MGB

I agree with Mike. The general default rule is a wearaway (as your calculations are doing); it takes additional affirmative language to create a fresh start adding two pieces together. Although there is no specific language concerning this amendment, the plan probably has a general statement somewhere in the plan following the language of 411(d)(6)(A), which is the basis for the default wearaway.

I agree they should not be used. The general idea is that, by law, the qualified J&S is supposed to be the most valuable form. Therefore, it must be used.

tshwab: I don't understand what guidance they are waiting for. It is very clear under the law that you cannot rollover the lump sum and that the plan can have installment payouts. The IRS is about to issue omnibus proposed regulations on all aspects of 457 plans...but there is no reason to wait for these. The rules that you are concerned with are very clear.

I am not sure how useful these listings are (I've never tried them), but they list real people with every section of the Code: http://www.tvalue.com/cgi-bin/irsp.dll?ReS...h=1&pb=1&nm=200 Alternatively, if there are any regulations, proposed regulations or other items (e.g., notices) associated with a subject, there is always a contact person listed. I've never dealt with Roths or IRAs, so I don't know what kind of pronouncements are out there.

Pardon my ignorance, but can you retain 404© protection for a subset of participants when you have lost it on others? If so, then the plan still has 404© protection with respect to those affirmatively electing investments, and the only problem is with respect to the auto enrollees. Right? Then, the only worry is to prudently invest the auto enrollees' money. I agree that money market, no risk investments do not fill this bill and that a well-diversified fund seems to be more prudent for the fiduciaries.

WendyCatherine, The reference that James III states above is from EGTRRA (EGTRRA is just an amendment to the Code...there is no separate language outside of the Code).

turbodiesel, In response to your original question (all of the replies have been off-topic), your understanding is correct. To transfer after-tax money to a qualified plan, it must be in a direct trustee-to-trustee transfer. Once the person gets their hands on the after-tax money, it can only be rolled over to an IRA. For an exhaustive discussion of all of EGTRRA's provisions, you can check out some things I wrote immediately after the law was passed (there are additional writings there concerning later guidance also - another one is about to be released covering many recent issues). The original writings are called "Legislative Information Bulletins." You can find them on our website under "Publications," then "Employee Benefits." http://www.milliman.com

mbozak, Your discussion implies that after-tax money that is eligible for rollover can somehow be transformed into pre-tax money. Given that it is impossible to do, your argument has no meaning. Obviously it is better to have pre-tax money instead of after-tax money. That is not the situation here. Here, the person already has after-tax money in an account. It doesn't make sense to take it out instead of rolling it over (assuming it is going to be used for retirement in either situation).

Actually, I have to agree with Wick (I was there, too) under certain circumstances. If a plan describes a limit in the same manner as the IRS (I don't have LRMs right here, but I think this is the way they do it), it will include language that the changes in limits are "as determined by the Commissioner" and given out in Notices, etc. If such language is in the plan, then all numbers freeze at 2001 levels. That does not mean that you "must" do this. Once you do not go with the current-law limits (for whatever reason), you have a plan-based limit that can be defined in any way you so choose. So, the plan can incorporate language describing the actual calculation and arrive at what the number would have been if the law had not changed. Now, in the case of nonconforming states, it depends on what their own law's language is. In this case, the plan language is irrelevant. Most states say that they follow the Code as of a specific date, such as 1/1/2000. The Code states that the adjustment is to be determined from regulations, but then goes on to say that the regulations should follow a certain methodology (third quarter, etc.), but does not give all of the details. To me, this is inconclusive as to whether the numbers can be determined from this language in 415(d) (most CPI adjustments all refer to this section), or if you must recognize regulation 1.415-5 where it says the "adjustment factor is to be determined by the Commissioner," in which case all numbers under the old law froze in 2001. I do not recall if it was on the boards here or if I heard it through ABC or another source, but someone called the California Tax Authority (or whatever it is called) and they are telling people the 402(g) limit for state purposes is $10,500.

It is a very broad reading. It doesn't make any difference if the former employees were ever in the plan, have benefits currently in the plan, etc. If a person had a million dollar salary 40 years ago and no one has been that high since, that person is still at the top of the high-25 group even if no longer around and even if he was never in the plan.

k man, The benefit formula can be changed at any time. It doesn't make any difference that he is retired. A bigger question though: If he is retired, who is the plan sponsor? Shouldn't there be an underlying business?

I agree with Mike P that you are mixing a general requirement (that the alternative forms must be at least the actuarial equivalent of the normal form) with language about actuarial equivalencies in the plan. The plan's definitions of the basis to use for actuarial equivalent is irrelevant to the general requirement. The bottom line is whether you could withstand scrutiny of the amount of the alternative form using reasonable assumptions in court. If UP84 (0,-3), 7.5% is reasonable, then discussion is over with. UP84 (-1,-1) never enters the analysis.

Thanks Appleby. More importantly, where did you get the electronic versions? These are typically only available to the press (e.g., BNA) on the day they go to the Federal Register. I think there is an agreement that they will not release them. Although I can get a hardcopy from the Federal Register office (I am in DC) and is what we always do, the electronic versions are usually never available until later. I'd love to know how to get them the same day.

Although you can have one, whether or not the contribution is tax deductible is dependent on your adjusted gross income. If your income is too high (different amounts depending on marital status and there are phase-ins that make some of it nondeductible), you can contribute the $3,000, but it will not be deductible (the earnings are still tax-deferred). In this case you are better off contributing to the Roth. However, if your income is very high, you cannot contribute to the Roth and only have the nondeductible IRA available.

Just to add to Mike's comment on BRFs: Assume that this is a plan with one very high paid person and the rest are low paid. The high paid dies under the "good" death benefits. A month later, the plan is amended to strip it down to the REA benefit. This would be a discriminatory timing of the amendment. I would also consider this a change that should be given a 204(h) notice ahead of time. I agree with the others it is permissable to cut back death benefits except the REA minimum. I would be cautious if there are life insurance contracts in the plan covering the former death benefits. Perhaps there are rights to be able to have these contracts that carte blanche terminating of them might not be appropriate.

"In addition, is there any way to freeze the plan for a certain period of time so that evenually the NFP will not have to make additional contributions? " Freezing does not reduce the level of contributions in the future to be less than what they would owe terminating it now. Actually, if all assumptions are realized, the amount of funding in the future will be greater (it increases each year by interest and mortality). The only way that putting off the funding will reduce the funding required is if the fund earns more during that time than the discount rates being used to compute the current values. (Or there are large gains such as deaths of participants with large benefits coming without large death benefits.) The biggest concern is whether your current underfunded status is being calculated with the same assumptions as the lump sums. If you are looking at unfunded based on an actuarial valuation using an interest rate higher than that used for lump sums, the actual amount required to terminate the plan might be much greater. A group annuity from an insurance company can be bought that allows lump sums in addition to annuities (insurance companies don't like to do this, but some will). They will price the entire contract as if everyone took the lump sum. This will actually cost more than the calculation in the prior paragraph because there needs to be administrative costs and profit added on top of the lump sum calculations. Therefore, offering the lump sums to participants upon termination of the plan (they can roll over) is typically less costly than transferring these to an insurance company.

Trustee-to-trustee transfers under 457(e)(17) are ONLY to defined benefit plans to purchase service credit. That is not what the original question referred to. Transfers to 403(B) or IRA are expansions to allowable plans in which a rollover may be sent. All typical rollover rules apply here including the need to have a distributable event.

Updated through 3/8/02 (as states introduce or pass new legislation, it is updated): http://www.americanbenefitscouncil.org/iss...stateupdate.htm Or, go to their site (www.americanbenefitscouncil.org), click on issues on the left, then retirement, then state issues. That page has a link to this document along with other specific documents on individual state updates as they occur.

In addition to "higher skilled trades," there are unionized workers in many high-paying professions (some of these are ALL over $85,000): -professional sports players, -airline pilots, -private school professors, -white collar workers (e.g., insurance companies with everyone unionized except for the very highest executives), -etc.

Note that if you do give them 5500s, not all of the schedules are public information and should not be copied, particularly any that include individual information (such as the SSA).

Under JCWAA, you can now give the participant their 1099-R electronically, too (must have an affirmative election by the participant to receive it this way). This is effective with tax years ending after JCWAA (i.e., the 1099-R being filed after the end of 2002).

What do you mean by terminated? (How can there still be assets?) Do you have a date of termination? This will make a difference in applying EGTRRA. What parts of EGTRRA are you referring to? Was this under 100 participants and not able to use unfunded current liability in the past?

I think we need to be a little more careful than pax's comments about the IRS. I agree that 401(a)(17) is not supposed to be incorporated by reference. However, since EGTRRA, I've been bombarded with the reality that a large percentage of plans do have this reference. I don't think it makes any difference that the IRS does not view this as an appropriate reference. First, they have been allowing it in their determination letter process for many years (they wouldn't have allowed it in the 80s, but got very lax on it in the 90s). Second, I would be more concerned with the language of the plan than what the IRS thinks. It is the language of the plan that would be brought into court, with the IRS as just another interested party that may or may not chime in. So, my concern centers on just what the language says. For example, if it says that the limit used is the highest allowable under 401(a)(17), then you may have an automatic retroactive pop-up, in my opinion. The next concern is when this occurs. This is going to depend on the structure of the plan's formula and tie-in with maximum references in the plan. Under some plans, this occurred on January 1 and is now an anti-cutback issue, while under other plans it does not occur until a year of service is performed in 2002. Again, this will take careful review of the language of each plan. I don't think there is an across-the-board statement that can be made about all plans. As soon as possible (should have been before the 2002 plan year), the plan should be amended to clarify what such reference means. If the plan does not incorporate 401(a)(17) by reference, then you have until the end of the 2002 plan year to adopt a good-faith amendment stating the intentions (DON'T do it by just incorporating 401(a)(17) - that is ambiguous).

Yes. (If I remember right, I believe the notice even says so.)

http://www.ifebp.org/cebs/usprogram.asp They do not have an online membership directory, but you can contact them from the above website. As Stephen says, there is a printed copy of the membership directory that all members of ISCEBS receives. (ISCEBS is the International Society of CEBS. If they received the CEBS designation, but does not keep up their membership, I assume they would not be listed in the membership directory. Therefore, someone may have passed all of the exams, but is not a current "CEBS."