KJohnson

You can look at PLRs 8311071 and 8003135 for in-service distributions from a pension plan after normal retirement age. Also the fact that you can still distribute to actively employed non 5% owners reaching age 70 1/2 even though these are no longer MRDs is evidence that you can have "in-service" distributions from pension plans. [This message has been edited by KJohnson (edited 12-20-1999).]

I think I generally agree with the above. However, since you are a multi you are, by definition, collectively bargained. You might see if you can "play" with 1.412©(3)-1(d)(1)(ii) where collectively bargained plans can take into account future benefit increases in their valuations. You may be able to pair this with the 11.412©(7) regulations so that you "deem" a year 2000 benefit increase as being in effect for the 1998 valuation. This MIGHT work if the collective bargaining agreement covers a period which includes both 1998 and the year 2000. Use of future benefit increases in valuations for collectively bargained plans also has to be done on a consistent basis. I am not aware of any guidance on this. [This message has been edited by KJohnson (edited 12-20-1999).]

Participant and Spouse participate in the same Plan. Participant begins taking minimum required distributions from Plan based on a single life. Participant subsequently rolls the remaider into an IRA where she has to continue on a single life basis under the 401(a)(9) proposed regs. Participant's spouse dies. Participant rolls the death benefit into the same IRA. Can participant take distribuitons from the "death benefit" portion of the IRA based on joint lives while continuing to take single life for the "retirement" portion of the IRA?

Look at Rev. Proc. 99-31 Section 4.05 for APRSC correction. This refers you back to 415 correction method and generally the money has got to come back to the Plan either from the participant of from the employer. Action for overpayment will be an "equtiable" action for restitution under 502(a)(3) of ERISA. What this means is that return is not "automatic" and equitable defenses will apply. In some cases if participant has "changed positions" in reliance on the payment Courts will consider this as an equitable factor. Generally, the quicker you act the better.

Look at 1.401-1(B)(1)(i) for the general rule. Also, generally for pension plans you only have to have a "separation from employment" rather than the "separation from service" required for 401(k) Plans. Look at GCM 39824.

In an asset deal seller terminates its plans. All employees are hired by a successor employer. However, successor employer has a 3 month waiting period for new hires. Are these employees M&A beneficiaries? It seems under the proposed regs that they may be left without coverage and with no COBRA rights for these 3 months.

404© disclosure is the problem with unlimited self-direction. You can meet broad range of investments and volatility rules. However, disclosing information on each investment choice may be impossible. Also, 404© talks about giving investment instructions to a "fiduciary" and a broker would proably not qualify. I have heard DOL state that they think 404© compliance would be very difficult if not impossible in such a situation. Without 404© protection, DOL's position would probably be that plan fiduciaries are still on the hook. Who knows what a Court would say.

I agree it would be the second for 204(h) purposes. However, be careful 204(h) may not be your only disclosure obligation. A number of courts have stated that, from a fiduciary standpoint certain plan design features should be disclosed to participants as soon as they are under "serious consideration"

M Weddell--I thought the definition of Plan incorporates the permissive aggregation rules of 410(B). 1.401(k)-1(g)(11). Thus could you permissively aggregate the two plans under 410(B) [although this would ordinarily not be neccessary since the both cover everybody) and then you could aggregate deferrals of both HCEs and NHCEs in your ADP test.

Apparently not if part of a severance deal. PLR 9612008

Generally, if your plan has an annuity option, you must offer this option to all participants with accounts over $5,000 upon plan termination. 1.411(d)(iv) provides that you can only "strip" other distribution options upon termination if there is no annuity option.

Does anyone see any problems with an employer paying the COBRA premiums to an insurer for some terminated employees and not others. Could this actually be construed as creating a new plan with additional COBRA rights? I would think that as long as the COBRA notice was given, no benefits need be offered after the 18 months no matter who pays the premium.

A day late and a dollar short, but look at a 5th Circuit decision called Spacek in where a Court goes through a 411(d)(6) analysis regarding a multi's implementation of new suspension of benefit rules and finds no violation.

My understanding has always been that the (k) regs regarding hardship do not have anything to do with a hardship distribution from employer contributions in profit sharing or matching accounts. I think that if you use safe harbor for both (k) and profit sharing/match accounts you would be okay. However, I think that profit sharing and match definition of hardship could be much broader. I have seen some Plans limit hardship from match and profit sharing accounts to participants with 60 months of service or "seasoned" money of over two years. That way even if the IRS does not like your definition of hardship, you fall within another permitted "in-service" distribution option. [This message has been edited by KJohnson (edited 12-06-1999).]

I know that there have been a number. Generally, any action would have to be brought under 502(a)(3) of ERISA which provides for equitable relief. You would be seeking a remedy of "restitution" and a participant would have "equitable" defenses. In other words, just proving an overpayment might not be enough. The following may be DB cases, but I think the same analysis would apply: In sum circumstances Courts have refused to allow a Plan to recover where "in reliance on the correctness of the amount of benefits, [the Particpant] changes his position so that it would be inequitable to compel him to make restitution. Wells v. Unites States Steel & Carnegie Pension Fund 950 F.2d 1244,1251 f.n. 3 (6th Cir. 1992); Gallagher v. Park West Bank & Trust Co. 11 F.Supp. 2d 136, 140 (D. Mass. 1998) citing Restatement (Second) of Trusts §254. Other Courts have analyzed recovery of overpayments under an "unjust enrichment" theory or similar nuances of "restitution." However, these Courts have noted that one factor which must be considered is whether the participant should have "reasonably expected" to repay the Plan. Harris Trust and Sav. Bank v. Provident Life and Acc. Ins. Co. 57 F.3d. 608, 615-617 (7th Cir. 1995), Health Cost Controls v. Harlow 825 F.Supp. 152, 157-158 (W.D. Ky. 1993). See also Provident Life & Accident Ins. Clo. v. Waller 906 F.2d 985 (4th Cir.) cert. denied 498 U.S. 982 (1990). [This message has been edited by KJohnson (edited 12-06-1999).]

I think the ERISA Advisory Council to DOL has come out with a recommendation for more frequent statements, but DOL has not acted on this.

If the new employer is in the same controlled group then the contiguous service regs would apply and you would have to credit. Did you check for a partial termination in which case you would have to vest anyway? Other than those two items, I don't know of anything else that would require additional vesting.

I realize that there is language in the proposed regs about irrevocable elections as to the form of required distirbution for death benefits, but is there "irrevocable" language with regard to distributions prior to death?

Under 411, consent is not required to begin MRDs. See 1.411(a)-11©(7). If you are dealing with a money purchase or defined benefit plan subject to 401(a)(11) and 417 you also may need to pay attention to QJSA rules. For QJSA purposes if a benefit is no longer "immediately distributable," consent is not required to distribute in the form of a QJSA. 1.417(e)-1©. If a benefit is "immediately distributable" then the propsed 401(a)(9) regs would imply that you have to try and contact the particpant and obtain consent. If you cannot reach them, then you could go ahead and distribute in the form of a QJSA even though this might otherwise violate the consent rules-- Prop. Reg. 1.401(a)(9)-1 H-3. For a Plan in which the QJSA rules apply, I would think that you would always need consent to begin distributions in a form other than a QJSA. I guess this is a long way of saying that, depending on your situation, the lack of consent may not be a problem. As to changes in the form of a distribution, after MRDs have begun, you may need to check your plan document. As long as you are not "slowing down" distributions, I would think that you could make a distribution which exceeds the MRD. For a DB Plan there are certain special rules for annuities. [This message has been edited by KJohnson (edited 12-02-1999).]

Thanks Harry O. I looked for PLRs but could find none on this issue. IRS does seem to take a fairly strict view on construction of TEFRA elections. As a follow up, I saw one PLR which indicated that if a beneficiary was not designated in the TEFRA election then the entire election was invalid. Another PLR seemed to indicate that you look at the election separately for the participant and beneficiary. Election could be o.k. for participant and not o.k. for beneficiary in which case you simply distribute death benefits in accordance with 401(a)(9). This seems to make more sense. Again, anybody have experience with this?

Someone must have had experience with this in the last few years.

In 1983 Participant makes a TEFRA 242(B)(2) election to defer distribution until retirement and to take a lump sum at that time. Participant is now in his mid-80s and is retiring. How much of the distribution can be rolled over into an IRA? All? The balance minus what he would have had to take but/for the TEFRA 242(B)(2) election? Any cites on this? [This message has been edited by KJohnson (edited 12-01-1999).]

The regs provide that once a distribution begins in the form of an annuity, the period for taking distributions cannot be lengthened. However, you would appear to be shortening the period with a lump sum. The regs also provide that, with certain exceptions, the amount of the annuity cannot be increased. However, your lump sum would not be an "annuity payment" but would be another optional form of benefit under the Plan. Logically it would seem that such a distribution would be o.k. but I've never seen anything on this. You probably have more of a plan document issue. Does the Plan allow a participant to "change" the form of distribution once payments have begun in the form of a QJSA. I think allowing a change from a QJSA raises other questions (i.e. QJSA has to be actuarial equivalent to the most valuable form of benefit, QPSA has to be at least as valuable as QJSA etc.)

I believe that unless the participant affirmatively elects an optional form of distribution allowed under the Plan, required minimum distributions must be in the form of a QJSA. I also posed this question on the Distribution Q&A Board on benefitslink. Look at the follow up answer to Retirement Plan Distributions Q&A 122. Also although the participant is 70 1/2 he is not NRA. Therefore benefits are still immediately distributable and consent to any distribution would ordinarily be required. Prop. Reg 1.401(a)(9)-1 Q&A H-3 specifically contemplates this situation and says that you can make a such a required minimum distribution without consent if you have made efforts to obtain consent. However, I believe that any non-consensual distribution must still be in the form of a QJSA because of the 417 regs. Another hitch is that if the employee is active and not a 5% owner, this really is not a "required distribution" from a 401(a)(9) perspective and I am not sure whether you could take advantage of Q&A H-3 and distribute without consent. Also, if the employee is not a 5% owner, does the Plan allow the employee to defer taking a distribution until actual retirement? [This message has been edited by KJohnson (edited 11-29-1999).]

Two calendar year 401(k) Plans merge effective January 1, 2000. Each Plan will have a different profit sharing contribution amount for the 1999 year. Does the profit sharing contribuiton for the 1999 year have to be in by the effective date of the plan merger, or does the employer still have until March 15th to make the contribution under each Plan's 1999 allocation formula?