MGB

I vote for "must be changed." What does the plan administrator say? They are the ones charged with making sure it is qualified (not the attorney). Once it is pointed out to them that it was accepted incorrectly, the PA should make the call as to what happens next.

There is no question or ambiguity here whatsoever. You are NEVER allowed to recognize anything but the current liability interest rate (whether it is higher or lower)...even in determining the future lump sum amount (i.e., ignore all other interest rates for all purposes - you can only value the annuity benefit).

How do you "convert" a DB plan into a 401(k) plan? (Seriously!) Aren't you just terminating the DB plan and allowing the participants to rollover their distributions into the new profit sharing plan? Or, did you come up with some way to force the transfers without the participant electing it?

And of course, one may ask "How would anyone know?" That is why there is a box on your W-2 indicating how much was deferred. If the IRS receives more than one W-2 with numbers in this box, they add them up and will follow up with penalties, etc., if the numbers add up to too much.

The official IRS view is that spousal consent is not required (this was originally stated by Jim Holland at the CCA meeting last fall, and recently was in an IRS Notice). That implies to me that a QJ&S is not required because they trigger off of the same issues. However, at some recent meeting, Paul Shultz was heard to have said that a QJ&S was required. I'll leave this tidbit as is - unofficial.

Just a quick addition to Pax's last comment: If you are only going to contribute the amount that generates the maximum employer match, you should find out the following about your plan (this may be an issue anyway, even if you are contributing more). Do they do an adjustment at the end of the year for accelerated contributions? I.e., let's say the company matches 50% of the first 6% of compensation that you contribute and that you contribute 12% for half a year (0% for the remainder). Will you get the full 50%, given that you contributed 6% on a full year basis? Not all plans will do this adjustment at the end of the year. Some will only match in each payroll period. So, in the above example, you get a match for the first half of the year, and no match for the second half. In total, you only get an employer amount of 1.5% instead of 3%. In this situation, you want to contribute 6% every payroll period throughout the year instead of accelerating the contribution. Of course, if you are in a plan (ask!) that makes an end-of-year adjustment based on the 6% for the entire year, you can accelerate all you want. These adjustments are called various things, but most often "true-ups".

I am sure Martha's "audience" of where her comment is directed to is Congress to urge permanency of EGTRRA provisions (she is one of Deloitte's lobbyists in Washington), not plan sponsors trying to decide whether or not to add the provision. Of course, making the comment to plan sponsors is also directed to Congress by way of getting the plan sponsors to pressure Congress for permanence.

The two-year service requirement should be seen as a "safe harbor", or just as something that the IRS has blessed (which is weaker than a safe harbor) for certain facts and circumstances. I was in a plan once that in service distributions had no time limit on them (it was at one of the largest benefit consulting firms in the country). I removed mine (non salary deferrals) every year after receiving the match. However, in your situation, given that it is the owner/HCE that would probably use this feature more than anyone else, you could be restricted (even to not being able to use it on a 2-year basis).

There must really be a disconnect between my brain and reality...I had no problem doing it. But then, everyone has always said there was such a disconnect once they knew me.

As GBurns said, state law needs to be examined. If the state allows purchase of insurance (instead of using a state fund), then, "self funding" means to set up a captive insurer, at which point you need to explore what the state law (and federal tax law) require for the insurer to sell policies to the public at a minimum in order to be recognized as an insurer. It is possible that a state would allow direct self-funding, but most likely not. I suggest they work with someone that is very familiar with their state law, which becomes very complicated if they operate in more than one state.

Just to help clarify mbozek's post in case you don't know all of the terminology: The 7.5% payment to the 401(a) plan is NOT a salary reduction. Note that he does not include it in relating to the 14k. Getting back to the original question, (b) is the answer, as pointed out by mbozek. Note that the amount is even higher if you will be 50 or older by the end of the year. This assumes the university 401(a) plan is truly a pure defined contribution or defined benefit plan and not a 401(k) plan.

Although the price on EBay is up to $41, the same comic can be purchased elsewhere for $1. #683 and #684 http://milehighcomics.com/cgi-bin/backissu...=DC&snumber=661 batman.doc

It all depends on whether the entity is required to produce audited financial statements that follow generally accepted accounting principles (GAAP). The formation of the organization is irrelevant, even a sole proprietor could be subject to GAAP if they borrow money. Any corporation that issues public stock or debt must follow GAAP in its filings with the SEC. Other companies that borrow money or in some other way have others involved with financial interests of the organization (e.g., a joint venture) will often be required to produce GAAP statements to the lending organization. The term "audited financial statement" means an auditor has reviewed the financial statement and agrees that it has been completed following GAAP. GAAP requires that all pronouncements by the FASB have been followed. Many corporations do not follow GAAP because they are privately owned and do not borrow money. Also, if an insurance company does not issue stock (i.e., a mutual company), they will not follow GAAP, but do have to follow statutory accounting principles, which are similar to GAAP for pensions.

You are applying DC rules. A DB plan should pay out the monthly accrued benefit beginning with the required beginning date.

Only the unofficial discussions; they've indicated no link. So, you could use the top of the range for minimum and the bottom of the other range for maximum. It relies on the "may ignore" language in the law for this two years, which overrides the earlier linkage issues.

An interesting twist. Be careful what you rant over. It may induce the IRS to start thinking that no service should be recognized in any ongoing plan for years where wearaway is projected to occur for purposes of spreading costs in the future. That is the IRS's way of dealing with such arguments. What starts as a limited scope issue suddenly applies across the board to the vast majority. Typically, this jumps up at us in situations where there has been nothing specific in writing (like this one). Perhaps the reason nothing has been clearly stated in an official promulgation is they feel they would logically have to extend it to all situations and know the ranting that would occur if they actually did that.

WHAT?? You mean to imply there ought to be consistency between regulations? Sounds like a pipe dream that only Hunter S. Thompson, rest in peace, would come up with.

The "reasonable funding method" regulations from 1981 (yes, there actually are still some things from them that apply) include the statement: "Under a reasonable funding method that allocates liabilities among different elements of past and future service, the allocation of liabilities must be reasonable." 1.412©(3)-1©(5) (Note that the aggregate method is not subject to the above statement because it does not allocate liabilities.) And, they even go into more detail on this as it applies to the unit credit method under 1.412©(3)-1(e)(3). "...this allocation must be in proportion to the applicable rates of benefit accrual under the plan." The IRS views a frozen plan as having no "future service," so if an allocation of liabilities occurs, all liabilities must be allocated to past service. The only method that does this is the unit credit method (which then must follow the benefit accrual pattern which is zero going forward; so all statements of allocation fit nicely together with no loopholes). I get the impression from them that they view this as "obvious," (I agree) so it is not in any official promulgation, but certainly has been voiced by IRS representatives.

That depends on your sophistication of investing. If you leave it in the employer plan (assuming it is not in employer stock), you probably would have access to good investments (e.g., mutual funds) that are diversified and are managed by professional money managers. However, if you roll into an IRA, you will need to become the professional and choose your own investments (which could include good mutual funds, but you still have to pick them). You could also run into fees for maintaining the IRA that you are not being hit with in the 401(k). Also, if you roll into an IRA, it is all that much easier to cash it out and spend on something that you shouldn't (along with paying regular taxes plus 10%). Also note that student loan interest (once you start paying it) will be tax deductible. However, with work after your masters, perhaps you will not be eligible (I think the deduction phases out after $50,000 adjusted gross income, but there was a bill introduced this last year to remove that limit so anything is possible by the time you are out).

Don't! Borrow through a student loan instead. The effects on your future financial situation (due to the tax effect of each) is substantial. Not even a close decision.

It doesn't make any difference if Manhart applies or not, nor what the DRO says (prior to accepting it as a QDRO). You must follow plan provisions.

"Actuarial adjustment for sex"...hmmm...I am sure all of the connotations running through my mind don't come anywhere close to the "actuarial adjustment for gender." Seriously, there is no reason to ignore it. The adjustment for gender under the plan is already built into the unisex tables -- zero. Just because it is zero doesn't mean it isn't being recognized in the calculation. On a fully subsidized early retirement factor, haven't you ever said the "early retirement adjustment is zero"? And, aren't you recognizing that it is an early retirement even though the adjustment is zero?

Harry O., The only ones that will stay in your plan are those that don't respond or don't want a lump sum if you replace the $1,000-$5,000 mandatory lump sum with an elective lump sum. Most likely people will still take it.

JanetM, I disagree with your analogy. The IRS keeps an official list of code sections that can be incorporated in a plan document by reference. 401(a)(17) is not on that list (even though many have put it in their plans and have inappropriately got them through IRS reviewers). Therefore, a change in the 401(a)(17) limit downward must be because of an amendment and cannot decrease the accrued benefits. (415 is a hybrid, in that it can be incorporated by reference AND the IRS considers any change to be on account of an amendment, even though you don't amend the plan.)

I authored this: http://www.milliman.com/eb/publications/cl...10_retroasd.pdf