KJohnson

I thought that while your document must be updated for current law at the time of termination, it does not have to be updated for subsequent law as long as assets are distributed as soon as administratively feasible. There is the one year presumption in Rev-Rul 89-87 but I would think that the presumption would be "rebuttable" in this case. The old document had obviously not been updated for TEFRA,DEFRA,REA,TRA'86 not to mention GUST and EGTRRA.

Here is another issue. A D.C. Plan was terminated in the late 1970's Several participants selected an annuity option from the plan. The annuities were purchased under a single group annuity contract. The terminated DC plan has now received demutualization proceeds from the insurance company based on this contract. The former trustee has decided to allocate these proceeds based on the original purchase price of each participant's annuity for all participants (or their beneficiaries) who were still receiving annuity payments on the demutualization date. The trustee has set up a checking account in the old trust's EIN. Will these distributions to the former participants be eligible rollover distribuitons?

MWEDDELL--Obviously DOL takes the position it is a fiduciary decision. However, if you amend your plan document is it actually a fiduciary decision? Typically amending a plan document is a settlor decision and then a fiduciary's duty is to abide by the terms of that Plan document. If you specifially amend you document to provide a speicfic allocation formula (and assuming you don't run afoul of any vesting/accrual provisions of ERISA or the Code with that formula) have you, in fact, insulated yourself from fiduciary attack on the allocation formula?

Posted on the IRS website today. Here is the link http://www.irs.gov/retirement/article/0,,i...=102884,00.html Relationship between Revenue Ruling 2001-62 and Cash Balance Pension Plans Revenue Ruling 2001-62, 2001-53 I.R.B. 632 describes a new mortality table applicable under section 417(e)(3) of the Internal Revenue Code for determining the present value of plan benefits on or after December 31, 2002. The revenue ruling allows the new table to be incorporated by reference (by referring to the mortality table in Rev. Rul. 2001-62). The revenue ruling also provides section 411(d)(6) relief for an amendment substituting the new table for the prior table (if any resulting reduction is not applicable to benefits paid before the later of the effective date or the adoption date of the amendment). Please refer to section 767(d)(2) of the Retirement Protection Act of 1994 for additional information. Question: What is the effect of section 411(d)(6) of the Code, section 4980F of the Code, and section 204(h) of ERISA where there is an adoption of the table described in Revenue Ruling 2001-62 under a cash balance pension plan? Answer: It is the Service's position that an amendment to a cash balance pension plan adopting the new table as described in Rev. Rul. 2001-62 would not violate section 411(d)(6) and that advance notice to participants is not required under a good faith interpretation of section 204(h) of ERISA and section 4980F of the Code.

If this is Principal or Prudential both put out fairly extensive demutualization manuals that presented (but did not really endorse) varioius methods of allocation of demutualization proceeds for both DB and DC Plans. Of course you have to follow your plan document but it is probably silent on this. I generally agree that MBOZEK's methodology reprepresents a good compromise and I believe it is the "default" methodology used by the Principal. Of course even under this method if there is an individual who participated for years under the contract but received a complete distribution shortly prior to the demutaliztion date that person may argue that they too were part of the contract during the period that the 'surplus" being distributed was created. Usng the proceeds for legitimate plan expenses is another possible option, but you don't want the proceeds to sit unallocated in an "supsense" account at the end of the plan year. Also, make sure your document supports this use. I don't think there is a perfect answer and I think DOL recognizes this. Also, there are issues in a participant directed plan where the GAC is the basis of some investment options but not all investment options.

I have always operated based on the assumption that only the participant who falls withing the death/retriement/disability category would be entitled to an allocaiton under the "old method" Also, although I haven't gone back to look at them, I believe that the 401(a)(4) regulations say that an allocation formula that gives the better of two safe harbor allocation formulas may still be a safe harbor allocation formula. I believe that there are some "availability" constraints to this rule but if you only have an NHCE in the death/retirement/disability category, I would think that you would still be in a safe harbor allocation.

Generally agree with M. Preston. However, the one thing, however, to watch out for is if the Plan waived the last day /1000 hour requirement for anyone who terminated because of death, retirement or disability. If the Plan contains this language then anyone who falls into this cagegory has already accrued an allocation under the old formula for the year.

I think you can do this (at least I hope you can because I have done it). Tom's points are well taken. As Tom points out you should make sure you: 1) Have the provision for the 3% first year ADP in your document. 2) For 2002 in order to you use the 3% ADP, prior year testing must also be specified in the document. 3) Make sure your ADP testing provisions take into account an entire year's compensation and not just the compensation atrributbable to periods where an individual was a participant under the CODA. 3) To switch to a safe harbor for 2003 Notices should be given by 12/1. 4), Your Plan should contain the safe harbor provision, 5) Your plan must "switch" to current year testing for 2003 in order to use the safe harbor. (If you continue with safe harbor this should be no big deal, but if you do not you are stuck with current year for five years).

LOOK AT THE FOLLOWING--I BELIEVE THE CPA IS CORRECT. http://www.reish.com/practice_areas/Techni...ps/IRStip16.cfm

You have problems 1.401(k)(a)(3)(ii)--deferrals can only be made after the later of the effective date or the date that the employer acopts the CODA

As Katherine notes, these don't work and the IRS shot them down earlier this year in Rev. Rul. 2002-3 http://www.benefitslink.com/IRS/revrul2002-3.shtml I would ask the provider how they square their "scheme" with this Rev. Rul.

Tom, Who was speaking for the IRS, Wickersham?

I agree with Katherine on the 80% but not on the double attribution. You are only attributing once in each instance--Dad to kid, and Mom to kid. Kid is deemed to own 75% in one entity and 100% in the other. You might want to look at this link from Derrin Watson. http://www.benefitslink.com/cgi-bin/qa.cgi...who_is_employer

1) Has anyone found an IRA custodian that is willing to enter into an agreement that meets Rev-Rul 92-76. 2) If so, has you felt comfortable using an IRA as a vehicle without getting a PLR that this does not "blow up" the IRA because it is posted as security. Or, have the prior PLRs given you the requisite level of comfort.?

I meant I wasn't sure I agreed wth Archimage. David got in his post while I was taking a call.

I'm not sure I agree. I don't think this is an accrued benefit question but a question of the elimination of an optional form of benefit. You cannot have a change the timing of an optional form of benefit unless it is deminimis. See the following from the 1.411(d)-4 regs. (ix) De minimis change in the timing of an optional form of benefit. A plan may be amended to modify an optional form of benefit by changing the timing of the availability of such optional form if, after the change, the optional form is available at a time that is within two months of the time such optional form was available before the amendment. To the extent the optional form of benefit is available prior to termination of employment, six months may be substituted for two months in the prior sentence. Thus, for example, a plan that makes in-service distributions available to employees once every month may be amended to make such in-service distributions available only once every six months. This exception to section 411(d)(6) relates only to the timing of the availability of the optional form of benefit. Other aspects of an optional form of benefit may not be modified and the value of such optional form may not be reduced merely because of an amendment permitted by this exception.

DOL, in the ENRON case, is apparently taking on the issue of what "proper directions...made in accordance with the terms of the Plan and not contrary to ERISA" means. This is the American Bankers Association response] http://benefitslink.com/articles/bankersbriefenron.pdf

. Your amendment should reflect your operation. Katherine has summarized Rev Proc. 2002-29 which is pretty explicit on what must be done if you "switch" methods mid-year in 2002. It provides: .02 If a plan sponsor begins operating its plan under the § 401(a)(9) Final and Temporary Regulations on a date in 2002 and prior to such date the plan sponsor has made required minimum distributions for 2002 under the § 401(a)(9) 1987 Proposed Regulations or the § 401(a)(9) 2001 Proposed Regulations, then the plan must also be amended to provide the transitional rule for 2002 required minimum distributions that is set forth in section 1.2 of the model amendments in the Appendix to this revenue procedure The transitional rule in the model amendment states: 1.2. Coordination with Minimum Distribution Requirements Previously in Effect. If the adoption agreement specifies an effective date of this article that is earlier than calendar years beginning with the 2003 calendar year, required minimum distributions for 2002 under this article will be determined as follows. If the total amount of 2002 required minimum distributions under the plan made to the distributee prior to the effective date of this article equals or exceeds the required minimum distributions determined under this article, then no additional distributions will be required to be made for 2002 on or after such date to the distributee. If the total amount of 2002 required minimum distributions under the plan made to the distributee prior to the effective date of this article is less than the amount determined under this article, then required minimum distributions for 2002 on and after such date will be determined so that the total amount of required minimum distributions for 2002 made to the distributee will be the amount determined under this article.

I haven't gone back to look at the guidance, but my understanding is you are stuck with Lafayette's RAP. Using the Lafayette Life Protptype is the equivalent of getting a Lafayette life certification. You are stuck with their RAP of 12/31. However, I believe that there is some guidance that says that you get the latest RAP of any document they submitted. Therefore if Lafayette Life has a DB Plan or some other plan out there that didn't get its letter until later on, you might have some more breathing room. I would look at Announcement 2001-12 for examples of how this works. This is pre the 12/31/02 extension, but the examples are still valid on how the extentsion works if you use someone elses's prototype/certificaiton for the extension and then restate on another document.

Shortly after 98-52 I remember going to a benefits conference and someone asked the IRS where the 4% came from. To paraphrase, their response was "We made it up because we thought it was a good rule."

I think thats the point. This gets back into the distinction between a "disqualified person" under the Code and "party in interest" under ERISA. Under the Code, an employee is not a "disqualified person" unless he or she is a highly compensated employee, officer, director, or 10 percent shareholder. Thus, if you are not a disqualified person, you cannot have a Code PT to begin with. Accordingly, paying benefits to an "ordinary" employee would not be a Code PT. However, even for those employees who are enumerated as "disqualfied persons" there is the exemption that R. Butler points out. (Not the exemption says "disqualfied person" it does not say fiduciary) Under ERISA, however, any employee of a sponosring employer is a "party in interest. "

Good catch R. Butler. The differences between the Code and ERISA with regard to PT's is often subtle. Of course payment of benefits to an active employee is not a PT. On the ERISA side, however, you need to strain a little to get there but on the Code side it is apparent.

I spoke to broadly. I do not think that payment of benefits is a transaction for purposes of 406(a). Fiduciary "self-dealing" in 406(B) is another matter and that is why you see the exception in 408. You may want to look at the following letters/opinions Adv. Op. 2001-05A, DOL found that §406(a) of ERISA would not be implicated by payments to a party in interest as long as the benefits are “clearly specified as plan benefits in the plan document.” DOL Adv. Op. 81-30A (Section 406 “does not prevent the payment of plan benefits to a party in interest who is entitled to them”) DOL Op. F-2987 A, 1985 Lexis 55 (same); DOL Adv. Op. 82-32A (no prohibited transaction if payments to a party in interest are “payable …pursuant to a plan’s provisions”).

You may want to look at some language in Lockheed v. Spink 517 U.S. 882 (1996) which states that the payment of benefits in accordance with a Plan document is not a "transaction" as contemplated by Section 406 of ERISA.

Now I am confused --A discretionary mtach of 100% on the first 6% deferred would mean that for anyone wo defers over 4% of commpensation, you would be making a match in excess of 4% of that participant's compenstion. As I think we both agree, you cannot make a discretionary match in excess of 4% of compensation if you do not want to have to run the ADP test in a safe harbor plan.