KJohnson

I am not sure that it gets you there, but your 90 day rule is tied to the annuity starting date. Section 1.401(a)(20) Q&A 10(B)(3) provides that a payment will not be considered to have been made after the annuity starting date because "actual payment is reasonably delayed for calulation of the benefit amount if all payments are actually made" Thus, I guess if you determine that your supplemental payment is actually being made pursuant to a "reasonable delay" for calculation of the benefit and all payments are made, you would have an argument that you don't need new forms. There might be something else that I am not aware of. However, I always err on the side of sending too much in the way of QJSA disclosure rather than too little.

Yes, I believe that the consensus is that such distributions would be allowed after NRD. Don't have a cite handy. However, you can look to the fact that the IRS specifically allowed all Plans to keep mandatory distribuitons to currently employed partcicipants (non-5% owners) who reached age 70 1/2 even though those distributions are no longer mandatory. In essence, allowing a Plan to "mandate" in-service distributions. You may want to look at this link: http://www.benefitslink.com/boards/index.php?showtopic=7054

I agree and will flag it in the request for the determination letter.

Thanks, Glad to see the confirmation because I told them fifteen minutes ago that they could do it.

Has anyone ever dealt with John's quesiton? I have a client that wants to start making hardship distributions for funeral expenses which the regs give as an example as an immediate and heavy financial need but do not list as one on the safe harbor alternatives. What I wonder is whether we could we amend out of the safe harbor for the "immediate and heavy financial need" to cover this but still keep and rely on the safe harbor provisions for the "distribution being deemed neccessary to satisfy the financial need" so we don't have to go through the "resources checkk"

It comes out quarterly in the federal register which you can search at the GPO site. This link might work (or should at least get you started: http://benefitsattorney.com/cgibin/framed/...gi?ID=66&id==66

You might want to check out this prior discussion. http://www.benefitslink.com/boards/index.php?showtopic=3881 MWeddell--Do ou see anything wrong with a document that mandated plan to plantransfer as opposed to merely permitting the plan to plan transfer (of course assuming no 411(d)(6) cutback issues on OFBs or BRFs).

I think you are right you use earnings. But if the delinquency carries over into the next year, each month would actually generate 3 separate excise taxes: one for 2000 and two for 2001. For example, let's say the $5,000 9/2000 contribuiton is not paid until 5/1/2001. The contribution could have been depostied on 10/1 2000. My understanding is that you would have a 2000 excise tax (using your 10% interest rate) calculated as follow: $5,000 X .10 X .25 ( 3/12 for the three month delinquency in 2000) X .15 for an excixe tax of $18.75. THEN since the 2000 PT carried over into 2001, you would have to pay the $18.75 excise tax again in 2001. THEN for 2001, you would have a new P.T. beginning on January 1 calculated as follows. $5,000 X .10 X .33 (4/12 for the four month delinquency in 2001) X .15 for an excise tax of $24.75. Thus the total excise tax for 2000 and 2001 would be $62.25: $18.75 for 2000 $18.75 for 2001 (the 2000 PT not cured until 2001) $24.75 for 2001 (the "new" PT beginning January 1, 2001) You would then do this "tripling" for each month of the deliqnquncy (but probably not for December since this may not have been "due" until January.)

The fiduciary analysis is interesting. It would seem that under the Supreme Court's decisions in Spink and Jacobson that the decision on whether to merge and the conditions for the merger would be a "settlor" decision and could not be attacked on fiduciary grounds as long as all "techncial" requirements are met. However, in the multiemployer world, I don't think that DOL has yet admitted that a Spink analysis applies. But even with multis I believe that DOL takes the position that the fiduciary analysis is based on the financial/actuarial position of the merged plan and not the "individual pieces" that go into the Plan. As long as the merged plan is not in "finacial trouble", it would seem that the DOL would give a "pass" on fiduciary issues. Thus DOL has allowed mergers of a multi with UVBs with one that had assets well in excess of vested benefits. Where you have a single and a multi, I don't know what DOL's position would be, mut you may want to look at this: Department of Labor. Pension & Welfare Benefit Programs. OPINION 89-29 A September 25, 1989 Re: Textile Workers Pension Fund, Identification No.: F-3813A REQUESTBY: Ronald E. Richman, Esq. Chadbourne & Parke 1230 Avenue of the Americas 1st Floor New York, NY 10112 OPINION: This is in response to your letters requesting an advisory opinion regarding the application of sections 403, 404 and 406 of the Employee Retirement Income Security Act of 1974 (ERISA) to the proposed merger of three multiemployer pension plans. You represent that the Textile Workers Pension Fund (the Fund) is the sponsor and administrator of four multiemployer pension plans; the National, New England, Mid Atlantic, and Philadelphia Pension Plans. n1 The National, New England and Mid Atlantic Plans (the Plans) are each independent legal entities. Each plan has its own tax identification number, plan benefits, summary plan description, actuarial valuation, and files its own Form 5500. The assets of each plan are used only to pay the benefits and expenses of such plan. n2 n1 The Philadelphia Plan will not participate in the merger. n2 By letter dated May 17, 1989, you notified the Department that the contributing employers to the New England Plan have ceased contributing to the New England Plan and are now contributing to the National Plan. You further represent that the Fund provides all administrative services for the Plans. Most of the Plans' assets are invested in a commingled trust and assets attributable to each plan are allocated to the plan in accordance with strict accounting principles. The Trustees of the Fund are trustees and fiduciaries of each of the multiemployer plans participating in the proposed merger. Some of the Fund's Trustees are stockholders and/or employees of contributing employers to the New England and Mid Atlantic Plans. The Fund's Trustees make all policy decisions for the Plans. The Fund Manager is responsible for the operation of the Plans on a day-to-day basis. In addition, the Amalgamated Clothing and Textile Workers Union (ACTWU) is the collective bargaining representative for all employees who participate in the Plans. Each of the Plans has a different level of funding. The National Plan has assets well in excess of vested benefits. The New England Plan has assets slightly in excess of vested benefits. The Mid Atlantic Plan has less assets than vested benefits. n3 n3 As of October 1, 1988, the Mid Atlantic Plan had unfunded vested benefits in the amount of $18,285,000. You state that the Trustees of the Fund propose to merge the New England and Mid Atlantic Plans into the National Plan. Under the terms of the proposed merger, participants in each of the Plans will maintain all benefits accrued to the date of the merger. Immediately subsequent to the merger, all participants in the merged National Plan will earn future benefits at the present National Plan formula. Individuals who participated in the National Plan prior to the merger will continue to earn past and future benefits in accordance with the formula used to calculate benefits in the National Plan which was in effect prior to the merger. The merger proposal contains four elements designed to reduce the Mid Atlantic Plan's pre-merger unfunded liabilities. First, contributing employers to the New England and Mid Atlantic Plans will enter the merged National Plan with a "withdrawal liability" account balance equal to the amount of unfunded vested benefits allocable to them by the plan to which they contributed prior to the merger. n4 Contributing employers to the National Plan will maintain their "withdrawal liability" account balances as calculated under the National Plan's modified direct attribution withdrawal liability method. Since the merged National Plan will maintain the National Plan's method of calculating withdrawal liability, the former contributing employers to the Mid Atlantic Plan (the only plan which has unfunded vested benefits) will have the ultimate responsibility for paying the unfunded vested benefits attributable to the Mid Atlantic Plan. This liability will be terminated if the merged National Plan has no unfunded vested benefits at the conclusion of five years after the merger. n4 You indicate that the merger proposal calls for an assessment of withdrawal liability pursuant to individual employer contracts. It was represented that such assessment is outside of the provisions of Title IV of ERISA because the merged National Plan will be fully funded. Second, effective September 1987, the contributing employers to the Mid Atlantic Plan increased their contributions from $57 per participant per month to $90 per participant per month. The merger proposal calls for continued contributions at this rate for at least five years. In each year, the first $1 million of contributions from former Mid Atlantic employers will be allocated to reduce the existing unfunded liability. Third, the balance of the contributions, after the first $1 million is allocated to the existing unfunded liability, will be used to provide future service benefits under the National Plan formula. Under the merged National Plan, former Mid Atlantic Plan employees will be provided past service benefits in accordance with amounts accrued under the former Mid Atlantic Plan. It is represented, therefore, that the balance of such contributions will exceed the amount required (on an actuarial basis) to provide future service-only benefits. This excess amount will also be used to offset the Mid Atlantic Plan's pre-merger unfunded vested benefits. Fourth, as a condition precedent to the merger, the ACTWU and contributing employers to the Mid Atlantic Plan will transfer a lump sum of $6 million to the Mid Atlantic Plan. The collective bargaining parties will obtain this money by terminating the Dyers Vacation and Welfare Fund (the Dyers Fund) and contributing $6 million of the Dyers Fund's assets in excess of the assets necessary to satisfy all of the Dyers Fund's liabilities to the Mid Atlantic Plan. n5 You have stated that the termination will comply with section 403(d)(2) of ERISA. n5 All of the Dyer's Fund participants are also participants in the Mid Atlantic Plan. You have represented that the total of the amounts transferred to the merged National Plan pursuant to the above provisions will be less than 100% of the Mid Atlantic Plan's unfunded vested benefits as of October 1, 1988. However, the Fund's actuary estimates that, if the merger occurs in accordance with the Trustees' proposal, the merged National Plan will have assets slightly in excess of vested benefits. Finally, you have represented that the proposed merger will satisfy all of the merger requirements for mergers of multiemployer plans set forth in section 4231 of ERISA and regulations promulgated thereunder by the Pension Benefit Guaranty Corporation (PBGC). As a condition precedent to the merger, the Fund will obtain a favorable compliance determination from the PBGC. You have requested an advisory opinion that: (1) The proposed merger would not violate sections 403©(1) and 404(a)(1) of ERISA; and (2) The proposed merger would not constitute a prohibited transaction under section 406 of ERISA. Section 403©(1) of ERISA provides, in part, that the assets of a plan shall never inure to the benefit of any employer and shall be held for the exclusive purposes of providing benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of administering the plan. Section 404(a)(1) of ERISA similarly requires that fiduciaries of a plan discharge their duties solely in the interest of the participants and beneficiaries of the plan, and for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable plan administration expenses. Section 406(a)(1)(D) of ERISA provides that a fiduciary with respect to a plan shall not cause the plan to engage in a transaction if he knows or should know that such transaction constitutes a direct or indirect transfer to, or use by or for the benefit of, a party in interest, of any assets of the plan. Sections 406(B)(1) and 406(B)(2) of ERISA provide that a fiduciary with respect to a plan shall not deal with the assets of the plan in his own interest or for his own account or in his individual capacity or in any other capacity act in any transaction involving the plan on behalf of a party (or represent a party)whose interests are adverse to the interests of the plan or the interests of the participants or beneficiaries. Section 408(B)(11) of ERISA provides that the prohibitions of section 406 shall not apply to a merger of multiemployer plans, or the transfer of assets or liabilities between multiemployer plans, determined by the PBGC to meet the requirements of section 4231 of ERISA. Section 408(f) provides that section 406(B)(2) shall not apply to any merger described in subsection (B)(11). Finally, section 4231© of ERISA provides that the merger of multiemployer plans or the transfer of assets or liabilities between multiemployer plans shall be deemed not to constitute a violation of the provisions of section 406(a) or section 406(B)(2) if the PBGC determines that the merger or transfer otherwise satisfies the requirements of this section. n6 n6 Section 4231 is contained within Title IV of ERISA which is within the sole jurisdiction of the PBGC. In discussing section 4231 of ERISA, Congress noted in the legislative history accompanying the Multiemployer Pension Plan Amendments of 1980 Act that: The rules regarding mergers and transfers are designed to allow mergers in all cases where the resulting plan will not be expected to be in financial trouble. This facilitates the committee's purpose of encouraging mergers which expand a plan's contribution base to provide greater stability by looking at the prospects for the resulting plan instead of focusing on the narrow mechanical test provided under current law. The committee believes that a merger which complies with the conditions will generally be in the best interest of plan participants. House Comm. on Education and Labor, H.R. Rep. No. 869, 96th Cong., 2nd Sess. 87 reprinted in [1980] U.S. Code Cong. & Ad. News 2918, 2955. Issue 1 The provisions of Title I of ERISA do not expressly prohibit or limit mergers of multiemployer pension plans. In the Department's view, whether a proposed merger of multiemployer pension plans complies with the provisions of sections 403©(1) and 404(a)(1) of ERISA can only be determined by the appropriate plan fiduciaries based on all relevant facts and circumstances. Based on the statutory framework and the Congressional intent described above, it is the opinion of the Department that, in determining the propriety of a merger of multiemployer pension plans, the fiduciaries of each multiemployer plan must make their determinations under sections 403© and 404(a)(1) by reference to the multiemployer plan resulting from the proposed merger. In making such determinations, the fiduciaries must consider the funded status of the resulting merged plan, as well as the long-term financial viability of such plan. n7 In this regard, it is contemplated that the fiduciaries would, among other things, take into account the economic outlook of the industry, demographics of the resultant participant population, current and anticipated contribution rates and administrative expenses. The fiduciaries should be aware that compliance with the requirements of section 4231, as determined by the PBGC, will not, in and of itself, satisfy the fiduciaries' obligations under sections 403© and 404(a)(1) of ERISA. n8 Accordingly, the Department expects that the fiduciaries will make independent determinations taking into account all relevant information pertaining to the proposed merger. n7 In the instant case, we note that the trustees may wish to consider, among other things, actuarial projections made of assets and accrued and vested liabilities for the merged plan under a variety of alternate scenarios. n8 This analysis of fiduciary duties under sections 403 and 404 of ERISA is limited strictly to instances of multiemployer pension plan mergers. Issue 2 You represent that, as a condition precedent to the merger, the Fund will obtain a favorable compliance determination under section 4231 of ERISA from the PBGC. Therefore, it is unnecessary for the Department to address the issues raised under section 406(a) and 406(B)(2) by the proposed merger. Whether the proposed merger is prohibited by the provisions of section 406(B)(1) of ERISA involves questions of a factual nature which can only be answered by the Trustees based on all of the relevant facts and circumstances. This letter is an advisory opinion under ERISA Procedure 76-1. Section 10 of the procedure describes the effect of an advisory opinion. Robert J. Doyle Director of Regulations and Interpretations

and the next year, and the next year .....(believe me I know).

Thanks RLL So I take it there would be no discrimination or cutback problem with an amendment that would change the allocation of stock sold from pro-rata for all participants to a method that would allocate the shares of stock to be sold and the cash generarted from that sale first from the account of any participant entitled to a distribution?

I have a similar circumstance when the Plan is running out of cash and distributions can only be made in cash because stock ownership is restricted to active employees. Can you give the Plan a "put option" to sell stock in the terminated employee's account back to the employer to cover the amount of any distribution? The Plan does have a provision where stock can be sold back to the employer, but the allocation of the cash received has to be allocated pro-rata to participants accounts. This seems to lead to a convoluted process where stock would be sold from the account of everyone to raise cash that would be applied prorata to all accounts, that cash would then be used from those accounts to buy back the shares of the terminated participants. It would seem simpler to allow the plan to have a "put" option with the employer where it can sell to the employer the shares of a terminated participant's account to raise adequate cash for the distribution. I realize that there would have to be adequate valuations and the fiduciary issues related to the sale back to the employer, but are there other issues? 54.4975-11(a)(7)?

Good point 1950, I should be able to "design around" that possibility.

I gave a try a few weeks back on this same issue and did not come up with anything. http://benefitslink.com/boards/index.php?showtopic=9893 Although, not directly on point, I do think that T-32 helps if you automtatically transfer account balances when an employee leaves one plan and enters the other. T-32 acknowledges that there can be plan to plan transfers within plans maintained by the same employer and specifically deals with the top-heavy consequences of such transfers. In such instances the "receiving" plan takes into account the transferred funds for the top-heavy calculation and the distributing plan ignores such an account balance. It would be strange to have such a regulation, if, upon transfer of an account balance related to a key, there would be automatic mandatory aggregation so it really would not matter which plan includes the acoount balance in its calculation.

John A If you are referring to escheat, the IRS seems not to object to this notion--1.411(a)-4(B)(6)--"...In addition a benefit which is lost by reason of escheat under applicable state law is not treated as a forfeiture" However, I believe that DOL has stated its views that state escheat laws are pre-empted. I've always wondered what would be the result if you incorporated the state's escheat law by reference into the plan. You would then be following your plan, not an arguably preempted state law and DOL would have a hard time on the forfeiture issue in light of the IRS reg. I've also seen people suggest savings bonds in the name of the Participant (and have seen this provision in a plan document). With a savings bond you don't have to worry about finding a bank and don't have to worry about bank fees eating up the distribution amount within the first few months that the account is open. Of course the question is, where do you keep the savings bond in the event the particpant "shows up".

In a D.C. plan containing QPSA/QJSA provisions a participant names his wife as the beneficiary for his entire account balance. The participant then divorces his wife, remarries, and dies several years later while still employed and without changing a beneficiary designation. It would seem that spouse No. 2 is entitled to the QPSA benefit of 1/2 of the account balance and the prior election regarding spouse No. 1 for the entire account balance would be invalid as to the QPSA benefit. What about the other 1/2 of the account. Is the entire beneficiary election invalid so that the other half goes to his estate-- the "default" beneficiary under the Plan when their is no designated beneficiary. Or, does spouse No. 2 get the other 1/2 because the particpant was still free to name a beneficiary for the non-QPSA portion?

It seems to be one of the things that people screw up the most. Q&A 5 just raised the question in my mind whether the "fix" found in repeated PLRs is still available.

Thanks for trying to get this clarified with the folks in D.C., Did you also raise the issue of distinguishing between a rollover and a spouse treating an IRA as his or her own with regard to when an IRA beneficiary is an estate or trust and the corresponding beneficiary to the estate or trust is the spouse under Q&A 5 of 1.408.8? If you did, thanks again.

The sentence regarding segregation into separate accounts by the end of the year following the year of the employee's death refers to 401(a)(9)(B)(ii)or (iii) or (iv). I didn't see anything on 401(a)(9)(B)(i). That, combined with the first sentence regarding lifetime distributions, is why I thought that separate accounts must be established by the employee's RBD if you were to use separate accounts for death distributions after the employee's RBD.

Barry, Would your response regarding the timing of separrate accounts be the same if the death ocurred after the required beginning date? It seems 1.401(a)(9)-8 Q&A 2, the segregation has to be by the employee's required beginning date if separate accounts are going to be used for a death post-RBD.

Thanks Hans, As to the first point, 1.416-1 Q&A T-6 provides that "For purposes of determining whether the plans of an employer are top-heavy for a particular plan year, the required aggregation group includes each plan of the employer in which a key employee participates in the plan year containing the determination date, or any of the four precedeing plan years." I am inclined to agree with you on the second point or at least believe that it would be a very defensible position that there is no required aggregation if there has been a plan to plan transfer.

In addition to ACP, each level of match would me subject to discrimination testing for current and effective availability under 401(a)(4). However, if you can pass ACP and 401(a)(4) testing I suppose it would be o.k.

Segal puts out the results of surveys of various assumptions used in multiemployer plans. This year's survey I believe involved over 400 plans. Not surprisingly most used the "Segal Method" for the interest rate assumption with a small number using the funding assumption. You can find the report here: http://www.benefitslink.com/articles/multi...nding010410.pdf Look toward the end for an explanation of certain actuarial assumptions. Other consultants/actuaries may have published similar surveys.

Law Firm has two plans: one for partners and staff (top heavy) and one for associates (not top heavy and in which no offfiers or owners are eligible to defer or receive allocations). The two plans pass coverage separately and it would appear that they are not in a required aggregation group. However, what happens when an associate become a partner and either immeditately or eventually becomes a key employee? They are no longer an active participant in the associate's plan but are immediately in the partners and staff Plan. However, the required aggregation group is a Plan in which a key participates in the plan year containing the DD or any of the four preceding Plan Years. 1) Would aggregation be required even though new partner was not a key in the preceding 4 Years in which he or she participated in the associates' plan? 2) If the new partner's prior account balance remained in the associate's plan (although no further contibutions were made) would aggregation be required because the key would be a "participant" in both plans by virute of the account balance remaining in the associates' plan? 3) Would a plan to plan transfer between the plans immediately upon a participant becoming a partner solve the problem because of 1.416-1 T-32?

BILL MM, I THINK THAT WITH YOUR PLAN PROVISIONS YOU WOULD HAVE PROBLEMS NOT PROVIDING 100% VESTING. FROM A QUALIFICATION AND FIDUCIARY STANDPOINT YOU MUST ABIDE BY YOUR DOCUMENT. EVEN IF YOU FIRST AMENDED YOUR PLAN TO DELETE THE VESTING PROVISION AND THEN ELIMINATED THE MATCH, I THINK YOU WOULD STILL HAVE PROBLEMS. ELIMINATION OF THE VESTING PROVISION WOULD APPEAR TO BE A CHANGE IN VESTING SCHEDULE WITH THE ATTENDANT PARTICIPANT OPTION TO ELECT THE OLD SCHEDULE. (I HAVE NOT GONE BACK AND LOOKED AT THE LAW AND REGS ON THIS POINT). ALSO, EVEN THOUGH AMENDING THE PLAN IS NOT A FIDUCIARY FUNCTION, BASED ON WHAT YOU HAVE TOLD PARTICIPANTS IN THE PAST REGARDING THE VESTING OF THE MATCH, YOU MAY BE INVITING FIDUCIARY BREACH LITIGATION UNDER THE SUPREME COURT'S DECISION IN VARITY.