RCK

meggie, I agree with your concern. If someone works half time and gets half pay, then it does not make sense to give them one quarter benefit--which is what you do if you count actual pay and give partial benefit service. You have to adjust one of the factors. I do agree with pax' earlier comment that you have to be very careful about annualizing earnings. But if you insist on the partial credit approach, then you're going to have to address this in order to end up with a reasonable result. I also think that the problem is greater if your formula is integrated or stepped in any way on either earnings or service. RCK

There is a separate thread on the Discriminatory affect of increasing matches. Be sure to take a look at that.

We added automatic enrollment for employees hired after 3/1/99, and it has been a classic good news/ bad news. Good news is that only 5% opt out. Bad news is that only 5% call back to change from the default percentage and allocation. If we were to do it again, we would probably make the default 3 or 4%. We give new hires a nominal 30 days to opt out, but in practice it is more like 35-40 days. We did not sweep existing eligible non-participants, but if we did, we would probably do a 45-60 day notice period for them.

I agree with your comments in the context of the original question. But I still feel that it is a misuse of plan assets. But if the retiree in question was getting $150 instead of $50, then (s)he would undoubtedly have acted in reliance on the higher level and it would be hard to recover. If he was getting $4100 per month instead of the $4000 that he was entitled to, I would reduce the monthly benefit automatically going forward, and give him a couple of choices on how ai was going to recover the overpayment.

It seems to me that using plan assets to pay a benefit that the participant is not entitled to is a breach of Fiduciary Responsibility. Where the benefit is wrong going forward, that must be reduced. And some effort must be made to collect past overpayments--either directly or through reduction of future benefits. Wrong benefits on benefit statements is just that--a wrong estimate. As long as they have an SPD and a disclaimer on the estimate, the plan can only pay the correct level of benefit. The only time that the participant is entitled to more is if they can prove (in court) that they acted in reliance on the statements. And then, the correct benefit is paid form the plan and the balance from the employer.

I think Paul is on the right track, except I'd make sure that this excess is allocated in exactly the same manner as the original excess. Then you end up in the same place as if the calculation had been right in the first place. This will be a nuisance for the insurer, but as long as they messed it up in the first place, they should not give you too much grief about that. And it should keep you from filing another 5500. rk

Of course if the buyer does not have any other 401(k) plans, you might want to have them assume the 401(k) and terminate it. Then you could force out distributions. They would not have much incentive to do this, but our experience is that there is usually so much going in an acquisition that you might be able to trade this for something else.

I would assume that in this case the participant is solely responsible for determining that there was an excess, deciding which plan to take the refund from, and proving tehre was an excess to the administrator when requesting the refund. Since we went to 90 day eligibility, we have been warning people about the issue. But we have nto had a participant initiate a refund yet. rck

I don't think that there is a "should" answer to the question--you can do whatever works best for you. We leave it in the fund it was in until it is forfeited. Then it goes to a Money Market fund until it is used to pay expenses, or allocated to participants. That works well for us, but I'm sure there are plans that move it immediately.

mo again: I understand the concept, but have no idea how I'd go about proving that anyone could or could not afford making a given level of deferral. And why doesn't the same logic apply to the base-level match?

I'm used to pretty vanilla plan designs, so I am evidently missing something. The higher match percentage is available to everyone--it's not based on service or profit center or . . . The only people who can't take much advantage of it are those at the earnings cap, who will be hitting the 402(g) limit pretty quickly. It seems that there would be a good chance of ADP/ACP problems, but I think of that as a separate issue. Can someone educate me?

I agree with Tom. Assuming that you aren't doing something funny coverage wise, your only testing issue is with ADP/ACP. You would also have a potential issue with the test results requiring a cutback in the top paid HCE contributions. I would attempt to model the test results to see if the plan passes. Assuming that is not a huge group, I'd probably model each HCE separately, and make 3 or 4 NHCE's represent the entire NHCE population. I'd guess that the results won't be what the owners or top paid are expecting. rk

Gary, having read this thread, I'm not sure if two points are clear. If you already knew--don't be insulted. TPF&C is Towers, Perrin, Forster and Crosby (I think), and although they probably did not do all the research to create their own table, they probably did their own adjustments to some industry ataqndard table. Forecast means that they have projected improvements in mortality. So a 1971 table would have been based on earlier mortality, but adjusted to represent mortality as of 1971. For many purposes, it is then more appropriate to project improvements in mortality for a given number of years, such as to 1980.

That would be true, but why would a DB plan, where the alternate payee's entitlement is to a portion of the accrued benefit and its lump sum value, include a dollar amount plus interest? Any way, I should have made it clear that I was talking about DC plans. And that makes me think that I'm happy that all our plans that I review QDROs for does not include a Cash Balance plan.

I agree with rcline46 in concept but maybe not in investment philosophy. Any change in investment alternatives is a fiduciary decision, and not to be entered into lightly. So, be careful about adding an option, removing an option, or keeping one. If I were required to buy insurance that I did not need or want, I'd be very upset.

I can't provide a reference to case law or regs, etc. But I can give you my perspective. Unless there is specific language in the document that says that the alternate payee is entitled to $X as of (say) the date of dissolution, plus y% from date of dissolution to date of distribution, then as a plan administrator, I would interpret interest as investment gains and losses. And if it does define interest, I would obviously view only the ultimate amount as relevant to the process. And segregated amounts means that you separate the alternate payee's funds from the particpant's funds in the same way that you separate participant A's funds from participant B's funds. So if the funds are invested in collective funds and the recordkeeper does the allocations, and no shares have individual ownership, then that's what happens with the alternate payee. If on the other hand the only option is individual brokerage accounts, then you'd have to set one up for the alternate payee.

OK. I don't understand. If you skip the details, someone who works 60% time gets 60% of a year's credit and 60% of pay, for a benefit of 36% of a full time benefit?

I am not answering your question--I'm off on a tangent. What kind of benefit formula does this plan have?

I can offer you two things: 1. Perspective. I'm a benefit manager for a Fortune 500 company, and have been known to disappoint participants and beneficiaries. That usually happens when the plan of an acquired company is really messed up and it has taken us a long time to get it sorted out. And those things always take longer than expected. That does not explain the severity of your situation. As an aside, we will not deal with financial advisors without a release from the participant. And if I have a stack of calls to return, advisors/agents/brokers are not at the top of the list. 2. Advice: As a beneficiary of a former participant in the plan, you are now a participant, and have the rights of a participant. You want to submit a formal (return receipt requested) request to the administrator for a Summary Plan Description (SPD). When you get that, it will include information on how to file a formal claim for benefits. You should file a claim for benefits, following the rules in the SPD, making it clear that it is a claim for benefits, and should submit that (also return receipt requested). This will almost certainly get the plan administrator moving.

Bill, The plan language includes a gneeral description of how the process will work. Given all the controversy that this thread has started, we may go back to verify that the document is very clear about what is going to happen, and will probably even highlight it in the cover letters to the determination letter filings. rck

I guess that I have to be the one to say "what does the plan document say?" Ours say: " All Participants shall make payment of loans by monthly or more frequent payroll deduction. The making of the loan is considered an irrevocable authorization for payroll deduction." And goes on to discuss what to do if the available payroll amount is less than the loan payment.

Bill, we do feel that we have it figured out. Both of our providers are well thought of major firms and told us that the approach is OK. We have not filed for a determination letter on the structure yet, but should be doing that soon. That will of course not tell us much, but will provide a little assurance.

to michaelv: you are right that transfer to a different type of employment within the controlled group is not a distributable event. But then again this is not a distribution--it is a plan to plan transfer. to Bill Berke: Good question(s). As a context for this, the core plan has 20,000 participants and about $500 million in assets. The other plans are much smaller, but still have at least 1,000 participants and several million in assets. The approach that we are using was suggested by our (high profile)recordkeeper as one they are using for similar companies. And it was blessed by our ERISA counsel, who is generally not overly aggressive. The attorney has suggested that we consider rolling it all into one plan, but we have not pursued that yet. So I can't provide detailed answers to your last questions. I'm only an Enrolled Actuary trying to survive in a defined contribution world.

WE actually allocate the forfeitures back to the plan under which the employer contributions were generated. That is, if Participant terminates with non-vested employer contributions due to Plan X and Plan Y (his plan at termination), the Plan X forfeitures return to Plan X and the Plan Y forfeitures stay in Plan Y. The vesting schedules are the same, and vesting of course counts all service.

I either don't understand the question or am afraid I do understand it. What is the brokerage firm's official capacity? Is the brokerage firm a fiduciary? Can you walk through the events that take place when the participant terminates employment?