MGB

I was once an expert witness against J. Hancock on their market value adjustment of a group annuity contract. The methodology made sense (ratio of PVs of a stream of payments using two different interest rates). However, the methodology for determining the current "market" interest rate is where I went ballistic. They adjusted current rates for their future administration, expenses (e.g., amortized sales expenses), and profit. (E.g., instead of using 5% now, they would use 7%, or something similar.) The result of the market value adjustment was not only to cover them on having to liquidate invested bonds, but it also would immediately recoup all future amounts that they would have made off of the contract. This was detailed in the contract as purely a market value adjustment, not a surrender charge. Note that this was standard practice on hundreds of millions of dollars in J. Hancock contracts. (This was one of these cases where the "principle of the situation" was driving it, and not the money. The adjustment was $11,000, but the client spent many times that on attorneys and actuaries fighting it. He REALLY hated what the insurance company was trying to pull.)

I have no idea what this "agent" is doing (how many "consultants" are out there like this????), but I don't like it a bit. Don't they make movies of the week out of these types of financial "helpers"? Sorry, I don't know how to handle such a person legally. Actually, I thought I'd throw in another story (mid-season replacement while we wait for next season's continuation of the prior story). I worked for an insurance company in the early years. Although I wasn't there when this happened (it happened a few years earlier), the story was frightening even years later. No one at the company was a true pension actuary (this was before my boss and I were hired). When ERISA passed, you could become one of the initial Enrolled Actuaries in 1976 (around 1800 got in this way - most have since retired) by listing some experience somewhat related to pensions and answering some questions (kind of like a test, but much easier). This company had an actuary that had once worked for awhile in the group annuity department and was able to get his EA status in this initial group. However, he never worked with pensions going forward (he was actually a VP of marketing when this occurred), he just signed the Schedule B's for the insurance company's clients because they didn't have a true pension actuary. Because of his actual duties, he had to travel around the world (this was a very big international conglomerate insurance company). In order to get the Schedule B's signed while he was away, he just signed a stack of them that the administration department could use (he was never the one that entered any of the other information anyway). Well, of course, Murphy's law applied and obviously someone didn't understand the concept of a pre-signed form. Instead of filling in the rest of the Schedule B, they filed a bunch of them with the associated 5500s with only the signature. Needless to say, the IRS and Joint Board were not pleased. But then, this guy was actually and EA so there could be sanctions. If he had been faking his being an actuary, maybe nothing could have been done. P.S., I have heard Pippens and Holland say that they continually see Schedule B's signed by people that put into the EA number "applied for", or "studying to be one", and similar things like that.

Yes. See Q&A 39 of the 2004 ABA questions to the IRS at: http://www.abanet.org/jceb/agency.html They specify that the deemed distribution of the loan must occur prior to the date of the cashout for this to work. Presumably, this should have been a deemed distribution way back in 2001.

Note that what Pax posted is NOT the same as what the original question asked. But then, I suspect that the original question was asking for something different than what he really wanted. It sounds like what he wanted is what Pax posted. That is a mortality table from the IRS. It is NOT the GAR 94...it is DERIVED from it (removal of loads, projection to a date in the future, and blended sex). If you use a 50/50 blend of GAR 94 (as the original question asked), it would produce different results.

Out of your list, only recordkeeping fits in with a SAS 70 report. In the Academy Alert that I released a couple of weeks ago, I tried to make the case that SAS 70 reports are generally not applicable to actuarial valuations. Originally, the draft said outright that a SAS 70 report is inappropriate for actuarial services. However, after discussions with the committee, we decided to make a softer statement and concede that actuarial services at some firms could be a candidate for SAS 70 reports. We were thinking of situations where every actuarial valuation is done in the exact same way every time, such as what is seen with numerous insurance companies' or some small TPAs' administration of DB plans.

Isn't that what all exemptions are?

Our auditors, our clients, and their auditors agree...SAS 70 is required for pure TPA work (that is all we do and we spend a LOT on SAS 70 reports). There are a lot more applications of a SAS 70 report than tracking assets at a financial institution, especially now that Sarbanes-Oxley 404 requires controls to be audited for ANY outside servicer of records that could affect the plan sponsor's financial statements.

Bob, You are correct with respect to elective deferrals (the amount that a participant contributes on a pre-tax basis). That cannot be distributed while actively employed. This is the only "401(k) account". The plan is a profit sharing plan (there is no such thing as a 401(k) plan). The entire plan is not subject to the same rules that apply to the elective deferral portion of the plan. If the company makes a profit sharing contribution, it is not going into the "401(k) account", and therefore, is not limited to those rules. The law does allow in-service withdrawals of profit sharing contributions. However, as already noted, it is up to the specific plan document whether or not those amounts may be distributed while in service (they don't have to allow it and may restrict the distributions in the same manner as the 401(k) account). There may be other styles of restrictions in the plan, such as only allowing distributions after the contribution has been vested for a certain period of time (e.g., 2 years). The tax/withholding rules are the same whether the person is still employed or terminated.

There is nothing special about a SAS 70 report. It is just a single audit, with the results summarized into a report in such a way that the report can be handed out to multiple auditors looking for the same information. Doing a SAS 70 audit is one audit. Doing a single audit for each client is multiple audits. Normally, the SAS 70 audit is a cheaper way to go. However, that depends on how thorough the SAS 70 audit is in comparison to the single audits. Another big differential may be how much knowledge the individual audit firms have in auditing recordkeeping processes. Having someone not familiar trying to do an audit versus having someone audit you that is very familiar may be a huge differential in total cost.

The article is also completely irrelevant to the question at hand. (There is no such thing as a "Keogh plan". Congressman Keogh's legislation was prior to ERISA, which pretty much deleted the whole concept. The reference now just means that they are setting up a normal qualified plan.)

Here is a personal story of dealing with this: I submitted a check to RCA music (before they became BMG) along with the monthly card saying I didn't want any album from them. The check was actually made out to BofA and should have been put into the envelope for my car payment. RCA cashed the check and posted it to my account. They also sent me a nice thank you, but did not respond when I asked for the money back. When I received the cancelled check, I took it to my bank. They said it should never have been accepted by RCA's bank because it constituted a forgery by RCA. MY BANK (not RCA's) took the check, credited my account, and sent it back through the system to RCA's bank as a forgery that my bank would not accept. So, perhaps having the bank that cut the check deal with this will help, instead of the trust dealing with it directly.

Official numbers are not published until after the September CPI comes out (in October).

I presume the same problem can occur at the opposite end. If you are not disability insured, the SSA will not make a determination. And, if you are not financially needy, SSI will not cover. For example, during the 1990s I left the real world and went back to school for a PhD. Because I went so long without SS covered earnings, I lost my SS disability coverage. For the first couple of years back to work, I still was not covered by SS disability. If I had become disabled during that time, I presume COBRA would not have recognized it.

flogger, See the references earlier in the thread about the Mack Truck case. Refusing to hire because of cost of benefits is not age discrimination (at least the courts have so far said this). 510 is with respect to blocking a participant from exercising their rights under the plan. If you aren't hired, you have no new rights.

I can't imagine why there would be any limitation by the government. Why would they care? Eveything is based on annual amounts. The only issue is how easily the payroll and plan administration can handle frequent changes. I presume the plans you refer to that "penalize" a person for going to zero is because it causes such a problem that they want to strongly discourage it. (Our plan allows changes as often as you want, but each change is not effective until the payroll run after 30 days after submitting it.)

Well, there is an extremely small probability that a person will be a participant in two or more plans, with none of them having a catch up provision. So, this might have just been a mental exercise.

I wasn't convinced, so I did some more reading of the 414(v) regulations. My concern was for the situation where both plans did not allow catchups. (I would have thought that the person would be limited to the 402(g) limit in the aggregate and could not make catch-ups.) Does the fact that the plans do not allow catch-ups affect the definitions of "catch-up eligible participant" (i.e., if you are a participant in plans that do not allow catch-ups, are you still one of these?), and the definition of "applicable employer plan" (if it doesn't allow catch-ups, is it still one of these?). (Note that both of these terms are used in 1.402(g)-2(b) referenced earlier.) If either of these definitions are affected, then the person can only do the 402(g) limit in the aggregate. Well, I was surprised. The participant definition (1.414(v)-1(g)(3)) is not restricted to being a participant in plans that allow catch-ups. You only have to be over 50 and eligible to make elective deferrals. The applicable plan definition (1.414(v)-1(g)(1)) is only a list of the types of plans that can have catch-ups - they don't need to actually have them to be an applicable plan. So, now I am convinced. A person in two plans, both of which do not allow catchups, can still electively defer the 402(g) limit plus catch-up limit somehow allocated between the two plans as long as the 402(g) limit is not exceeded in either one.

Unfortunately, duh's response completely misses one very crutial issue: the risk of outliving your investments (although perhaps not an issue if you have lots of alternative resources). That should be the primary reason for purchasing an annuity. Although I haven't tried it, the following gives (I think) probability distributions of outliving your money: http://www.soa.org/ccm/content/areas-of-pr...lyzer-software/ Being an engineer, he ought to appreciate the significance of statistical distributions of his decisions.

It doesn't sound as clear to me as EM describes and I am guessing the plan document language is ambiguous.. That is where the question of discretion coming from. I am only guessing here, but here is a likely scenario. There are mergers/acquisitions that occurred over those years. There is a provision in the plan that those that were acquired during this period get some type of extra grandfathering (e.g., their old formula or ER subsidy on future accruals). There is now confusion over whether all people involved in these acquisitions get the extra benefit or if it is only those that entered at a certain point in time. The confusion (and need for discretion in interpretation) is probably arising out of ambiguous language. Ambiguous language should usually be settled in favor of the participants, particularly if they were led to believe they get extra benefits. Of course, the above is conjecture and more information is needed on the actual situation (what kind of communications occurred?) and what the plan document language says.

Before describing the rider, what is a "401(k) product"? It sounds like we are talking about a no-premium-payable rider to a whole life insurance policy in a DC plan.

Wendy, I agree with QDROphile, there is no requirement to have a suspension at 12 months, 6 months, etc. (EXCEPT for a safe harbor 401(k) plan). Using a suspension at all is an attempt to meet the safe harbor (not the same safe harbor as 401(k)) for determining if there is a substantial need. There are other ways to determine it without a suspension.

You are correct. Nothing in the law affects 2003 FSA entries.

No. You are being WAAAAYYYYY too specific. The periodic cost is an annual amount, pure and simple.

What do you mean reported? Reported where as what? It is a "journal" entry only.

Although further details are warranted, it sounds like two transactions: One a distribution, and second, a repayment to the plan under some agreement with the DOL for some type of misconduct. If that is the scenario, why wouldn't it be it a distribution? The fact that it is later distributed to another participant doesn't sound like it has any bearing.