Mike Preston

I would think so.

Tymsup, that is my recollection, too. Hence, Andy shouldn't be worried about having the balances burned in a way that precludes 412(m) from being satisfied, only that the Notice should be scheduled for delivery along with, or as a part of, the SAR for the year.

Austin, do you really expect an answer?

This is how I understand it is supposed to be done. Not correct, to the best of my knowledge. The way the law is written?

Well, I suppose one can't argue with what you say. However, it doesn't really bear on the issue, does it? Couldn't you also have said that you have to test the plan for benefits, rights and features to ensure compliance with the non-discrimination regs?

I disagree that each plan in your example would pass coverage on its own. Passing coverage for a plan is always defined in terms of ensuring that the ratio percentage of that plan exceeds the applicable minimum. When determining the ratio percentage of a particular plan one must take into account all employees of the entire controlled group. That wasn't explicitly stated because it is always a given in any calculation.

I understand that the notice requirement is activated in that manner. When are the notices required to be given?

I don't have time to look up what the timing requirements are with respect to the notice of missed quarterlies. Can you list them?

Neither, as it depends on plan language. In most plans I've seen, though, you would be wrong because of plan language, not because it is impossible, theoretically, to do what you suggest.

Andy, I'm not entirely sure what the issue is here. Quarterly contributions, to the extent they are not made when due merely establish additional charges to the funding standard account (or whatever it will be called under the new PPA paradigm). So, if you burn your credit balance for a good cause, even if that is done retroactively, the net result is that the required minimum contribution goes up by a small amount to reflect the interest due on the missed or late quarterly contribution. Note that I did not review your analysis to see whether any of the mandatory burns come into play as I think your focus was the impact on quarterly contributions.

Or maybe downwind of the DEA on burn days.

With a third segment rate of 6.66, once the 417(e) rates are fully phased in, it is hard for me to fathom that they will have any impact on lump sums in the majority of plans. Sure, if a plan uses 8% for its actuarial equivalence, 417(e) will always remain relevant. Even in 2008, with a 20% phase in, we are at a low of 5.02 for the first segment rate and a high of 5.28 for the third segment rate. Assuming a 5% actuarial equivalence interest rate, the mortality would have to make up quite a bit for 417(e) to require an uptick, wouldn't it? Again, I don't have time right now to do a complete work up, but assuming a current age of 65 (minimize segment 3 impact) the 417(e) factor is 141.4463 based on the 20% phased-in percentages of the August rates (using estimated mortality of the CL08 blended). The factor using 5%/94GAR (by far the most common actuarial equivalence factors in small plans) is 141.5291. So, plan actuarial equivalence is more expensive. As you retreat in age, the impact of the third segment rate increases and the 417(e) minimum lump sum is even less. Once we are talking fully phased-in, the age 65 factor would be only 130.029. That is almost a full 9% less than the actuarial equivalence.

They all get a free pass.

I've substantially modified my post in: http://benefitslink.com/boards/index.php?s...mp;#entry154180 effectively saying that 417(e) is essentially dead.

Definitely determined by the IRS. The methodology was shown for those who wish to do some sort of projection (think Ibbotson) for the future. Us mere mortals will await the IRS prestidigitation.

Yes.

I hate to say it, but reading that section was downright fun! My guess is that if they put that stuff on the EA exams (the how's and why's of that methodology) there would be far fewer EA's. Maybe that is their intent.

I don't expect the mortality table published with the proposed regs under 430 to change, do you? But that is solely for funding and it looks like you are looking for the 417(e) mortality table. Are we convinced that it is going to be something different than 94GAR? If so, is it likely to be anything other than a unisex version (qxf/2+qxm/2) of the combined table as published in the proposed regs under 430? In any event, I've obliterated my prior content where I babble on about segment rates incoherently (well, not really, but you get my drift). Essentially, I find it hard to believe that the 417(e) rates will have any applicability in the vast majority of plans, starting as soon as the new rules become even partially effective. Since I believe that the annuity stream will almost always generate a significant liability with respect to segment 3 (ok, maybe not "always"), the net result is that Congress has harpooned 417(e). I, like you, eagerly await somebody actually running some numbers, which I will do after the 15th.

I'd be concerned, and I have in fact been concerned in the past, about an indirect PT. If the plan sponsor takes into account that income and then pays the individual a different amount that might otherwise be paid, you clearly have an indirect PT. Could it be proven that such indirect PT did not take place? I suppose many things are possible.

There is no way that anybody here can effectively answer you. You simply must engage ERISA and litigation counsel to determine what is your client's best course of action. Period. End of discussion. Keep in mind that anything you disclose on the 5500 will be subject to disclosure and be part of the litigation process. It will at some point be referenced by the folks that your client will probably sue and by the folks that may sue your client for recovery of their monies. Do not pass go. Do not collect $200. Go directly to engage appropriate counsel.

401(k) Deferral for 2007 was $15,500 and it is highly likely to be the same for 2008, unless inflation in the one month period ending 9/30/2007 was an annualized rate of about 39%. The catch up limitation will remain $5,000 until we have about 12% inflation on the index as of August 2007. For that to happen in the one month period ending 9/30/2007 would be impossible. 401(a)(17) will most likely be $230,000. Here, we only need an increase of about 1.2% for the one month period ending 9/30/2007 to see it increase to $235,000, so that is definitely a possibility, although still unlikely. That would translate to an annual inflation rate of about 15% so it isn't likely, but is possible. The DC 415 limit is based on the same factors as the 401(a)(17) limit so we ARE going to increase to $46,000, and if the 401(a)(17) limit goes up to $235,000 it will be $47,000. The DB limit will be $185,000 unless things for the month of September go completely haywire.

Yes, these are all family members. No, there are no other participants and there won't be as the plan is terminating. Yes, the election forms allow the beneficiaries to elect the amount of the distribution, subject to being increased if it doesn't satisfy the 401(a)(9) minimum required distribution amount. Yes, they each ELECTED the amount that is consistent with the oldest beneficiary (the sibling that is in charge of this process "asked" each of them to elect the same amount so as to keep the accounting simple - and therefore retain the same exact interest in the plan for all beneficiaries). I'm thinking that the issue is one that can go either way, based on how they document the file.

But we know what they are going to be. Which amount are you interested in?

I guess my point is that if the Plan Administrator were to sympathize and ask what the minimums would have been had they taken the position that there were individual accounts, we would respond that they were all less than the distributions actually taken. Hence, nobody would have violated the minimum. Further, since everybody took the same amount, the accounting would yield a result such that each beneficiary has the same interest in the account. It seems to me that if, upon distribution, the Plan Administrator writes a letter to each beneficiary declaring that the individual account method was adopted to determine the absolute minimum for each participant but that each participant received a minimum distribution which kept everybody's account identical, then each beneficiary could determine their own minimum accordingly. Does this go under the definition of no-harm, no-foul?

Your approach is the only right one.