MGB

You may find that the plan only allows distribution requests like this once per quarter or once per year. Has the person asked the plan administrator why the delay? They may be able to tell you that it is normal procedures.

Also note this is why there is a box on the W-2 showing the amount deferred by the individual. One of the checks that the IRS does is to add together these figures across all W-2s to verify the total from multiple employments does not exceed the limit. Also note this rule applies equally whether the multiple employers are consecutive (e.g., quit one mid-year and then go to a new employer) or at the same time (e.g., a full-time job and a part-time job at night).

Watch the new JOBS bill (also referred to as ETI). Congress is completely changing the rules on this. Under the new rules, the distribution option must be selected the year before the compensation is earned and deferred.

They've been asked in writing, but have not provided any official (or unofficial) guidance. However, those that have spoken with them have gotten the impression that they agree there is no link between max and min rates once this election is made.

Also note that there is a letter ruling (fairly old, if I remember correctly) that states including ERISA language in a plan does not invoke an ERISA election. For example, if a church plan adopts a prototype, it certainly must follow the terms of the plan. But, where ever an outside interpretation of an ERISA provision is necessary, there is no need to look to regulations. And, if ERISA is amended, it doesn't automatically apply. In this situation, the ERISA provisions would be revocable.

They passed it (with modifications, such as a 6/3/04 effective date). It now sits until the House and Senate appoint conferees for a conference to match up the two bills into one.

(I don't have model notices, sorry.) With regard to your statement "October 1" will be here before you know it...these notices need to be provided 30 to 90 days before the distribution. The effective date is distributions on or after October 1. So, yes, JULY 3 will be here before you know it. (There is a VERY high probability that some of this regulation will be delayed. However, any comparison between a lump sum and the QJ&S will probably not be delayed.)

Does anyone know of a website with old Federal Register pages? The official government site only goes back to 1994. I am looking for something from the late 1980s (volume 53).

The point is to be able to contribute more than what the corporate bond calculations would allow.

It also says that a plan sponsor can elect to ignore these temporary corporate bond rates and use the existing law for purposes of calculations under 404 (max).

Do you have a link to an electronic version of this?

What was being applauded was the original suggestion by ASPA, which is not what ended up in the law. They (and others) wanted to remove all references to floating assumptions and lock in a fixed table based on 5.5%. The fact that some calculations may end up slightly smaller was offset by the added simplicity and communicability of a fixed maximum at each age. Unfortunately, the message was garbled by the time it became statutory language and what is in the law is not what was lobbied for. Even stranger, all of this was pointed out to Congress prior to passage, but they refused to change the errant language.

The "problem" with the language is that it is missing an actuarial phrase: "present value". To be an incidental benefit, it must not be worth (in present value terms) more than the retirement benefit. That is where the 50% comes in. If it is more than 50%, then it is worth more than the retirement benefit (which is the rest of the 100%). By leaving out the "present value" phrase, this sentence is nonsense and not related to law, or at least the IRS's interpretation of what incidental is. However, having said that, there is legislative history that tried to explain that incidental was in terms of "expected payments", rather than present value, but the language in the plan isn't exactly the same as this description, either. The following is from the conference report to TEFRA: “As under present law, the required distributions must be made in such a manner that more than 50 percent of the total benefits for the employee are payable to the employee over the employee’s life expectancy (or the joint life expectancy of the employee and the employee’s spouse).” I presume this is where your plan's language might have originated from. It is also not clear in the last phrase of the plan's language "total benefit being paid to the participant", that this must refer to the entire benefit, including the survivor portion.

They were effectively withdrawn at the beginning of the year when the Treasury Department was denied funds in their appropriations bill to continue any work on them. These regulations covered a LOT more than cash balance issues. This is the entire section on how to accrue benefits after normal retirement age. There is still the outstanding proposed regulations from 1989 that continue to be the guidance that should be followed and relied upon (the proposed regulations in 2002 that were withdrawn could not be relied upon and did not negate the 1989 proposed regulations).

What kind of leave? The IRS is taking the position (actually goes back to some guidance they gave 40 years ago) that "gross ups" to full compensation for employees that are called in to active service is NOT compensation because there was a termination of employment when they were called up. However, they are looking at possibly reversing that stance in new guidance. Currently, you cannot defer out of this pay, although "everyone" does.

It is known as the "90CM" table, prescribed by regulation 20.2031-7. Actually, this is the right forum. Every actuary should have access to this if they ever work on contributory plans that offer partial lump sums. For example, if a participant is allowed to withdraw their after-tax employee contributions (a partial lump sum), the question is, "how much of that is taxable under the pro rata rules of TRA 86?" In Notice 87-13, Q&A 11, the IRS decided that this obscure table is the one that should be used to calculate the total value of the accrued benefit in order to apply the pro rata withdrawal rules. Unfortunately, there are probably fewer than two or three of us in the country that know where to find this table. But that doesn't stop the IRS from making use of it. 90CM_estate.xls

The payouts should be EXACTLY as you are valuing them in your assumptions. Using a single life annuity for a future decrement is incorrect if you have assumptions that they will take another form (either some or all of the time). For example: Each year for the next five years, you have assumptions about the probability that a person will retire without staying active after five years. In each of those years, you have probabilities of each form of payment. For one decrement in the future, let's say you are assuming 50% take a lump sum of X and the other 50% take a single life annuity of X/12 per year. In the first year after decrement, the benefit payout projection is (prob. of living until decrement)*(.5*X + .5*X/12). For every year thereafter, the benefit payout projection is (prob. of living to decrement)*(prob. of living to each benefit payment age)*.5*X/12. These are then each multiplied by the probability of decrement and summed over all five possible decrement dates. This is straight-forward actuarial mathematics. The more complicated your PV assumptions, the more complicated this is. By the way, the Board feels that if you are not doing this in your valuation system already, then you are not applying SFAS 87 correctly, given that you must recognize the time to each payment in determining the discount for every cash flow in the future. Using commutation functions or PV factors with one discount rate is not following the rules correctly, according to the Board. Therefore, they saw this as a simple piece of information already available and no new programming should be needed, except perhaps to capture a summation of each future possible cash flow.

I would not be so quick to label it either an age discrimination nor BRFs needing testing (although both issues, may, in fact be a problem). Taking a step back a moment, let's first set the ground rule that the only mortality table that truly represents expectations is a fully-projected generational mortality table. In other words, a person age 65 tomorrow has a lower probability of death than a person age 65 today. That observance has not changed throughout history and is expected to continue in the future (of course, at what rate these mortality rates change over time is open to argument). What you describe here is a simplified version of that with only a few steps instead of a step for every age. Would the use of a fully-projected generational table create the same question? Or, because of various laws are we locked in to having the same conversion rates for everyone, with the only ability to recognize increased longevity being through an amendment to the plan's factors every few years? Off the cuff, I am not sure of the answer to this. But, that needs to be answered before looking at situations like this one that are in-between one-size-fits-all factors (like most use) and a true mortality table.

Doing searches on any of the following topics (either within the above references or elsewhere) would provide a significant amount of information on "paradigm shifts" (I really hate using that phrase, but it fits here) occurring in benefits. Benefits for spouses of same sex marriages and/or domestic partners. Phased retirement (how can the benefits be arranged for people that step down in hours over time?). Replacement of traditional plans with cash balance plans at many of the major employers (Watson Wyatt just produced a significant paper on this trend). Consumer-directed health plans (covers many aspects such as Health Savings Accounts; mainly means that the individual has more responsibility in the choices in the marketplace for care and the prices paid). Disease management arrangements (i.e., managing the entire health process through one person, rather than paying for care through multiple channels without any coordination). Although not considerd a "benefit" in the historical use of the term, there are a variety of workforce-related changes that an individual would see as a benefit. For example, flexible work hours (particularly for family members), telecommuting, "banks" of time off instead of rigid structures of vacation time versus sick time, and other related issues. As a plug (these are produced by my department), you may want to look at the articles over the past couple of years in our publication "Benefits Perspectives": http://www.milliman.com/eb/publications/be...s_perspectives/

Your question has nothing to do with a partial plan termination. Your real issue here is the procedures needed to be followed in distributing benefits to a terminated participant. What does the plan say (e.g., as soon as administratively reasonable, or some stated time limit?)? What is in writing outside of the plan concerning administrative procedures? There should be no reason why all need to be processed at exactly the same time unless you are under some time limit on all individual terminations. The partial plan termination has no effect on this issue.

Caution to anyone replying: Do not post rates here, they are copyrighted. The links that Pax described have agreements with Moody's to distribute only certain rates in a very limited manner (and is why you have to go through the "agreement section" stating you will not share them on the SOA site to be able to see them). To my knowledge, the Aa monthly averages (or daily rates) are not available in the public domain. However, you can personally go to Moody's site every day and retrieve the daily Aa rate (I actually do this), but need a subscription ($8000/yr.) to be able to directly access historical rates.

I would take that a step further...not "could be", but "is".

What about doing something non-fee oriented? Such as restricting the ability to change something for some period of time after doing this.

It is my understanding that (3) is not allowed. This is the major change from old regulations, although the IRS claims that it was never allowed. Item (2) is only allowed if the plan has a fixed-payout option (no life contingencies), and the participant elects that option. The $10,000 becomes irrelevant here. The amount of the annual payment is whatever the plan says is the correct amount under the conversion factors for that alternative form. The PVAB and life expectancy tables should never enter the calculation, other than to frame the allowable alternative form that is stated in the plan. When the minimum distribution kicks in, the participant elects a form of distribution. That form stays in effect in the future, including at actual retirement.

mbozek, I have a hard time digesting your statement about layoffs due to downturns. (When else would you lay people off?) Do you have any cite for that interpretation?