. Is that ok, or is there a problem with it such as a Prohibited Transaction? Admittedly I have not had time to research it and am hoping someone can point me in the right direction to do so.

Agreed. Well stated. (ok, I should have actually read the posts. At a glance, it looked good). (Reason #58)

Agree. Well stated.

Got it. Thanks.

Thanks, but..... How do you get the DB up to 25%? Once the combined limit hits 25.001%, it seems that JH is saying that 404(a)(7) applies the 150% goes away, no?

Blinky, from what you know, could you tell me how you think the IRS views the following? DB 412 10% of pay DB 100% CL 20% of pay DB 150% CL 40% of pay DC contribution (same participants) 3% Last week it was clear to me that the DB deduction limit was 40% of pay. The Notice seems to say that the limit is 20% of pay. What do you think? p.s. Upon further read of this awful Notice, I think the DB can be 22% (25-3), but again the answer should be 40%.

....if you have a few minutes... (I can't believe I beat WDIK to this) http://benefitslink.com/boards/index.php?s...amp;st=30

Ah, double posting. Two demerits. At least Tom and I seem to have said the same thing. If you want to get specific with your question, maybe someone will answer, but what you have cited is just a bunch of what-if qualifier language. I'm not sure what question that would answer. It says what happens if ..... but doesn't say whether the condition is true. Sorry I can't be of help with that.

a and b are right c is close. The match does not count. You give the gateway to anybody who "benefitted" under the plan, i.e. received a nonelective contribution. (Unless the otherwise excludable rule applies and you invoke it, that is.) Re your questions: "Also, a plan document can't classify the safe harbor match or nonelective contribution as an elective contribution can it?" Nope, it is what it is. "Do i have to use either a or b in the nondiscr testing?" You would use any nonelective contribution in the rate group part of the test and (almost) everything but the kitchen sink in the Average Benefits Percentage Test if needed.

We noticed the same thing and agree. I think it is a mistake. The 150% is implied but not stated. March madness. This notice is incomplete and inaccurate. I bet it was rushed for 3/15.

If there is any applicability to 81-202, it would constitute reason #57 why we need Mike on these boards. I started in this business in 1982, so 81-202 is too old for me! BTW, wouldn't it be superceded by a(4)-(BRF section) anyways? BTW II, the insurance guy who issues the policies on the day the plan is sold won't wait for a determination letter! He's got yacht club fees to pay.

I don't think this works in any world, let alone the real world.

Kinda Sorta I'm suggesting dealing with the insurance last. It is a BRF, not included in the a(4) general test. You need something equivalent to trade off. So, figure out what DC contribution is needed to pass the test, then add on to that contribution an amount sufficient to purchase the same level of insurance as the most expensive HCE. Then you are about as safe as having Julio Lugo as your shortstop and Mike Timlin as your closer!

The only thing certain here is that you definitely cannot have such a benefit difference merely because one is a DB and the other a DC. I think this situation is problematic if it already exists. It might be just the right excuse for an auditor to make an issue of a DB/DC combo. To correct it, I'd gross up the DC contribution to an amount sufficient to cover hypothetical equivalent premium (and, if greater, face value) levels, and offer the insurance option. Then when everybody declines I'd cancel the insurance and cross my fingers.

I'd be interested to hear an update from chris.

Is this elusive TAM publicly available anywhere yet?

Agreed. The 401(a)(9) rules no longer permit this type of thing. Just call the client and tell him he's a thief. I've never done that but I did have one who was. But he was a client because he was a thief, not the opposite. Or, if the payment was made in coins perhaps it could be revalued using the Blue Book instead of the Red Book?

I don't think you can have a second waiver because there is no second ASD. If there were a benefit increase then that might create a new ASD but only with respect to the benefit increase. I agree that the restricted payment issue is a related twist. We take the position that the unrestricted lump sum is an additional benefit option that did not exist previously; therefore a new election of that option is permitted. Just like adding a lump sum option at the time of plan termination. I agree that is debatable but it is practical and it works for me. MGB was the ASD expert, certainly not me. I read this all somewhere and was convinced by it-as was our legal department. Sooner or later I will find the source. I thought there was something authoritative that was directly on point but I could not quickly put my fingers on it.

Effen, first, thanks for the compliments. I don't think the spousal waiver at the time of plan termination is valid because it is not being made 30-90 days prior to the annuity start date. There is no second annuity start date here. Retiree takes lump sum to the casino. Spousie has a valid claim I believe. Or retiree dies and spousie demands survivor annuity. There are probably other issues as well, not the least of which is failure to follow the terms of the document (unless you amend to specifically allow a second election in which case I think you have a bad document)

I agree with the responses. 401(a)(26) will eventually kill the plan if nothing else. For 410(b), typically this plan might be aggregated with a new PS plan for coverage testing if need be, but that will not help 401(a)(26).

If, when they retired, they were offered a lump sum and chose something else, no. If they were not offered a lump sum (e.g. the plan was amended later to add that option), yes. No, this is not new.

I think the issue with retirees is that the valid spousal waiver can only take place at the annuity starting date, so you cannot refuse a lump sum and later elect a lump sum; but that is not being stated as an issue here.

Tom, wouldn't it be nice to work for the IRS and not have to provide answers? Maybe you are secretly aspiring to that?

I'm looking at what to me is a new animal and would appreciate any comments. It seems to be described as a "variable annuity plan" where the accrued benefit appears to be increased or decreased with actual investment experience. The plan expresses benefits as annuity benefits and offers an optional lump sum (converted using 417(e) rules). It appears to me that this does not meet the definition of a "Statutory Hybrid Plan" of Notice 2007-6 since it does still appear to be annuity based. The accrued benefit each year is a fraction of the 415 dollar limit. There are no references to compensation. (Take that, FASB). What is the legal status of a DB plan that adjusts accrued benefits for actual investment experience but does not meet the conditions of Notice 2007-6? Other comments?

Opinions wanted: Will the increase in the interest rates applicable for lump sum payments being phased in from 2008 to 2013 be meaningful enough to cause insurers to raise the rates (lower the costs) they use to price annuity purchases? Large frozen plans that do not offer lump sums wil be faced with the choice of offering lump sums or annuitizing the plan. Will the annuity cost be favorably affected by this?