Blinky the 3-eyed Fish

What requirement is there that all beneficiaries must be treated equally? A beneficiary of an NHCE may be able to withdraw funds, while a beneficiary of a restricted HCE may not. A death benefit to the beneficiary of restricted HCE would be subject to the same restrictions. A QDRO cannot force a plan to operate outside of it's terms. As the IRS has stated, the restrictions apply, therefore a failure to comply would both be a violation of 401(a)(4) and also a failure to follow the plan document. I do think the plan most assuredly can and must impute the restrictions. I think your cite more applies to the ability to distribute 401(k) or pension monies prior to their otherwise availability. I think it's a stretch to apply that to QDRO's in this case considering the intent of the rule, an intent that the IRS confirms with the answers given.

You are getting some issues confused. The 7.5% - 8.5% interest rate requirement is the range required for general testing. An age-weighted DC plan that converts contributions using a interest rate within this range and a standard mortality table will pass general testing automatically (i.e. a psuedo safe harbor). However, there is no such requirement for a safe harbor integrated DB plan. Read 401(l).

Logically, in thinking about the intent of the restriction, it is to not leave NHCE's in a lurch should the plan discontinue and be underfunded. Paying out a portion of the restricted HCE's benefit in excess of the restricted amount for any reason would serve to violate the intent of the rule. So there's the logical answer. I have no experience to whether it is correct or not.

Ah, that's clearer.

Bad law? Why? A law that allows the plan to be brought up to full funding in a given year is bad? A law that gives the flexibility to fund more in good years is bad? It's always been available for plans with over 100 participants, so is it bad for them or is it just bad for plan with under 100 people? Proposed changes to pension plans would allow for MORE funding in good years, so that the underfunded problems we are seeing wouldn't be so prevalent. Still bad law? And because it's bad, the actuary should change assumptions like lowering the interest rate to less than 5% or creating an artificially high mortality? IMHO, it's anything but a bad law. I am really curious why you think so.

There is the unfunded current liability deduction under 404(a)(1)(D). Under PFEA you can still use the lowest rate under the old range, i.e. 4.59% for a 1/1/2005 valuation for valuing RPA CL for this purpose. That should allow your deductible contribution to be above the $30,000 range. If this were a PBGC covered plan, then the unfunded liabilities replace the UCL in the year of term. Obviously, extraneous information that doesn't apply here. (Edited since I put the wrong interest rate.)

However, as perhaps others have discovered, the DOL has been contacting plan sponsors who marked "yes" to 4a and asked that they "volunteer" to go under the VFCP program. I believe this is a new initiative, so I don't know the ramifications of declining their invitation, like perhaps an audit. I also don't know what percentage of people are being contacted who marked "yes".

I actually had this same situation not too long ago. The participant was to roll over his distribution into an IRA and then take a distribution to pay back the embezzled funds. While I knew of the arrangement, I didn't feel particularly "involved" enough to warrant legal advice. The participant signed the distribution election forms and returned them to me while not being flanked by 2 large gentlemen, i.e. he acted of his own free will. He will then have to initiate the distribution from his IRA of his own free will. I think avoidance of jail time is affecting his decision to comply. I may be naive, but I didn't feel that I was at any risk. I was just complying with the distribution request. Whatever they did after that was neither my concern nor under my influence.

It is under the prior benefits structure test and its optional to exlude them or not. Now the question would be why someone would choose to exclude someone with benefit if they are trying to pass (a)(26)? I suppose if the benefits accrued by this person were not considered "meaningful" then excluding them would help the test. Anyway, you appear to be testing current accruals, so no she is not excludable.

I can't think of a circumstance that would require a new plan, including a new EIN.

Don't you have revenge to muster against that shark?

I fail to see how the issuer is going to have any knowledge whatsoever of the status of the plan, nor how it could possibly escheat to the state. I also fail to see how ACATing the distribution to a brokerage account versus taking the stock certificate is any different in the eyes of the issuer. It still is now owned by someone other than the plan. What's the difference? They still would show the owner as the plan unless the $150 was paid.

When something is worth $20,000 and the registration fee is $150 that is one thing. When the thing is worth $10, that is an entirely different story. There may be no inevitability here since the item will most likely become worthless. Even if the thing skyrockets to millions, that paper trail is clear that is was a distributed asset, so there will not be adverse tax consequences. The day I spend $150 on a $10 investment is the day someone needs to shake me violently. Also the day I pay a $100 commission to sell a $10 asset should result in the same punishment.

I think you have circumstances that show the doctor took the stock as a personal taxable distribution and the t's weren't crossed due to the large fees. I don't see it as an issue.

Well one of the components of the 415 limit is 100% of pay. If they had no pay, then no way!

While I agree that you can use age 65 for testing for the reasons you describe, be careful that you don't have any BRF issues with differing retirement ages. If for example, a much higher percentage of NHCE's had larger benefits in the DB plan, the fact that they have to wait until 65 to receive a distribution could be an issue. Now generally the opposite is true and more HCE's get higher benefits in the DB, so you may be okay. Just keep it in mind. Of course amending to 62 makes everything all warm and fuzzy.

Kirk, I think your reply button is stuck. You keep coming up with the same answer. BTW, I liked the response with the bolding. I was more becoming to my eyes.

I am getting some magic beans.

No Ritchie, I don't use Datair, but I do have a somewhat foolproof method. What I try to do is understand the concepts that apply to what I am doing before I do it. Carol, as was pointed out the last time you posted on top heavy 412(i) plans, what you typed makes no sense whatsoever. How can a software program grant top heavy benefits? You need to either have a formula that satisfies the top heavy and the premium is deposited into the insurance contract or you need to make the deposit into a side fund, which requires a Schedule B. What you cannot do is grant benefits on paper and call it a day. A good percentage of 412(i) plans are going to be audited. I fear that harm will befall both your firm and your clients.

I have concerns about this amendment. At the point in time the amendment becomes effective the participants CB is converted to an AB using the S&P rate. At the next instant the CB is converted using the lower 417(e) rate. The reduction in the AB and subsequent reduction in the lump sum seems like a 411(d)(6) violation to me. To my knowledge the IRS has not backed off the whipsaw issue.

Help me understand the question. Did the actuary perform a projected valuation and then a final valuation and that is why the funding differed? The rule to eliminate excise tax that you are thinking of is 4972©(7). It doesn't apply here unless you are worried about the deduction under 404(a)(7). If they made the deposit during the year and it is greater than the maximum deductible contribution, there is a 10% excise tax. As for the corporate return, they are limited to contributing and deducting the maximum deductible contribution. It really sounds like you and the actuary need a pow wow.

It also does not apply to plans which are not covered by the PBGC. While technically a waiver of benefits upon plan termination is not on the IRS approved list, they certainly will not challenge it for a plan that is not covered by the PBGC. While I agree that this actuary is incorrect in reducing benefits for funding, upon whose shoulders is the ultimate responsibility placed? The actuary is the one certifying to the numbers, so upon plan audit it would be his error. Any detriment to the client could be recouped by suing the actuary, at least I would think so. Personally, I never want to go through the experience to know for sure. Bad actuaries, like bad chicken, mess you up!

§1.415-6(b)(7)(ii).

If the yacht fits... http://benefitslink.com/boards/index.php?s...=28211&hl=yacht

I agree with pax. Read Rev. Proc. 2000-40 for a description on what causes a reduction in the assets for the IA funding method. It is just talking about 412.