Blinky the 3-eyed Fish

A transfer of benefits is going to warrant a 5310-A submission, so that probably isn't a viable option each occurance.

I guess I didn't understand this statement then. How are people gaining options when in fact they are losing the ability to choose different forms of benefit from either plan? Anyway, I see two options. 1. Hope this never becomes a problem and that people choose the same form of benefit. I suppose then you also need to hope that people under $5k in one plan and not in the other don't pose any problems. That though would depend on how the documents are written. 2. Get more flexible software.

At a minimum you should amend the options of each plans to match. Then at least you are operating the plan documents appropriately.

401(a)(17) is only prorated if the plan year is short. You are merely running a valuation in which you are assuming the person is retiring on his NRD. You are not assuming 2008 is going to be a short plan year. FWIW, a valuation is an estimate based on assumptions, so even the assumption that he will only earn 10 months of salary in the final year is far more specific than most actuaries or their software programs will assume. Most would assume a full year's pay.

As pax mentioned, you have issues with the plan being terminated at all. Read Rev. Rul. 89-87 and note that plan assets generally must be distributed within one year of the termination date. Extensions are considered for reasonable delay, but 6+ years!? If the IRS does consider the plan not terminated, you have a whole host of issues like the need for actuarial valuations and potential contributions since the termination (and I use that term loosely) and the need to update the plan document for law changes. I seriously hope the benefits were frozen along with the termination or you could also have additional accruals. If the plan was TH, you definitely have additional accruals. Now as for amending for GATT, while technically there's an anti-cutback exemption, I think you have issues because the benefits were probably not paid out timely. A participant could raise issue with an amendment now that reduces a lump sum that should have been paid years ago. The accrued benefits are definitely not reduced.

The FFC is not affected by the contribution made so your credit balance will be 40,000.

Of course you may be talking about the restriction on in-service 401(k) deferrals. 1.401(k)-1(d)(1) in older regs.

Dmb, I don't agree with the notion that self-employment income is earned 12/31, rather I think a reasonable determination of compensation should be made. Now while you could try and physically calculate the true earned income up to the date of termination, that very well may be impossible to determine. Instead a proration of the total year's income through the date of plan termination would seem to be reasonable to me. Of course then you won't have an earned income figure by the end of the year and won't be able to distribute possibly unless you can guess the income, run the valuation and have him contribute an amount that ends up satisfying the final valuation's minimum amount but is not over the maximum amount. Good luck if you want to guess on that.

Not legitimately.

The change in plan provisions can be handled many different ways, so it's a matter of the intent of the amendment and the current document provisions. Are you intending with wear-away or without wear-away (or with extended wear-away, but no one chooses that)? How is a year of benefit service credited? 1,000 hours? You just need to make sure that there is no 411(d)(6) violation. So for example if a year of benefit service is 1,000 hours and someone had compensation of $210,000 and 1,000 hours at 5/31, you would need to grandfather a whole year of benefit service and the full $210,000 to avoid a cutback.

Not only is there a way, but you are REQUIRED to after the last plan year ending in 1999. Now of course I think you mean something different. The document in question has PBGC rates for 417(e) and you want to know if they can be amended to the 30-year Treasury rate. While you are required to consider the 30-year Treasury rate, of course the PBGC rates will yield a higher lump sum and so the comparison is moot. So in short the answer is yes, the same anti-cutback waivers are available now versus then, you just need to amend the plan.

Correct, which is why if you are lowering the cash-out limit under § 411(a)(11)(D)in an attempt to avoid establishing IRA's, you should also include rollovers in the amount. I know for nearly all of our documents we excluded them with the EGTRRA amendment, so that will change.

LIBOR = litespeed? Anyway, I hope Tom's post may have cleared some things up because your last post shows a little uncertainty. For coverage this could be very easy to pass since you are aggregating the plans. You could give $1 to everyone in the PS plan and a huge benefit to everyone in the DB plan and this would pass coverage testing at 100% as everyone would benefit. But as pax said, you now have nondiscrimination concerns under 401(a)(4) because the level of benefits does not meet any safe harbor. That is why you certainly cannot have a "very minimal" profit sharing plan as Tom explains. General testing a DB plan and a DC plan is an advanced concept that requires a thorough knowledge of general testing as it specifically relates to DB plans. Having the plans administered by two separate parties adds to the difficulty. Good luck.

I like "if" because a plan can elect on whether or not to exclude the rollovers from the determination of the $5K, so it may or may not be excludable.

Yes, I didn't notice until you pointed it out you have pre-retirement mortality. Of course then for simplicity, you can use D(65 11/12)/D(66) instead of (1.055)^(1/12) * (lx at 65 11/12) / (lx at 66) or you could just use X * D(65 11/12)/N12(66)

Harold, do you know how to convert a lump sum amount to an annuity? If so, and it depends on a consistent methodology used, well then you have a new lump sum to convert every month the annuity is taken valued at the date in consideration. The offset is the sum of them. No time for actual numbers, but a quick example is if the guy is 65 11/12 when he took a monthly payment of X and now he is 66. Convert X to an annuity like this: X * (1.055) ^ (1/12) / (APR of UP 84 at age 66) = annuity value to subtract

The two plans are being aggregated for coverage so you need to aggregate them for nondiscrimination. The combined plans are certainly not a safe harbor and must be general tested as you have 24 people in the DC getting nothing in the DB. Additionally, the gateway rules will apply unless you can general test on a contributions basis.

Just change the cite to read: ...the portion of the distribution attributable to a rollover contribution counts for § 401(a)(31)(B) (over or under $1,000), even if you chose not to count it for determination of whether the present value of the nonforfeitable accrued benefit exceeds $5,000. There was another long thread on this subject if you want to search.

I missed this until now, but WDIK I am sorry for your demise much like mine.

Ashley, you are confusing two different occurances. Corrective distributions for say a failed ADP or ACP test are not eligible for rollover, but you would expect that or there wouldn't be any true penalty for the excess. Making a corrective contribution for a failure to make the TH correct the first time is completely different (it's not a distribution for one thing). When it comes time for a distribution, it certainly is eligible for rollover.

Mike, I have a much different read on that cite. It is describing when a plan is subject to needing to offer J&S not when spousal consent is required. You can be sure that if the plan offers J&S and you don't elect the J&S, you need spousal consent. Ritchie, I believe one of the rules for being exempt from providing annuities is that the spouse must be 100% beneficiary unless they waive. In fact here is the cite in Q&A - 3. (1) The plan provides that the participant's nonforfeitable accrued benefit is payable in full, upon the participant's death, to the participant's surviving spouse (unless the participant elects, with spousal consent that satisfies the requirements of section 417(a)(2), that such benefit be provided instead to a designated beneficiary);

The reason I don't like #1 is because you can get vastly different numbers based on a person terminating one day later than another. For example, when the premium is determined one person is terminated that day and one person is active, but ends up terminating the next day. Clearly the person who is active will have their premium determined as if she will continue that active status. In my little example assuming they are the same age with the same projected benefit, the person terminated would receive $5,537, while the person active for one more day will receive $7,226. That's flies in the face of fairness and logic.

I am a simple person so help me out Gary and pick from the above 1, 2 or 3, unless your version is something different. I could take your comment to mean 2 or 3. As for the other comments, assume no life insurance, assume the person is 100% vested, don't worry about the distribution options and thanks for the New Darth comment.

No, I haven't gone to the dark side, but I do have a curiousity question on how to fund terminated participants to comply with the level annual premium payment rules of a 412(i) plan. Let's say a person enters the plan, works 1,000 hours and then quits all in the same year. How would you fund his benefit in a 412(i) plan considering I can think of 3 possibilities? 1. His premium is based on his PVAB of the CSV at retirement and only one payment is made on the basis that he is no longer "participating" in the plan after the one year (i.e., funding the entire benefit in one year). Ex: CSV at NRA = 10,000; assume 3% guaranteed rate and 20 years to retirement so the PVAB = 5,537, so funding is 5,537 2. Project his benefit to NRA as if he is an active participant and fund the level premium for that year based on ILP method. No funding the next year since he's not active. Ex: Proj benefit CSV is 200,000 / Annuity factor of 27.6765 = 7,226 funding needed this one year. 3. His projected benefit is his accrued benefit. His projected CSV at NRA is funded for until NRA in level payments. Ex: Proj CSV = 10,000 / 27.6765 = 361 funding each year until retirement. So which would you choose and why?

Let me clarify my point. I was stating that the allocation of the QNEC does not necessarily need to be on 2004 compensation in a case like this. A cleverly drafted document could allocate the bottoms-up QNEC to the annual additions limitation, which here is based on 2005 compensation. I think you are saying it can't be done, but I would ask you why not? However, you may be saying that the ADP test is based on 2004 compensation, which of course I agree. I also agree that we aren't understanding each other.