Mike Preston

Do you really have a current plan that uses a PIA offset? Amazing. Regulation section 1.401(a)(5)-1(e)(4).

Don't we already have different AFTAP percentages for the AFN foisted upon us by the PBGC requiring different calculations for the AFN than for the SB?

I don't consider the fact that some asset values include receivables and others don't much of a catastrophe. For those of us who have to complete 5500's, as well as produce Schedules B and SB, there have always been circumstances where asset values differed. Now, there are more circumstances. No big deal. A small, picky, itsy-bitsy comment to dmb who wrote: "there would be no change in operation of plan even after reducing 2009 AFTAP by 10%". In this case, the 2009 AFTAP is not reduced by 10% as of 4/1/2010 because such a reduction only takes place if the prior year's AFTAP is in the range of 60-69.99% or 80-89.99%. That is, the reduction only takes place if, after the reduction, there would be a change in the plan's restrictions (you end up going from 80% or above to something less than 80% or from 60% or above to something less than 60%). This is critical to understanding how other things work under the regulations such as automatic burns or how big a 436 contribution must be.

Just a small clarification. You need to check the language in the plan. There is at least one volume submitter plan that conditions the status of a plan as being safe-harbor or not on the notice being sent out. If the notice isn't sent out, the plan is not a safe-harbor plan for the year and is therefore subject to ADP/ACP testing. In this particular case the IRS might have gone along with it based on the fact that the language regarding the safe-harbor contribution (the 3%) is not modified. Hence, if the notice doesn't go out, the plan is subject to ADP/ACP testing and the plan sponsor is still required to make the 3% contribution.

I'm not so sure. While what you have stated is correct in the abstract, I think it is intended to address circumstances where there are multiple plans, one or more of which have differing plan years. I don't think it is intended to deal specifically with a short plan year. I don't have time to look through the regs to see if there are specific provisions addressing short plan years the way you have defined them. By the way, I presume you have a typo in your description and the two plan years are actually 1/1 through 6/30 and the 7/1 through the next 6/30. Are you saying you really have two short plan years in a row? And that the next plan year after the short plan years is again a 12 month year ending on 12/31? I don't think the IRS would even allow that.

That would be my recommendation.

Yes.

The regs do not specifically address the situation where the only definition of actuarial equivalence for lump sum purposes is the 417(e) rates.

Unless the deferral authorization form specifically addressed this issue, I would be hard-pressed to understand how it could be interpreted to allow for a make-up. It would seem to violate the reasonable expectations of most employees.

I've never been comfortable with anything less than the lowest percentage which exceeds zero on the plan's vesting schedule. That is typically 20%.

Since we don't know what benchmark you would be measuring against, it is hard to provide a meaningful answer. If you are interested in generalities, you might look into old PBGC instructions for premium payments. In those instructions, the PBGC lays out a methodology of determining what the modified liability is based on a theoretical retirement age and a "before" and "after" interest rate. Then you would need to determine what the "before" (your current interest rate) and the "after" (your new interest rate - perhaps the effective rate?) interest rates should be. I'm not saying this will definitely determine an accurate answer to the question you pose, but it may provide you with some insight. Otherwse, what David said.

Those of MY lawyer.

You must first make a decision as to what benefit is appropriate to value. Assuming you go with the lump sum, then you must value it using the greater of: a) the lump sum provisions under the plan without consideration of 417(e); and, b) the funding segment rates and 417(e) mortality; with the result just obtained limited to no more than the lump sum payable under 415. The IRS isn't very concerned about this issue because the cushion will normally produce a range that provides for a maximum well in excess of what it would be prudent to contribute (at the high end) and if the low end produces an underfunded plan, then the client is just shorting themselves.

Do whatever you would do had there not been a potential restriction. That is, ignore the potential of a 436/401(a)(4) restriction when determining assumptions.

I think we are saying the same thing, but with different words. The contribution made in 2010 will be applied to either the 2009 plan year or the 2010 plan year. If it is applied to 2009, it will be reflected, as appropriate, on the 2009 Schedule SB. Yes, you apply the first dollars shown for any given year (like 2009) to any unpaid amounts for prior years (and the Schedule SB has a line specifically for this). Same with the deficiency stuff. You don't get to recharactarize a 2010 contribution, ostensibly made for 2008, such that the assets used for the 2009 valuation are modified. They remain whatever they were (lower than what they would have been had minimum funding for 2008 been satisfied on a timely basis).

This I agree with. The (1) magically changed to a (3). Shouldn't this also be "(1)"? Also, note to OP: Tom's method only works if you satisfy the requirement of that particular regulation: the document must call for the contribution to be determined as if the affected individual was age 65. If it doesn't do that, then you don't satisfy the regulation. In other words, an age-weighted document can be drafted such that it takes advantage of this rule, but it doesn't need to do so.

Sorry, it doesn't work that way. The deficiency at the end of 2008 gave rise to a deficiency at the beginning of 2009 and impacted the required contribution for 2009. If you make a contribution in July of 2010 you have a choice as to whether to apply that to the 2009 year (which is the most likely thing) or to the 2010 year. Assuming you apply it to the 2009 year you would discount it to the valuation date using the effective rate for the 2009 valuation. Follow up if this isn't clear.

You may run disaggregated testing for 401(k) non-discrimination and non-disaggregated for PS. Keep in mind that there are special 401(k) aggregation rules that apply to HCE's even if you run on a disaggregated basis.

Hate to say, but you were never exempt. And you aren't now. However, if your plan is funded to the point where it is considered 100% funded (that definition has changed over time, but the basic percentage remains the same) in the prior year, then there are no quarterly contributions required for the next year.

Instead of xCy I've always been fond of: ( x ) y But darn if I know how to format that so that it looks right. You didn't ask for the underlying formulas.

Did you evaluate my expression?

Let x = 1, then the answer is: ((x+1) x 10(x+1) + (x+2) x 10x + (x+3)2 x 100 / 2) x 101 Right?

To the OP: Updates would be appreciated, even if the process takes longer than you would like. We like to keep abreast of how the real world operates. To the rest of us discussing this: I was looking for a court case that analyzed a given plan's QDRO procedures where those procedures included reference to pre-DRO holds of a certain length. I was aware of Schoonmaker, but that case made it clear there were no actual pre-DRO procedures in the plan or in the QDRO procedures. That case is the poster child for having language in the plan or in the QDRO procedures to cover what a Plan Administrator may, or may not, do. And while the award of damages was based on a similar circumstance to the case I am almost remembering ----I seem to recall it was based in or near Philadelphia and was related to Sperry/Burroughs/NEC in some way---- that is, the investment instructions were not followed leading to significant losses in the account, I was focusing on the length of time a hold could be considered legitimate given that it was documented either in the plan or the QDRO procedures.

You aren't going to like my take on this. I'm not sure I agree with QDROphile that plans which put a hold on the entire benefit can be faulted. Yes, they have a responsibility to preserve and protect your interest, but there is nothing that says keeping it in the plan doesn't do just that. The sections of the Internal Revenue Code and ERISA that deal with QDRO's are not a model of clarity. They seem to focus primarily on what a plan must do once it has received a Domestic Relations Order. They say precious little about what should be done in the all too common scenario which you describe: the Plan Administrator gets wind that a DRO exists or will soon be produced. Plans are therefore free to craft their own procedures to deal with this circumstance, subject only to eventual review by the Courts, which is expensive and therefore rare. That doesn't mean that Plan Administrators are free to do what they please. I seem to recall there was a case that relates to a large electronics firm which put a hold on things as you have described and, even though it was a participant directed plan, refused to honor a request from the participant to modify the investment mix. As it turned out the market tanked and the participant had requested that the funds be invested in a way that would have escaped the market plunge. The Plan was taken to court over the issue and, even though I can't lay my hands on it at the moment, I seem to recall that the Plan had to cough up some dough. But the plan wasn't challenged based on its refusal to allow a distribution (or a partial distribution). It was challenged on the fact that the participant's clear rights under the plan had been stripped and there was no support in the law for having done so. In your case, as I've already mentioned, the law appears to be silent on how a plan goes about protecting everybody's interests (the plan's interest, the participant's interest and the soon to be ex-spouse's interest) when it hears of an impending QDRO. You are therefore most likely stuck with the plan's own procedures. You need to analyze them in great detail (or have a lawyer do so for you) and see if you can ask the plan to make a distribution to you while still following the exact language of their own procedures. For example, you might want to assert that letting them know via email doesn't satisfy the definition of a "QDRO confirmation" as defined in their procedures so you are respectfully asking them to honor your distribution request because they would not be following their own procedures if they treated the email as a "QDRO confirmation." Will that work? Probably not, but it can't hurt to try, as long as there isn't anything in the QDRO procedures you haven't produced here that would otherwise grant them the discretion to put a hold on your entire interest. As has already been mentioned, your best course of action may be to see that the DRO is presented to the Plan Administrator ASAP so that this whole thing can be handled as expeditiously as possible. A little DRO historical note: the law allows a Plan Administrator an 18-month window during which it can investigate a DRO with the goal of determining whether it is qualified (and thus a QDRO) or not. Many plans have latched on to that 18-month period and say that it is therefore reasonable to wait the same amount of time after being told a DRO is in the wind before removing a hold on a participant's account. As far as I know, which since I'm not a lawyer doesn't mean much (since I don't have access to services which can search court decisions), there have been no cases challenging a Plan Administrator's right to use whatever period of time it thinks is reasonable in this circumstance. So, while there is no direct support in the law for a specific period of time during which a plan may refuse to honor a request for a distribution to a participant who may soon have a DRO presented to the Plan Adminsitrator, there is no guidance from the courts or regulators saying that a refusal is against the rules. Maybe somebody on this service is aware of a court case or regulation I'm not aware of and can provide updated information on this all too "squishy" a topic.

I don't dispute anything that you write, but I wasn't commenting on the likelihood of reversal, just whether or not reversal is precluded. It isn't. And it would be up to the law of the state involved as to what hurdles would need to be cleared before allowing a reversal. We don't know whether the OP's attorney never informed him of the ability to go after the ex-spouse's retirement was due to fraudulent disclosure or whether it was ignorance.