mctoe

Does anyone know if a plan sponsor is required to offer this new loan feature. I believe the $100,000 coronavirus-related distribution is optional for plan sponsors. Thank you.

Why doesn't the participant get to know who gets what? As a participant, I would want to know what the 85 bps is being used for. In your example, if the investment advisor for the plan is getting 25 bps some may consider that unreasonable.

Thank you for the responses. It is a $350M plan.

The more I look into this plan the more issues I find. I have limited knowledge of creating/maintaining retirement plans but do understand the principles of low cost/fee investing. The fund I mentioned in the original post is a Collective Investment Trust and as far as I can tell the excess fees are used for administrative expenses of the plan. The plan fund line up also includes A class shares which of course does not make sense. A more significant issue with this specific plan is the non-disclosure of certain "expenses" of the plan. The administrative expenses of the plan are documented and disclosed to participants, but there is another bucket of money being paid to "consultants". The funds used to pay the consultants are not disclosed. This is my understanding how this plan works: plan assets are transferred to the investment fund manager, an agreed upon revenue sharing amount is transferred to the revenue account, the revenue account then reimburses the plan for administrative expenses, and finally other funds in the revenue account are used to pay the consultants. The plan does not disclose the funds paid to the consultants. Is this common practice or highly unusual?

Ok thank you Bird.

Reviewing the fund lineup of a retirement plan. One of the funds is a CIT with an expense ratio of 25 bps. 100% of the CIT is invested in a single Vanguard Fund with an expense ratio of 8 bps. Why would someone create a CIT to only hold one mutual fund and then increase the fees of the fund?

With the work I do with gov't DB & DC plans it appears to me that these plans have no fear of being subject to a "real" audit. Also from my experience, the people (plan sponsor/administrator) overseeing these plans know full well they are not in compliance with various IRS regulations but don't seem to care because they are not going to get caught. Just my two cents.

Thank you Peter. I am a little embarrassed now that I asked this question. Guess what was in my bookcase? Yes, the Governmental Plans Answer Book! Going through Chapters 7-9 now, thank you.

What agency has oversight over Governmental DC plans? Are Governmental DC plans ever audited? If yes, by who?

The plan uses a 7% discount rate and an old mortality table-GAM 83. The pension valuation company used a 2.85% discount rate and RP 2000.

Divorcing individual has a defined benefit plan (government) and a pension valuation was prepared by a company. The pension valuation company used "customary" factors in performing the calculation. The PV of the pension prepared by the company was $2.1 mil. The pension plan calculates the PV of the pension at $1.3 mil. Clearly, a large discrepancy. Does anyone know if an argument could be made to use the lower value since that is how it is valued by the plan?

Thank you Effen, very helpful.

Thank you for the response. I have tried to find out what mortality table was used with no success. The discount rate used was 5.30% Not sure what you mean by ancillary benefits Yes, the ages are correct. Police defined benefit plan that provides a benefit after 20 years of service.

My apologies if this is a dumb question from a non-actuary. Is there a way to figure out what mortality table was used in determining PV of governmental defined pension plan? I have the following info: Age at cut-off = 41.86 Pension start age: 45.66 Accrued annual pension benefit at cut-off age = $40,639.32 PV of $1 pension = $12.2619 PV pension = $498,315 Thank you.

Ok, thank you!

Moron?? I was only trying to get some professional opinions regarding this questionable loan/distribution strategy recommended by a very large employer plan.

Thank you Kevin C. Clearly a distribution based on that Q & A. Yes, the participant is eligible for in-service distributions.

Believe it or not, this is recommended by the plan administrator as a way for the participant to receive the non-taxable funds only. Yes, the plan is "canceling" the loan and will not issue any 1099-R's.

Looking for comments on this so-called "strategy". Plan participant has an account balance of $200,000 which consists of $20,000 after-tax contributions and $180,000 of pre-tax contributions plus interest earned. Participant requests a loan of $10,000 from the $20,000 after-tax portion. Participant receives the $10,000 and begins to payback the loan via payroll deduction. A month later, participant cancels the loan and plan administrator pays off the loan using the participant's pre-tax contributions. Two months later, the participant again requests a loan of $10,000 from after-tax funds, begins to payback loan, cancels loan, and plan administrator pays off the loan using pre-tax funds. Ultimately, the participant was able to remove the $20,000 after-tax by itself. 1099-Rs will not be issued. Any thoughts on this?

I agree with your calculation. The $5,474 is subject to taxation/no penalty. I would certainly check with the 401k vendor to be certain the 1099R will be issued correctly.

I believe the age 55 rule exception does not apply regarding loan defaults.

Tried out the spreadsheet and I like it! Could this spreadsheet be used for say a 30 year old to project the benefit at 62, FRA,etc.?

I have no interest in preparing DROs. I am only interested in analyzing the pension/retirement plans aspects of the DRO. My target audience has fairly complicated governmental defined benefits plans and from my experience the majority of participants, some lawyers, and certainly alternate payees do not fully understand the intricacies of these plans. Does anyone know if a "pension expert" is ever hired by an attorney to assist with the preparation of a DRO specifically in the area of retirement plans? Any thoughts on the merits of the Certified Divorce Financial Analyst (CDFA) designation?

Thanks for the responses. In my limited experience it would appear that the drafting of the DRO is critical. If the alternate payee and/or his/her attorney is not familiar with the specific pension/retirement plan they may not really understand what they are agreeing to via the DRO. Also, in some cases it would appear that the employee/participant may have "the upper hand" if he or she is the one hiring someone to prepare the DRO. Is that true?

I have begun to educate myself regarding DROs in relation to governmental pensions/retirement plans. If I understand correctly, a DRO is based on what is written in the divorce stipulation. If something is silent in the divorce stipulation can it be added to the DRO? For example, if the divorce stipulation is silent on the issue of a survivorship pension for the alternate payee can it be added to the DRO? Thank you.