Blinky the 3-eyed Fish

I have found that the quality and correctness of answers to questions at the PBGC depends entirely on with whom you speak. If you want to put him/her on the spot, ask him on what authority he has to make this decision. Otherwise, just file the letter to the coverage department. If the plan becomes covered again, then start filing the PBGC forms again.

I have had no problems with the PBGC recognizing that a plan can become uncovered. Just mail a letter to the coverage determination address on the instructions and you will hear back, although I have noticed they have begun asking more questions recently.

Well said. P.S. Andy, I have you by 3 posts. Get busy.

I mean in a DB plan a participant doesn't forfeit their unvested accrued benefit after 5 BIS, while a DC plan can (and most often does) have this rule.

You have a clear failure to operate the plan according to its terms, and so you need to get the client to have some interaction with the IRS. Read Rev. Proc. 2003-44 to see how.

Why do you find this peculiar? My understanding is that the 100% vesting is to apply to those that haven't forfeited their balances in a DC plan. Those who still have balances in a DC plan don't forfeit until 5 BIS, hence the 5-year window. If the plan has a 0% cash out rule, then upon termination, a 0% vested participant will forfeit their balance immediately. Now for DB plans, they are informally treated in a like manner to DC plans even though there isn't the 5-year BIS forfeiture rule. It all seems consistent to me. Also, in response to your question mwyatt, yes, a DL was filed for. This person was included on the schedule as someone who terminated with less than 100% vesting, but his distribution information was left blank in the attachment because he hadn't received it yet. We will see if that combination gets questioned.

I ended up telling the client in so many words that you can take my advice or not, but don't come crying to me if it's discovered upon audit.

Veba, why do you go against the 98 Q&A and hold the position that a dormant or shell corporation may not sponsor a qualified plan? You give 2 fine options, but if it were that easy then of course these situations would be unnecessary. I would suspect the most common situation for continuing a qualified plan versus simply rolling over the funds into an IRA is that the assets held in the plan cannot be held in an IRA or the cost of the custodial fees precludes it.

A participant terminates 12/31/01 and the plan eventually terminates 12/31/03. He was 20% vested upon termination and his vested benefit was only worth a few hundred dollars. He didn't respond to attempts to pay him out (in hindsight it appears the client may have had a bad address), so he was cashed out. However, the check came back for a bad address and he was never paid out. The plan termination came and he is suddenly 100% vested. Does anyone know of a precedent in this situation that would allow for the client to argue he still should only be paid his 20% vested amount?

I apologize in advance that this is so far off the topic. Mwyatt, being he's an actuary, I can't imagine Jim Holland making the statement that 0/0 = 100%. I do understand that they clarified the 4a entry on the Sch B, but that was not to make a statement that 0/0 =100%, but rather to concede to an entry that is reasonable and that indicates no 412(m) charges are required.

If a math professor saw this statement, he would cry.

Your summation of my comments is incorrect. Try again and cease with the moxy.

It should be clear in the adoption agreement or supporting plan document what the period of service is that needs to be completed. If not, then QDROphile can chime in on what he thinks of your document. Perhaps someone familiar with this doc can assist where to look.

Is that definition clear to you? If not, as jquazza said, you need to interpret it and you may want to consider adopting an amendment that clarifies its meaning so you don't have these questions. How was it interpreted in the past? Your interpretation should probably be in line with past operations.

For what purpose are you attempting to define "owner-employee"?

This question has been asked before if you want to search for it and some people gave opinions different from mine. My take on the matter is that it is not a 12/31 valuation date, but rather an end-of-the-year valuation date. Thus, your valuation date in this case is 10/31/03. In these cases, I have valued the plan the instant before the distributions to avoid showing no assets and minimal or no liabilities on the Sch B. Sometimes there are required contributions in this case, which means that it may work out that a subsequent contribution is made to the trust and distributed out after 10/31. This of course means the actual plan year end is after 10/31. There is no good solution in this case, because if you now do the valuation at the actual plan year-end then you have a whole circular calculation going, so I stick with the 10/31 calculations. Now in your case, you must be confident that no contribution is due, since you state that the plan year completed 10/31 and you haven't even run the valuation yet. If the plan is that fully funded, you may want to consider a change to a BOY valuation date according to Rev. Proc. 2000-40. All this complexity of course means that I try to anticipate these situations and switch to a BOY valuation the year before the year of termination. Of course, this isn't always possible.

What about an IRS submission? Please. We all know that the client will sign what is put in front on him in all but the very large plan world and the very few clients that actually read what they are signing. In no way should the trustee be blamed for not trudging through 100 pages of nonsensical drivel. (That description of the plan document is what anyone not in this business would think.) Anyway, in this case, the first post said it was discussed with the client's management. Mbozek, I think the IRS' stance has been consistent that an amendment is not available in this situation. I am not familar with the case quoted, and not being a lawyer, I am unsure of it's impact on other clients.

(iv) Special Rule For Terminating Plans.-- In the case of a plan which, subject to section 4041 of the Employee Retirement Income Security Act of 1974, terminates during the plan year, clause (i) shall be applied by substituting for unfunded current liability the amount required to make the plan sufficient for benefit liabilities (within the meaning of section 4041(d) of such Act). Here is the cite. MGB, can you explain then the first reference to 4041 in the cite? What is the meaning of this? Specifically, what was the change in the heading that Congress made? Was it more than Pax's version as referenced in the link in my prior post where it used to say "professional service employers"?

Flosfur, just to clarify, you are correct that using the annuity method will cause minimum distributions to increase versus the account balance method. But reread your statement again. You were questioning the comparability of the account balance method for DB plans versus DC plans. I now know you meant not to make that comparison, but were merely pointing out how the new rules will negatively impact DB plans.

I think it is available to only PBGC covered plans. Andy, what is your reason for saying it's definitely available to all plans? Here is a prior discussion. http://benefitslink.com/boards/index.php?s...5&st=15&hl=pbgc

1. You don't provide the ownership percentages of the other companies only that one of the companies is 100% owned by a trust. That information is needed as well as the beneficiaries of the trust and their share of the trust. 2. The beneficiaries are attributed ownership of the trust. There are some more specific rules though depending on the type of trust.

It's a moot point either way. Whether or not the TH minimum is provided to keys or non-keys only is irrelevant. Keep in mind that the TH minimum is the lesser of the highest key's rate or 3%. If they don't make a contribution, then the highest key's rate is 0%. This, of course, is assuming the participants aren't making salary deferrals, which would be pointless in this type of plan arrangement.

I agree with the above. 404(a)(1)(D)(iv) is definitely not an all or nothing deduction, but rather a replacement of the UCL deduction for PBGC covered plans in the year of termination that is calculating the maximum allowable deduction. Also, the PBGC waiver has no effect on funding - EVER.

Why wouldn't the calcs yield the same figure DB vs. DC? P.S. If the account balance method is not available, then I will give you my account balance.

I know I didn't say that you didn't have to pay close attention to it, and if I may be so bold, neither did Tom. There is no disagreement here. Conclusion: know the rule and pay attention to the rule. The rule will have little impact, but that doesn't mean you ignore the rule. In other words, don't forget the rule (i.e. remember the rule). What I am trying to say is that when you learn some new information and feel you must purge some already-gained knowledge, then this rule is not something to purge. Instead maybe purge the number of career home runs of Reggie Jackson.