Blinky the 3-eyed Fish

What does your document say?

The calculation is going to be to hard to explain I fear. Rev Proc. 2003-44 Section 6.04 does say that the QJSA annuity that would have been payable upon the death of the participant is needed if no spousal consent can be obtained and the participant makes a claim. As Katherine pointed out, the participant would actually have to die. So in your case with a deferred annuity to 65 it is valued as a series of probabilities: PV of 65 annuity start = QJSA amount * prob husband dies before 65 * prob wife lives to 62 * SLA APR 62 /(1+i)^25 PV of 66 annuity start = QJSA amount * prob husband lives to 65 * prob husband dies during 65 to 66 * prob wife lives to 63 * SLA 63 /(1+i)^26 This continues until the end of the mortality table. You add up all the values. Have fun. (I found an error.)

Dietpepsi, your statement is incomplete. The ABT test is a 2-part test, the nondiscriminatory classification test and the average benefits ratio test. Permissive aggregation is what applies here if choosing to test the plans as one for the first part of the test. For the second part of the test, all benefits are considered, no matter the plan year ends. It is the coverage ratio, i.e. the first part of the test, that appears to be the problem here. Brian, I am curious as to what you find out.

Under what circumstance do you feel they would be required to be tested together?

I wonder who would argue that this participant is eligible for the TH minimum? Keep reading to Q&A M-12. Q-12. What minimum contribution or benefit must be received by a non-key employee who participates in a top-heavy plan? A-12. In the case of an employer maintaining only one plan, if such plan is a defined benefit plan, each non-key employee covered by that plan must receive the defined benefit minimum. If such plan is a defined contribution plan (including a target benefit plan), each non-key employee covered by the plan must receive the defined contribution minimum. In the case of an employer who maintains more than one plan, employees covered under only the defined benefit plan must receive the defined benefit minimum. Employees covered under only the defined contribution plan must receive the defined contribution minimum. ..... Clearly the employee is not covered by the plan. Best bet, save your money by reading the regs for free.

Why are you considering historical annuity rates? Where do you get the life expectancies from? Are you factoring in mortality from the current age to 65? Why not just get spousal consent from the woman and the exposure is $0? Also, my vague recollection in these cases is that the full 50% benefit must be provided if consent is not obtained and the spouse were to raise a stink. In other words, if the annuity was $887.37, you would have to provide an SLA of 1/2 that and the value of that annuity is your maximum exposure.

To continue this important line, pax, you are correct. In fact, I even used in once in jest. I guess it sucks when you look up suck instead of sucks. Trivia - who said this? "Yeah Moe that team sure did suck last night. They just plain sucked! I've seen teams suck before, but they were the suckiest bunch of sucks that ever sucked!"

I stand corrected, there are 2 prior instances of the use of the word "suck" in the same context on these boards. One is too from QDROphile that I chose to copy: "However, if the plan even has written procedures, they probably suck."

If the only distributable event available here is termination of employment, then I don't see how a distribution could be made to an employee that is not terminated. I would go as far to say that even if he/she had completed the election forms, but was rehired before the check was issued, that the distribution should be stopped. BTW, I don't recall seeing "suck" ever posted before on these boards. I should do a search.

Why do they "need" to be tested together? I'll just add on that if it's a need to pass coverage, that means you are attempting to permissively aggregate the plans. One of the requirement to do that though is that the plans have the same plan year.

I think the point, without going through the references of the cite, is that the maximum deductible amount is not reduced by law change.

On what basis? This doesn't make sense to me. I know if I could afford a TVR Speed 12, it would be better than my current car. Topgun, as for your other points, the stable rate of return of an annuity contract has been shown to pale in comparison to the stock market return over the long haul. Life insurance can be purchased the same in a traditional DB plan the same, so no advantage to 412(i). As WDIK brought up, the cost of a 412(i) plan investments far exceed the actuarial cost of a traditional DB plan.

You can't discriminate against a potential participant. It is okay to amend the plan before their date of plan entry as you suggest. This is also a lesson that the plan should initially be set up with the anticipation of future employees so you don't have to worry about such issues. If I was an IRS auditor, I would seek these Uni-K, Solo 401(k) or whatever you call them plans out in abundance in a few years. A qualified plan without a qualified person to monitor their existence means a host of problems will arise.

You need to determine its acceptability for what purpose? As for your calculation, you realize you are comparing the difference of the reduced annuity in choosing a J&50%S over an SLA. In trying to find the spouse's "portion" you are computing a negative figure, and obviously that is not a correct determination. If you answer the first question, maybe someone can devise some reasonable computation.

The merging of MP dollars requires the surviving plan to keep the distribution restrictions in place on those dollars. Thus, the restriction of taking a distribution before the NRA in the MP plan stays. Now in your case, because she is past NRA, if the document allows, then she sure can take a distribution.

MGB, I would still like to hear if you maintain that the unfunded liabilities is for all plans or just PBGC plans for the year of termination.

This has been discussed many times on this board. Use the search feature and I think you will find there is no definitive answer.

If the effect of the amendment is that everyone is in their own class versus just putting everyone in their own class, then I would say there is no difference as it relates to the deemed CODA issue. I think the IRS agent would not be dense enough to see through the veil. But on the deemed CODA issue, the IRS has blessed documents with everyone in their own group, so they may not even consider it an issue. I say put them all in their own group and be done with it. What are the chances of the IRS raising a retroactive issue with the arrangement?

No, as long as the timing of the amendment doesn't favor HCE's, which is unlikely for this type of amendment.

It means anymore you don't recompute 2003's CL for determining if 412(m) applies in 2004. Keep in mind that 2003's CL could have used the 120% rate; the pre-PFEA cite is saying to use the 105% rate.

Mike, the cite pax quotes relates to the optional recompute of 2001's CL for 412(m) determination, not 412(l).

The UCL is based on the 83 GAM mortality table and an interest rate range set at the beginning of the plan year in which the valuation is done. The actual plan liabilities can be based on any mortality table and a myriad of interest rates, with an overriding 417(e) rate and mortality for lump sum payouts. There is also the question of the timing of when the 2 values are determined. The UCL is a value at the end of the plan year (a projected value for a BOY valuation date and a known value for an EOY valuation date). It is not clear as to when the unfunded liability determination is made (at least not in my mind). So those are the differences in a nutshell.

Mike, just to be clear from my perspective is that I am not proposing giving less to the owner in the DC plan. Besides in my hypothetical the DC contribution to the owner has no bearing on his DB amount.

The hypothetical design is as such (I added some specifics to assist in your overall fun): 1. DB plan with a 10% career average pay formula for the owner and .5% to everyone else. The .5% is offset by the AE of the PS balance, while the 10% is not offset at all. 2. DC plan where everyone gets a pro rata allocation (like I said, I am not trying to go into whether a cross-tested allocation is appropriate here). Both plans are new and cover the same employees.

I'd like to hear from MGB. BTW, I wouldn't use the term "fuller deduction". The deduction to bring the plan to fully funded status could easily be less than the UCL.