Blinky the 3-eyed Fish

I don't mean to be rude, but how did you operate the DB plan if you or people in your office do not know the workings of 417(e)? I would consult with the actuary that signed the schedule B's, because I don't think this is a question that necessarily can be answered simply. If there is no luck there, perhaps you could post the actual questions the IRS is asking.

I thought I had read something, proposed regs maybe, that said the IRS was putting a definition to meaningful benefits to be at least 0.5% of compensation, but now I can't find where I read that? Can anybody help me reaffirm I didn't just dream this?

You might also be thinking of Safe Harbor 401(k) Plans, which are exempt from the top heavy provisions if only the safe-harbor nonelective or safe harbor match is provided.

Meaningful benefits are referenced in 1.401(a)(26)-3©(2). As for your question, the requirements of 401(a)(26) for the DB plan would not hinge on the DC plan in any way, even if it meant lower DC balances. The IRS would be concerned solely with whether the appropriate number of employees are receiving meaningful benefits in the DB plan.

Mbozek, it is common for loans in a DB plan to be collateralized based on a participant's present value of accrued benefit. I see no reason for the need to sue the participant, just offset the future annuity payments like b2kates said.

MGB and pax, the logic of what you are saying makes perfect sense, but goes against how I was trained. It's like being told the Earth is flat, only to find out otherwise. Another question, if you were to compute the dollar limitation past 65, what would be your methodology, with N's or a's?

I am trying to use this as a learning experience, so please tell me what is wrong with this logic. Here is a numerical example to illustrate what I was saying in my last post. I will use the dates in the previous example, but just assume the payments were made annually for simplicity Age 3/1/01 - 65 APR 65 - 11.992321 (83 GAM Unisex, annual payments) APR 66 - 11.674182 Interest Rate - 5% Benefit at 3/1/01 increased to 3/1/02 (3,000) * 11.992321/11.674182 * 1.05 = 3,235.84 Benefit paid at 3/1/01 (3,000 / 11.992321) = 250.16 Actuarial Increase of benefit paid to 3/1/02 250.16 * 11.992321/11.674182 * 1.05 = 269.83 Net benefit = 3,235.84 - 269.83 = 2,966.01 Therefore, 3,000 benefit still paid at 3/1/02 is worth more than 2,966.01 and the difference is the probability of dying while age 65. (1 - (2,966.01/3,000) = .01133 By the way, the Jordan book is 2 feet from me and is still on the reading list for the enrolled actuary exams. So, while us newer actuaries don't have to deal with commutation functions nearly as frequently as before, hope is not lost, because they must still be learned.

Oops, looks like I didn't read the language provided by Mike very carefully. I agree with MGB's statement. As far as the mathematical fact, I am not sure that is entirely correct because of the fact the person did not die. An annuity amount payable at n would be less valuable than the same benefit annuity amount at n+1 plus the money received for the year. But it's late, and I could just be loopy.

Mike, you will take the value of the accrued benefit at 2/28/01 ($3,000) and actuarially increase that to 2/28/02. Compare that to his accrued benefit under the plan benefit formula at 2/28/02 and take the greater value. Then subtract off the actuarial equivalent value of the distributions already taken. The net result is your accrued benefit at 2/28/02 (3/1/02).

I have now concluded that everyone agrees with Doug. All hail Doug!

Mike, what are the provisions in the document regarding the benefit for working past normal retirement? Most plans we have give the participant the greater of the prior year's benefit actuarially increased to the next year or the benefit under the plan. If you provide that information, I or someone else can chime in on the calculation methodology. I would suspect the document is silent regarding the specifics of the calculation.

AdminFL, your point is one of much debate. I, however, do think you can remove the last day for the simple fact is you could designate it an -11(g) amendment.

It is.

Advising clients to legitamately hire a spouse or child is common plan design advice as it can always help the testing to have HCE's with no or limited accruals.

You ask is testing the plans together the correct thing to do. My answer is maybe. It would be allowable, but the testing results may be worse than if they were tested separately. I don't know the situation. As for your other question, I will answer it with a rhetorical question. How many plans are there?

You say that you are led to believe the SSN is bad, but you are not 100% absotively posilutely. I would choose the 100% withholding option. That way at least there is a chance the participant will get the benefits of the money. If you follow mbozek's advice, the participant is guaranteed to get nothing and you are operating the plan outside of the document.

Pat, the answer to your question is no. An in-service withdrawal is not part of the items that can be operated outside the provisions of the document during the remedial amendment period.

If it's that urgent, try dialing 911. But when you tell them your name, leave off the credentials. I have found that the emergency operators do not care.

RCK, yes, you can test differently from year to year.

See a prior discussion on this topic: http://benefitslink.com/boards/index.php?showtopic=7063

Doug, thanks for responding. I am hoping others will take the time, even if it's to confirm they agree with Doug.

Your solution is solved from the old plan in that distributions were made. The problem comes now from the new plan, where they have rollover monies that were ineligible. Thus contact the new plan's administrator and explain the situation. If he doesn't comply by making the distribution, then it's his problem now, not yours.

In running the average benefits test to determine if the plan passes coverage, I know there are three options: use the current year benefit percentage, the current and prior year's average of the benefit percentages or the current and prior 2 years' average of the benefit percentages. My question is in determining the last two options, do you use the participants in each year or only the participants in the current year. I would suspect the later since coverage is a plan year thing.

I am curious how the actuaries and defined benefit mainstays out there would calculate the most valuable accrual rate using the plan year testing method for a general tested plan. Details: Testing age and normal retirement age is 65 Normal form of benefit is single life annuity Optional form is a joint & 50% survivor annuity Actuarial Equivalents are 6% post/pre and 83 GAM Unisex Testing Assumptions are 8.5% interest and 83 GAM Unisex Compensation is $100,000 Benefit accrued during the year is $500 sla annuity paid monthly Attained age is 50 I know you will have to break out the calculators and purchase rates, so I appreciate any input. Let me know if I forgot anything.

When was the actual demutualization? If it's before 10/1, I would say you have a very good argument to treat the check as a receivable. If it's after 10/1, I would say your argument is weak.