KJohnson

Interesting recent decision on this issue: http://www.ebia.com/weekly/articles/2001/E...lchNewYork.html

An employer's plan has one or two "quirks" that don't fit into a prototype, but they go ahead and, with the permission and approvoal of the prototye sponsor, adopt the prototype document with an addendum for the few "quirky" provisions and the addendum also contains a statement that the plan is an individually designed plan. Are they entitled to an extended remedial amendment period based on the following language from 2000-20? .06 Certain Employer Amendments Disregarded for Purposes of This Section - An employer that has adopted an M&P plan or a volume submitter specimen plan may have modified the plan in a such a way that the plan, as adopted by the employer, would not be considered an M&P plan or a volume submitter plan. Nevertheless, for purposes of this section, such a plan will be treated as an M&P or volume submitter plan and will be eligible for the remedial amendment period extension provided by this section. For example, an employer may have adopted an individually designed GUST-related amendment to an M&P plan that would have caused the plan to be considered an individually designed plan under section 5.02 of Rev. Proc. 89-9. Despite the individually designed amendment, the plan will be treated as an M&P plan for purposes of this section.

I HAVE SEEN MATERIAL REGARDING TOP HEAVY PROVISIONS AND THE POTENTIAL 411(d)(6) PROBLEMS OF WATING UNTIL THE END OF THE 2002 PLAN YEAR. I ADMIT I HAVE NOT REVIEWED HOW THEY CAME TO THE CONCLUSION THAT THE TOP-HEAVY AMENDMENT MUST BE IN PLACE BEFORE OTHER EGTRAA GOOD FAITH AMENDMENTS. HOWEVER, BASED ON YOUR REASONING, I ALWAYS THOUGHT THAT YOU HAD TO BE AN EMPLOYEE ON THE LAST DAY OF THE PLAN YEAR IN ORDER TO BE ELIGIBLE FOR A TOP-HEAVY CONTRIBUTION. SO WOULDN'T AN AMENDMENT PRIOR TO THIS "ACCRUAL" DATE BE EFFECTIVE.

I DON'T BELIEVE THAT YOU CAN CHANGE TO A SHORT YEAR AFTER EXPIRATION OF THE SHORT YEAR WITHOUT PRIOR IRS APPROVAL.

E. Moreland--what facts did you consider--the reversion lanugage of the prior plan document? Did you base the reversion amount on the amount actually received or on another value--such as the possible value of a future demutualization at the time of termination? Also, if an Employer chose to "give this" money to the annuitants, what is the source of the following warning that was in some of the documents: "SPECIAL ISSUES. Some Prudential group contracts were issued to fund plans that were at one time subject to ERISA but are now terminated. These contracts include termination annuities. Because it is not clear under the relevant authorities how demutualization compensation attributable to a terminated plan’s annuity contract should be treated, you may incur less risk of a challenge if you treat the compensation as a ‘‘ plan asset’’ and use it to provide enhanced benefits to the plan’s former participants whose benefits are provided under an annuity

Just a follow up--suppose there are two beneficiaries each as a beneficiary of 50% of the IRA. Could the RMD for the deceased be paid solely to one beneficiary instead of being divided between the two?

I agree that if you negotiate a different "deal" on an employer by employer basis there shouldn't be a problem. However, I don't think it will work on the participant level unless you jump through several "hoops." For a number of reasons, collectively bargained money purchase pension plans have "reclassified" themselves as profit sharing plans with a mandated contribution contained in the collective bargaining agreement (employer delinquencies being the primary concern). Therefore, I suppose what you could do is 1) reclassify your mpp as a profit sharing plan 2) add a 401(k) feature to the plan and 3) add a 125 funding arrangement to the welfare plans. An employee could then elect to take money in cash, defer it into the 401(k) or purchase additional welfare benefits through the cafeteria plan.

My experience is that they will first ask for the audit. If you don't provide it within a fairly short time frame, then the 5500 will be formally rejected. Once formally rejected you still have 45 days to "cure" before the penalty will be assessed. See DOL Reg 2560.502©-2(B)(3).

I am generally with Alonzo on the method. However, I am not sure regarding the payroll period issue. DOL regs give the 15th business day as the outside time period when deferrals need to be depositied. Regulations require them to be segregated as soon as feasible. If you "normally" could depost within, say, a week after each payroll, then arguably you could have multiple p.t's in anyone month. If on the other hand, it is only "feasible" to deposit monthly, I agree that the pt would occur as sometime after the end of the month, but no later than the 15th business day following the end of the month. Even on a monthly method this can get fairly cumbersome when you cross over to the next year. For example if you have eight months that should have been paid in 2000 and were not paid until 2001 you would have 8 PT's for 2000 and 16 PT's for 2001. You would "repeat" the 2000 PT on on the 2001 5330 form as well as listing 8 "new" PT's beginning on January 1.

You might want to look at the following from 2000-20 Either of these may fit your situation: 04 Period of Extension - If the preceding requirements are satisfied, the remedial amendment period for the employer's plan will not expire before the end of the twelfth month beginning after the date on which a GUST opinion or advisory letter is issued for the M&P or volume submitter specimen plan referred to in subsection .03 or the opinion or advisory letter application for the plan is withdrawn. Within this period, the employer must amend or restate its plan by adopting the GUST-approved M&P or volume submitter specimen plan (or another GUST-approved M&P or volume submitter specimen plan, or individually designed GUST amendments) and, if required for reliance, request a determination letter. .06 Certain Employer Amendments Disregarded for Purposes of This Section - An employer that has adopted an M&P plan or a volume submitter specimen plan may have modified the plan in a such a way that the plan, as adopted by the employer, would not be considered an M&P plan or a volume submitter plan. Nevertheless, for purposes of this section, such a plan will be treated as an M&P or volume submitter plan and will be eligible for the remedial amendment period extension provided by this section. For example, an employer may have adopted an individually designed GUST-related amendment to an M&P plan that would have caused the plan to be considered an individually designed plan under section 5.02 of Rev. Proc. 89-9. Despite the individually designed amendment, the plan will be treated as an M&P plan for purposes of this section.

The 72(p) regs proposed last year, Q&A 19, specify that the defaulted loan and all accrued interest should be considered in determining the permissible amount of any subsequent loan. I am nor sure whether the IRS considers this a "new" rule or simply a clarification of old rules. What is new, in Q&A 19 is the requirement of additional security for a loan after a defaulted loan. I think the IRS has taken some heat on this proposal and I am not sure of the status of these proposed regs.

I don't believe that the IRS has spoken on the applicable interest rate, but I believe that DOL's DFVC program says that you use the greater of what the participant would have earned or the 6621 rate for underpayments. I agree that the applicable amount would be the interest on the contributions. However, using this interest method, watch out when the delinquency crosses over from one year to the next. There is a new prohibited transaction at the beginning of each year for each month's delinquency as well as an "ongoing" prohibited transaction until the delinquency is corrected.

204(h)? I would comply which may mean getting that notice out today.

Plan provides for annual valuations and interim valuations at discretion of trustee. This is o.k. under Rev. Rul. 80-155 as long as the interim valuations do not discriminate pursuant to 401(a)(4). However, what are you looking at under 401(a)(4)--benefits rights and features testing? Also, when the market goes down, who are you testing? Are those that are "staying in" the Plan and not receiving a distribuiton actually the ones who are enjoying the benefits right and featrue?

This may not answer your question of "how" to calculate, but this is a good explanation from retirement plan distribuiton Q&As that were posted on benefitslink This is under the old proposed regs, but I don't believe that the QJSA analysis changes. http://www.benefitslink.com/cgi-bin/qa.cgi...d=122&mode=read Required minimum distributions and QJSAs (Posted 8/19/99) Question 122: In a defined contribution plan that is subject to the joint and survivor annuity requirements, must a required minimum distribution take the form of beginning a 50% joint and survivor annuity (absent spousal consent to a different form)? Or can the plan, without the consent of the participant or spouse, simply make yearly distributions calculated in accordance with the proposed regulations based on the life expectancy of the participant and any named beneficiary? Answer: Proposed regulation 1.401(a)(9)-1, Q&A H-3, states that Code section 401(a)(9) minimum distribution requirements must be met in this circumstance. It goes on to say that the plan "may" distribute in the form of a qualified joint and survivor annuity "if the plan has made reasonable efforts to obtain consent from the participant (or the spouse if applicable)." This implies that the participant (and spouse) might be entitled at that time to alternative forms of distribution under the plan that might also satisfy Section 401(a)(9), such as the regularly calculated minimum distribution amount. An interested reader has asked a follow-up question: A follow up to Q&A 122. Although participants may be entitled to elect to take their MRD in a form other than a QJSA, if no election is received must the Plan make the MRD in the QJSA form because of 1.417(e)-1© which provides that "all benefits that the plan requires to begin must be in the form of a QJSA and QPSA unless the applicable written explanation, election and consent requirements of Section 417 are satisfied."? I can find no exception to the requirement that benefits must be distributed in the form of a qualified joint and survivor annuity unless the participant and spouse consent to an alternate form, just because the participant has reached his required beginning date. The language of proposed regulation 1.401(a)(9)-1, Q&A H-3, implies this as well. I would conclude that the plan should require distribution in the form of a QJSA if the participant and spouse fail to consent to an alternate form of distribution. These topics are discussed in Section II of Chapter 3 of The Retirement Plan Distribution Book.

You may want to look at this thread. The IRS also generally takes the position that a Plan must have a sponsor even if it doesn't "do anything" other than maintain the Plan. Most states have laws that state that a dissolved corporation maintains the power to do all acts neccessary to wind up its affairs, but I am not sure that the IRS is "buying" that this power actually counts as a sponsor http://benefitslink.com/boards/index.php?showtopic=3704

Thanks for the cite, but they specifically punt on the new regs. Has anybody seen anything from the IRS in writing, whether formally or informally, regarding how this would play under the new proposed regs?

First, look at your Plan Document. If it doesn't allow the deferral then there is no quesiton. If you document does allow the deferral or if it is ambiguous, you may want to loot at this thread. You may want to look at the following: http://www.benefitslink.com/boards/index.php?showtopic=462 I think the IRS may have spoken informally on this more recently an an ASPA conference, but I don't have those Q&A's handy.

You might want to look at this prior post that discusses the applicable 410(a) regs. http://benefitslink.com/boards/index.php?showtopic=4519 I think that, as a practical matter, you could probably hold out someone in a profit sharing or MPP Plan until they complete another year under these regs, but you couldn't hold out someone in a 401(k) because there would be no way to put them "back in" the Plan retroactively. I haven't looked at this in a while, but I believe the regs cited in the prior post are the place to begin.

A POP 125 is not, in itself, a Plan covered by ERISA. The 5500 requirement is a Code requirement (6039D) and not an ERISA requirement. Similarly, the Plan document is a Code requirement and not an ERISA requirement. Therefore, I know of no SPD requirement for a 125 POP. Of course since the underlying benefit benefti is an ERISA benefit, and since many 125 Plans have Medical FSAs, I think there has been a tendency to give full SPD treatment. I know my practice is, in the statement of ERISA rights to state that the 125 Plan is not an ERISA Plan but that certain benefits offered under the Plan may be covered and then set forth the standard language.

For pure 401(k) amounts, hardship is the only permitted "in-service" distribution for individuals under 59 1/2 pursuant to 401(k)(2)(B). As Appleby points out, hardships from 401(k) Plans are no longer elgible rollover distributions. Although this change in the law was effective in 1999, the IRS allowed transitional relief for that year so Plans were not forced to comply until 2000. Many 401(k) Plans also have matching 401(m) and regular 401(a) profit sharing contribuitons. The rules on in-service distributions from these "parts" of the Plan are different. Generally, an in-service distribution will be allowed for these contributions at a stated age(even prior to 59 1/2), on account of hardshp, after five years of participation, or for money that has been "seasoned" for two or more years. Of course, your plan must contain provisions that allow such in-service distributions. You generally should be able to roll over these in-service distributions.

Of course nothing prohibits you from mandating contributions at a specific level into a profit sharing plan either in the document itself or in the collective bargaining agreement. In fact many multiemployer d.c. plans have converted from mpp's to profit sharing plan because of the IRS's position on employer delinquencies. Under a MPPP the IRS has said that you must credit the accounts of participants working for delinquent employers (they have not said where this money will come from) while under a profit sharing plan the Service has said that there is no such requirement. Since 404 limits are rarely an issue in this context, the reasoning had been why not just convert the MPPP to a profit sharing plan with mandated contributions. The only thing "lost" is that the funding would not be required under 412, but it still would be required under the terms of the Plan and the CBA.

I would generally terminate if you do not have QJSA provisions in your P.S Plan. If you terminate the MPPP and let the participant's have the option to roll to an IRA, take a distribution, or roll to the P.S. Plan, you would not have to preseve the QJSA/QPSA provisions for anyone who rolls into your P.S. Plan. However, some Plan sponsors might have the concern that they do not want their employees to have access to their money. If your P.S. Plan and MPPP have identical optional forms of benefits and benefits rights and features (including QJSA and QPSA) then it might make sense to merge the two. As to permanency, that may be a concern, but generally if there are legitimate unforseen changes regarding the benefit to the sponsor of maintainng a plan, I don't think the IRS would push this issue. Since most people have the MPPP up just for 404 limit purposes, I don't think I would be overly concerned on permanency for terminating even a fairly recently formed MPPP.

As to the original question, look at the legislative history of REA. The Senate Finance Committee Report regarding REA contained specific examples of the effects of §411(d)(6) with respect to a plan that contained early retirement subsidies This legislative history to REA specifically notes that even if a participant does not meet a plan's requirement for an unreduced early retirement benefit at the time of a plan amendment, that amendment cannot eliminate the participant's right to subsequently satisfy or "grow into" such an unreduced benefit. The Report then notes that: The bill does not provide an exception to the prohibition against reductions of benefits or elimination of benefit options in the case of a terminated plan. Accordingly, a plan is not to be considered to have satisfied all of its liabilities to participants and beneficiaries until it has provided for the payment of contingent liabilities with respect to a participant who, after the date of termination of a plan, meets the requirements for a subsidized benefit.

Also, be sure to check your document. Many condition the benefit on actual retirement and not merely attaining NRA. Also, I have seen a number of MPP prototypes that do not even provide an option for in-service distributions after NRA so you may have to restate to one that does, or go the individually designed route.