smm

Under AJCA, distributions are permissible upon "death". Whose death is the statute referring to? Is it only the participant's death? If so, why? The statute refers to the "participant's disability" ((2)(A)(ii)), but simply uses the term "death" ((2)(A)(iii)). Presumably, it could be the death of someone else, but then would it be a specified event which is not allowed? In the case of an arrangement that covers employees, could it be the sole shareholder's death (the shareholder does not participate in the plan)? The committee reports appear to be silent on this (unless I missed the discussion). Thanks in advance for your thoughts.

Once again, what does the plan say. I have seen nonqualified plans that require spousal consent for the form of distributin (installment vs. lump sum).

What does the plan say?

I'm having a brain freeze (this is not the first time and probably not the last). I'm trying to locate authority which permits a distribution to be made to a participant in a DB plan that has attained the NRA (as defined in the plan) but is still employed. Plan is silent and does not require a severence from employment to receive a distribution once participant has attained NRA. I believe that this is possible, but cannot locate authority. Any help is appreciated. Thanks.

My question concerns the taxability of grandfathered 457 plans (i.e., pre-1986 plans for tax-exempt entities). How are amounts under a grandfathered 457 plan taxed? Is the taxability governed by the substantial risk of forfeiture requirement or are the amounts taxable when distributed/received (i.e, assume an installment payment schedule). Thanks.

The Act applies to post 12/31/04 deferrals and prior deferrals that are not earned vested as of 1/1/05. Thus, if prior deferrals are subject to a substantial risk of forfeiture (as is the case in a 457(f) plan), they are subject to the Act.

The IRS announced yesterday that they will be issuing a model amendment to comply with the automatic rollowever requirements. The announcement is in the Special Edeition of Employee Plans News that is available on their web site.

Why do you want to know?

Does anyone know if the IRS will be issuing an updated 401(a)(9) model amendment soon (or at all) for defined benefit plans?

Does the top-25 restrictin apply accross the board or only if the plan is underfunded?

I agree that the recently issued regulations are silent on the use of the account balance method for DB distributions. However, what about amending the plan to allow a lump sum distribution upon the attainment of normal retirement age (not the actual termination of employment due to normal retirement). Then, assuming that the plan allows a lump sum distribution, the paticipant can do a direct transfer of the lump sum to an IRA and calculate minimum required distributions from the IRA using the general rules for RMDs. This is not perfect, because as long as the participant is still employed and accruing a benefit, subsequent distributions will need to be transferred made to an IRA. Is this too aggressive? Did I miss any issues?

An entity is leaving a controlled group and the account balances/assets in the 401(k) PSP attributable to the entity's employees are being spun-off to a new plan that the entity is setting up. Unallocated forfeitures from the suspense account are being spun-off along with the participants' accounts. Question: What do we do with the spun-off unallocated forfeitures? Do they go directly into the new account's suspense account (and are used pursuant to the terms of the plan)?, or must they be immediately reallocated among the participants in the spun-off plan. Thanks.

What exactly does the phrase "...form of a joint and survivor annuity with respect to the alternate payee and his or her subsequent spouse..." mean under ERISA 206(d)(3)(E)(i)(III)? Does this restriction apply to ANY J&S that is available under the plan or simply the QJSA? I concede, that the statute is clear on its face and precludes any form of J&S for an alternate payee and his/her subsequent spouse. However, the FAQs issued by the DOL on QDROs and Drafting QDROS both specifically say that a QUALIFIED JSA is prohibited. Which interpretation is correct? Also, on a related note, if a jsa is an optional form of benefit, could the alternate payee name his/her sister, child, etc. as the joint annuitant? Thanks.

Excellent question. Yes.

When exactly is an employee "retired" for 401(a)(9) purposes. Is a non-5% owner deemed to be "retired" soley because he works for no compensation? The employer considers him to be an employee as do all of the other employees. This particular individual hasn't received W-2 earnings from this employer in years but is subject to the rules and requirements that all other employees are subject to. I would prefer not to get into a detailed discussion of the facts, but suffice it to say that he is not a volunteer, nor is he a member of the board of trustees (it is a tax-exempt entity). In the 2003 IRS Q/As, the IRS says that "when an employee retires is a facts and circumstances determination....." This would suggest that "compensation" is not required. Any thoughts?

That was my concern.

Can participant loans be limited to participants who are actively employed by the employer at the time the loan is requested? Client does not want to make loans to terminated employees, alternate payees andor beneficiaries. Loan is payable in full at terminatin of employment and payments must be made by payroll withholding. Thanks

The dollar amount under 409(o) has increased to $830,000 and 165,000 for 2004. Have there been any changes to the distribution periods?

I just read the 1099-R/W-2/1099MISC instructions and agree that the death proceeds are reported on the 1099R. However, what are the withholding requirements? It looks like the proceeds are exempt from FICA/Medicare if paid after the year that the participant died and vica-versa. However, what about income tax withholding? Is the deathe benefit subject to any mandatory income tax withholding?

I'm the one who started that 2002 thread and my opinion is that a non-compete clause does not work. A participant is vested (and taxable) when there is no substantial risk of forfeiture and the use of a "non-compete" clause is not a substantial risk of forfeiture.

Kirk - thats what I thought. So does that mean that the withdrawing employer is off the hook?

Interesting thread. ERISA 4064 is applicable to a multiple employer plan - which is defined as one with at least 2 or more sponsors that are not under common control. Does 4064 also apply to a plan that has several participating employers, all of whom are members of a controlled group (i.e., parent, sub, etc..). I'm thinking of a situation where an employer withdraws on day 1 and is not a part of the controlled group on day 2, or something like that.

I love when threads take on a life of their own. I'll add my own FWIW. I just read that Johnson case decided 2 weeks ago in the 9th circuit. (BTW - that is not the recent ruling/case I was referring to). Although that case involved the elapsed time regulations and not the hour of service regulations, the analysis and conclusion is analogous to my initial inquiry. By anaology, service must be credited for a temporary "layoff" (Query: can someone receive severance pay during a temporary layoff????) - not a permanent "layoff" - when the severance pay that I am referring to would be paid. Thoughts??

I looked at your cite and it is not related at all to my inquiry. My inquiry has nothing to do with whether deferrals are permitted on severance pay - the answer is no, because the individual is no longer an employee, unless the severance pay is paid before the employee's last day of work - but rather, in the case of employer contributions, whether the individual must be credited with hours of service under the Labor regulations while he or she is receiving severance pay. I believe the answer is no under the regs, but thought there was some sort of ruling/case on point.

I seem to recall a not so recent ruling/case/or something that addressed the question of whether a person who is receiving severance pay is credited with hours of service for benefit accrual, vesting, etc. My recollection is that the decision said no. Does anyone recall anything of the sort? I can't seem to find it. Thanks.