MGB

There may be considerable safety differences, although subtle and difficult to summarize. The 401(a) plan offered by the governmental employer is not subject to Title I of ERISA (a federal law that does not apply due to states rights issues). Instead, the plan is subject to state law, which varies considerably from state to state. Title I of ERISA generally covers vesting, fiduciary actions (e.g., choice of investments), disclosures, and other participant-protection issues. A state may have very strict standards similar to, or exceeding, the Federal rules. However, usually states are not as strict. For example, they typically have much looser vesting rules, so you are not as quickly vested in the employer contribution as you would be under an ERISA plan. The private employer offering a 401(a) with or without a 401(k) feature, will be subject to ERISA. Therefore, all of the fiduciary, benefit protections and disclosure provisions of the Federal rules apply. As far as whether the "benefits will be just as good," that all depends on what benefit provisions the private employer incorporates in their plan (if they offer a plan at all). If the 401(a) plan produced a 6% contribution by your employer and the private employer's plan only produces a 4% contribution by the employer, it is obviously not as good.

Although I can't remember the reference right now (it was something to do with DB plans), I too, have heard the IRS say in the past year that this extension does not apply to acts that are not interacting with the government.

You would probably get much better responses to your question if it were posted under "health plans" instead of under the topic of 457 plans (deferred compensation plans for governmental and nonprofit employers).

If you get a spouse that refuses to consent for whatever reason, how do you ever make a distribution if there is no J&S default?

Even the new age discrimination proposed regulation on cash balance plans recognize the existence of different crediting rates between active and term vesteds. That does not mean they will automatically pass accrual rules...it doesn't mean they automatically fail either. Also note that Notice 96-8 is just that...a Notice. It is not a regulation and carries very little weight legally (although some recent court cases have inappropriately pointed to it).

Bottom-up QNECs are typically used for ADP testing, where the cross-testing is irrelevant.

Smitty, You may want to review the following thread. You and RBeck seem to have the same client (or clients of the same employer): http://benefitslink.com/boards/index.php?showtopic=18477 Same conclusion in that thread. There hasn't been any foul here. The issue isn't that there was no loss...the issue is that a rollover request is a separate and distinct issue from transfer of plan assets. The delay in rollover must be viewed on its own and has nothing to do with their transfer to new asset managers, no matter what the paperwork from the plan administrator implied.

It is more complicated than that. See my article at the end of the following publication: http://www.milliman.com/eb/publications/be...s/sum02_fin.pdf Note: The "IRS" doesn't allow anything -- Congress does. This was a law change under the budget reconciliation act of 2001, known as "EGTRRA".

What are you basing your conclusion on? The factors that are used by the plan to determine the amount of the alternative form have no bearing on whether 417(e) applies or not.

Rather than going through all of this effort to reverse it, why not just roll it over now? If she can't come up with the extra 4200 to do a complete rollover, she would only need to borrow that somehow until she receives her tax refund of the 4200. Or, just keep the 4200 as a distribution.

If you terminate prior to 55, you must wait until 59-1/2. In order to make use of the 55 exemption, you must terminate after 55. See Code Section 72(t)(2)(a)(v).

Long before the 100% of compensation was passed, IRS and Treasury officials have stated publicly in professional meetings that these are abusive methods of compliance. They DO have regulations already written to outlaw them. It was supposed to be issued early last year as part of an omnibus regulation on 401(k) that pulls together all guidance on 401(k)s. It appears to have moved to a back burner recently in order to deal with other pressing issues.

ALL employer-sponsored medical plans are "105 medical plans", therefore you are asking about a huge topic. Section 105 of the Code just says that reimbursements from an employer's plan for medical services are not taxable to the employee.

The rules are the SEC regulations under the Sarbanes-Oxley Act of 2002 concerning auditor independence. It technically does not apply to a company that is not subject to the SEC's jurisdiction. However, whoever (e.g., lenders) is using their audited financial statements would expect such independence. http://www.sec.gov/rules/final/33-8183.htm Note that under the previous rules, SFAS 87 and 106 work was a specific exemption under "valuation services", not "actuarial services". Actuarial services is considered to be insurance company reserving only. Under the new rules, the exemption for SFAS 87 and 106 was dropped.

As of next year, the auditor is forbidden to do the calculations under the auditor independence rules. The company must do it internally or hire outside expertise, i.e., an actuary (that is not affiliated with their auditor). Most of the companies that do these in-house are insurance companies because they already have actuaries on staff. A handful of other large firms have internal actuaries, but still use outside actuaries to oversee the internal work. The auditor has the final say in what the assumptions will be (or else can refuse to sign off on a clean audit). However, if they want something different, the client still goes back to the actuary to rerun the numbers.

A SS supplement (which is given a special rule) and SS leveling options are two different things. There is no special rule for SS leveling options. The distinction is that the SS leveling option is not a supplemental benefit. It is the actuarial equivalent of the benefits otherwise obtainable. The SS supplement is over and above the other benefits accrued.

Please note what the SSA is used for (this is its ONLY use). When the person turns 65, the Social Security Administration sends them a letter telling them that they should contact you (the plan administrator) because they probably have money coming from the plan. (Yes, I have actually seen these letters...they really do it.) Decades from now, do you want to be fielding questions from hundreds or thousands of participants wanting to know where their money is? What if you have no record of them (remember, this may be 30 or 40 years from now). How will you be able to justify to them that they actually don't have any money coming? I would try to not put people on the SSA if there is any chance that they are going to be paid out in the short-term.

Other SEC staffers have said that they will "question" rates of return above 9% for 2002, but absolutely will not accept it in 2003. I think this includes 9%; not that 9% gets a free pass. For those that have other-than-12/31 fiscal years, they have already been given a surprise by the SEC when they filed last year (early in the year the form letter was quite short, but by 9/30, the form letter has gotten much longer). With the 12/31 filings happening over the next week, there will be a flood of these requests coming out from the SEC. The SEC is asking for a HUGE explanation of the assumption setting process and what it means to future cash flow and expensing. This is in conjunction with the Management Discussion and Analysis; it is not governed by SFAS 87 in the footnotes. In this round, they are not asking for the annual report to be redone. Instead, they want companies to respond to the SEC, and then include this information in future filings. I do not know what triggers these letters. It may only go to those with something that raised a red flag; it may only go to large companies; it may only go to those whose pension assets are large in comparison to the operations; or it may go to everyone. The following is an example of the questions they are asking be discussed in the MD&A: Please expand in future filings your MD&A discussion to describe any known trends and uncertainties related to your pension plan that will likely result in a material change in your results of operations, financial condition, or your liquidity. Your description should allow a funding obligation, and the likelihood of materially different reported results if different assumptions or conditions were to prevail. Consider addressing the points below to the extent necessary for an understanding of your particular facts and circumstances. * the source you use to determine your discount rate assumption, including rating and maturity information; * the method you use to determine the market-related value of plan assets and, if you use a calculated value, the systematic and rationale method you useto recognize changes in fair value; * the estimated effect of any net unrealized pension asset market gain or loss on future periods and a discussion of the extent to which it is indicative of a potential directional change in future estimates of the expected long-term rate of return on plan assets; * the assumed asset allocation of your pension plan assets (common stock, bonds, etc.); the extent to which it differs from the plan's actual asset allocation at the reporting date and the reasons why; * the method used to determine expected return for each asset category, including the time period you use to analyze historical results, whether you base your assumption on an arithmetic or geometric average of historical returns, and the impact of using the arithmetic average rather than the geometric average, if applicable; * a description of the expected level of volatility in pension plan asset returns, for example a pension plan that has significant investment in international stocks may estimate a higher return but also expects greater return variability year to year; * the extent to which net pension credits/debits enhanced/reduced income from operations; * the extent to which changes in cash flows resulted from changes in pension plan funding requirements; * an explanation of the reasons for differences, if any, between the assumed discount rate and assumed expected long-term rate of return on plan assets used for pensions (i.e., SFAS 87) and those used for postretirement benefits other than pensions (i.e., SFAS 106); * a sensitivity analysis that expresses the potential change in pension expense and funding requirement that would result from hypothetical changes to expected long term return on plan asset assumptions, holding constant both your discount rate and other assumptions and explains your basis for selecting the hypothetical changes; and * a sensitivity analysis that expresses the potential change in pension expense and funding requirement that would result from hypothetical changes to your discount rate, holding constant both your rate of return on plan assets and other assumptions chosen for this year and explains your basis for selecting the hypothetical changes.

Any distribution that contains a partial lump sum is also subject to 417(e). Many contributory plans will allow the participant to remove their employee contributions upon retirement. This would subject any form of annuity chosen to the 417(e) rates. For example, if the person received a partial lump sum and then chose a J&S (or certain and life), then the resulting annuity must be at least as great as would be produced by using 417(e) conversion rates. Also, ANY temporary amount (not just SS leveling) would subject it to 417(e) rates. An example is an additional benefit to help pay for medical premiums. Note that the entire payout (including the underlying annuity) is subject to 417(e), not just the temporary amount (note in the above discussion of a partial lump sum that it is just a temporary amount that only happens to last for one payment).

The logic of this thread is going a little weird. The original post said they ran the ADP and it failed. I can't see how moving money from the nonqualified to the qualified can help the ADP unless there are non-HCEs in the nonqualified.

Appleby, (Too lazy to look up the rule, so I'll ask.) You cannot contribute to a regular IRA after age 70-1/2. Do they allow such contributions to a Roth? (The husband is over 70-1/2.)

The same statutory rates (select and ultimate) that they use to determine the liability of an employer when they turn over a plan to the PBGC. On 9/30 (the end of their fiscal year that the annual report is based on), this was 4.25% immediate, with 4% deferred. Currently, the immediate is down to 3.75%.

Also, if you are asking about a Wisconsin district (given you are from Wisconsin), no district can create a 401(a) plan. Only the State of Wisconsin, County of Milwaukee and City of Milwaukee are allowable plan sponsors under state law. The law also requires mandatory participation in the state plan. That is why every municipality, school district, etc. is part of the state plan.

Frankie, I disagree with your analysis. The PBGC was in a more serious deficit position from its inception to the mid-90s. It was only for a couple of years that it had a surplus, which it now no longer has (and there are very good economic arguments that they should never have a surplus). Its current deficit is very reasonable and managable. Most of the large plans that are underfunded have no possibility of being taken over by the PBGC. Of course, there are some plans that the sponsors are not healthy. Remember, two things have to happen for the PBGC to take over a plan: the plan sponsor must be bankrupt without any possibility of recovery and the plan must be underfunded (it can even be somewhat underfunded and not cause a drain to the PBGC because not all benefits are guaranteed by them). There is virtually no possibility that the PBGC will need to draw on their credit within the next 15 to 20 years, even if they take on the worst underfunded plans out there (primarily in the airlines, steel and auto industry). Remember, when they take over a plan, they also get their assets. The cash flow required to continue making payments for many years is well within their budget. Just because their assets are less than the PRESENT VALUE of the benefits they owe, that does not mean they are in any danger of not being able to pay benefits when due. If they calculated the assets by adding a recievable of the present value of premiums they are to collect in the future, they would be doubly overfunded or more. Of course, offsetting that by the plans they may have to take over in the future puts them back in balance, and not necessarily underfunded. Also, they did an excellent job at managing their money. While everyone else lost money last year, they gained investment income (about 2%) because they were primarily in bonds. Their current deficit position is also highly driven by the low discount rates that they use to value their liabilities. If interest rates edge upward even slightly, they would no longer be in a deficit position. One final point: If the government has to lend money to the PBGC to pay benefits, it would have absolutely no effect on the budget. The PBGC income and trust fund are part of the unified budget (premium income offsets the deficit and benefit payments increase the deficit). Borrowing from one hand and putting it in the other does not create a new debt of the government nor change any annual budget figures.

Note that the EBSA is not "formerly known as" the PBGC. The PBGC still exists and has not changed its name. The PWBA (Pension and Welfare Benefits Administration) changed its name to the Employee Benefit Security Administration (EBSA). The EBSA does not insure any benefits. It is the enforcement arm of the DOL with respect to ERISA. And, no, the PBGC does not insure governmental plans.