MGB

I don't understand why she would have $17,000 exempted. The entire amount should be subject to the 10% if she takes more than $17,000.

To clarify, I meant to say that you cannot "fully" recognize the limit at the end of year. The change in limit during the year is technically a plan amendment. Even though it is retroactive to the beginning of the year, you cannot fully recognize an amendment that occurs during the year (see Revenue Ruling 77-2). You may only do one of two things (consistently as part of the funding method): Recognize it pro rata for the portion of the year it is in effect, or not recognize it at all.

You can never anticipate increases in the 415 limit beyond the valuation date. It is not permissible to use an end of year limit for a beginning of year valuation.

What does the plan document say? What does the enrolled actuary say (they are the one signing off on the appropriateness of any calculations)?

I think that anything could happen. The views towards taxation of retirement savings continually shift. In 1986 they imposed an additional 15% tax on retirement payments that were "too big" meaning that if you had good investment returns and/or had large pensions from multiple sources, they wanted to take it. That provision was rescinded in the 1990s. A lot of it depends on public sentiment in the future. Note that we will have a major budget crises 20 to 30 years from now because there will be so few workers compared to the number of total consumers. The tax revenues required to sustain current programs will not be able to be borne by the workers. So, they will be looking at other sources for taxation (we could assume they would cut programs, but the size of cuts needed are not feasible). The twist in this is that those that vote the most will be the same ones that they will be looking at to tax - the retirees. It then comes down to how the Congress reacts to this dilemna. Note that even though the financial press thought that Toby Roth's getting the Roth IRA through was a great political victory, it wasn't seen that way by his own constituents. He lost his next election and is no longer in Congress.

Amortization is a generic term meaning to pay something off with scheduled payments in the future. A mortgage is an amortization to pay for your house. The payments in the future may be structured in one of many different ways -- they may be level, increasing, decreasing, or variable (e.g., based on the then-current interest rates). Most of the time the term is used with adjustments for interest. However, there are instances where the term amortization has been used without interest (e.g., financial accounting under SFAS 87), although this is a twisting of the term from what it is supposed to mean. A level amortization with interest adjustments at a fixed rate is the same as a level mortgage payment with a fixed rate of interest. In the multi-employer context, it could be used in many different ways: 1. If you are talking about the minimum required contribution that the IRS requires the fund to receive each year, then the amortizations are level amortizations at a fixed rate of interest for a fixed number of years specified in the law (section 412 of the Code). Each change in liability is amortized from the date established for differing lengths of time depending on where the new liability originated from (e.g., plan amendment, experience gains and losses, etc.). Although this sets the minimum required to be contributed, the actual contributions may be more than this, which is then tracked as a "credit balance" against future minimum contribution requirements based on the given amortization schedules. 2. If you are talking about the maximum deductible contribution, the amortization periods are all 10 years from the date established, but may be combined together and/or "restarted" and reamortized at any time over a new 10 year period. 3. The plan may have a funding policy that falls between the minimum and maximum and may be defining its own amortization approach, but constrained between the minimum and maximum amounts required by law. 4. They may use the term in a generic sense: "The unfunded liability will be fully amortized in 8 years given the current rate of contributions."

I once was in a plan that allowed annual withdrawals and I did it every year. (Note that this is not 401(k) elective deferrals, which cannot be withdrawn -- it was after-tax contributions.) By the way, it was at one of the largest benefit consulting firms in the country. At the time I could not afford to put money away for retirement, but I did want the employer match. They matched my after-tax contributions and allowed me to withdraw it every year without losing the match. Once the new pro rata rules kicked in after Tax Reform, this became less and less feasible as the total account balance (matches and profit sharing) became more and more tilted towards tax-deferred money. This caused my after-tax contributions to be quickly triple-taxed (once before going in, once when I took it out the following January (or most of it anyway), and the 10% extra tax).

Government employers are not subject to any financial accounting standard released by the FASB -- they have their own set of standards under the Government Accounting Standards Board (GASB). The GASB has a new statement on post-retirement medical obligations due out early next year.

They are catch up and not refundable. The participant elected to have a certain amount of elective deferrals. It is irrelevant to the participant whether it is deemed to be an ordinary elective deferral or a catch up. In fact, there is no reporting (to the participant or the government) that it is a catch up.

It sounds like you are reading an old version of the law. EGTRRA delinked 457 deferrals from the 402(g) limit. 457©(2)(B) no longer exists.

You cannot (why in the world do you want to change the NRA???). You can only do one of two things. You can begin paying them out at 60 or you can adopt suspension language so that they forfeit the actuarial increases. Anything else is a Catch-22 that disqualifies the plan.

Plus another $1,000 in catch up to the 457 plan (this catch up is not coordinated with other catch ups). And, if the person is within 3 years of NRA, this catch up can be replaced with another $11,000 for a total of $63,000. And then, don't forget the DB plans and the 403(B)'s. (Private industry needs to start making more noise about parity - everyone would love to have these numbers.)

No. But it does increase for the 415 CPI increases after termination of employment.

How is the plan administered? Can a person put in the extra 15% for January? If not, she is contributing the maximum and is eligible. Being an NHCE, 15% of pay for 11 months is going to exceed the $12,000 limit, so yes from that standpoint, too.

After further research on the issue, I completely rescind my earlier remarks. If the person is restricted, they can only receive the single life annuity amount. They may not receive anything greater, even up to the 1% calculation. The 1% calculation is compared to the "entire interest" in the plan, not the current distribution. If their entire interest is over 1%, then the most they can get this year is the single life annuity amount. Even if you could do what you are saying (I used to think so), you could not restrict this to the high-25 group due to nondiscrimination. The same payout option would have to be available to all.

If you are looking to maximize contributions, you should not be using age 65. Age 62 has the same DB limit now. Using something lower may produce higher contributions, but would be scrutinized as to whether that is reasonable for the given industry.

There was a court case in December 2000 (CSC Industries, Inc. (2000,CA6) 2000 WL 1715180) where the 6th Circuit upheld a bankruptcy judge ruling the PBGC's interest rates were out of line with other creditors of the bankrupt firm. The court required them to recalculate liabilities using a "prudent investor rate" of 10%. This dropped the unfunded liability from $50 million to $2 million.

See the new Code section 25B for the new rules. Subsection © states who is an eligible individual: Must be 18 (by end of year), regardless of whether or not a student. After 18: - May not be claimed as a dependent on another tax return, and - May not be a "full-time" student. In addition to mbozek's list of eligible plans and IRAs that the contributions may be for, all qualified plans, not just 401(k) plans, and in particular, contributory defined benefit plans are also included. However, there is a catch here that applies to all qualified plans, particularly defined benefit. If the contribution is mandatory as a condition of employment, then the tax credit does not apply. Only voluntary contributions are eligible for the tax credit. If a contributory plan allows a person to decline participation, then those that contribute can take the credit. So, for example, in the many state and local governmental plans that require employee contributions as a condition of employment, these contributions are not eligible for the credit. John G: Your comment "so little income" does not match reality. Nearly 50% of households in the US are eligible for some level of credit. ($50,000 AGI.)

The referral to ASPA was only to check to see what their surveys say are standard fees to be able to take this information to a lawyer.

I am unaware of any distinction of these rules applying differently to DB versus DC. If there is a reference out there, I'd be interested in seeing it.

1) If you are talking about "eligibility" as being the initial eligibility to become a participant in the plan, that should be based on 1000 hours. For benefit accrual purposes, there is no upper limit on the hours requirement and 2040 is OK for a full year of credit. However, anything above 1000 hours must receive a pro rata allocation of whatever the full year is (basically, because these are contributions and not a DB, this ends up being the same as a 1000 hour rule). 2) Individually designed. I assume no prototype is set up to do this. 3) This needs a lawyer, there are problems with both the CBA and the plan. For past years, there may be an issue of benefits that should have been accrued and were not.

According to the proposed regulations (see 1.457-4©(3)(iii)), any year after 12/31/78 which a participant was eligible to participate and was subject to a limit may be counted. They do not need to have actually deferred. Note that the limit in those years is the lesser of the applicable dollar limit that year and one-third of the applicable compensation that year. Then, to determine the unused limit, you need to subtract all coordinated deferrals in years prior to 2002. So, if they had a 403(B) or 401(k) plan, those deferrals are counted against the limit for pre-2002.

In litigation that focuses on this, it is usually the testimony of medical experts, not actuaries, that is used to put a time-period on this. There typically is not enough public data (which is what an actuary would make use of) that is refined to the level of the particular issues and medical problems involved with the person. Only after a thorough medical examination could an expert opine on this.

No. The limit is on deductions, not contributions. Prior to EGTRRA, the after-tax contributions would be used in applying the 25% individual annual addition limit under Section 415. However, that limit has changed to 100% now.

EGTRRA did not allow the transfer of funds between these plans. What it did allow is to do a rollover between plans. In order to have a rollover, there must be a distributable event. The most common distributable event is termination of employment. Another is the termination of a plan (e.g., when a defined benefit plan is terminated, the participants can roll over their money to another plan). However, given that you cannot terminate 403(B) plans, the only regular distributable event to be able to move 403(B) money is termination of employment. If mbozak is correct, and there is a way to terminate these contracts, then there could be a rollover, but I don't think the law lists this as a distibutable event.