Mike Preston

It really is lazy language. "after his return" should maybe have been "after such break". The writer was trying too hard not to be redundant. Redundancy is sometimes a good thing. Redundancy is sometimes a good thing. The language in question seems to define what happens with respect to periods AFTER the break in service. It doesn't say too much about the period DURING WHICH a break is taking place. While I agree there are exceptions, if an individual is a participant in a plan and the individual is not a terminated employee, then the number of hours worked is not going to impact whether that employee continues as a participant. The number of hours may dictate whether that individual is eligible to receive an allocation or an accrual, though. There is some history on this, I imagine, although I can't remember precisely what it is. Older plans (pre-TRA) used to define active participation and inactive participation. Something must have changed with TRA, although, as I said, I can't put my finger on it at the moment. My guess is that PIP's position is the one that the IRS would take without clear language to the contrary in the plan itself.

Yes. No reason. But the mere fact that you are asking this question gives me pause. What is unusual here? Do they each have thousands of employees? Are they separated? Something smells funny.

I think the insurance agent is just a bit confused about the bond. They may not be familiar with an ERISA bond. They should call somebody familiar with ERISA bonds and go from there. By the way, aren't your numbers off by a factor of at least 10? With $200,000 in assets the bond should be $20,000, at the least, not $2,000. Maybe even more if the assets include things other than marketable securities. In fact, it is usual to procure a bond for something in excess of 10 times the current market value to account for growth in the assets.

Remember that it is 6% of those who participate in the DC plan. Anybody in neither plan or in only the DB wouldn't have their compensation included.

Combine.

9. Plus anybody who is an HCE via ownership.

I agree with both of you. I think. I think it is a double dip if you include a mortality increase for a period where death does not bring about a forfeiture. I think you have to follow the terms of the plan, and if it is drafted to give a double dip, then a double dip it shall be. Gotta watch that 415 thingy, though.

As is said occasionally, Treasury is theoretically downwind from the DEA and these regs evidently were drafted on a day when a big stash was being burned. Notwithstanding the above, I think that there are options which can significantly decrease the RMD from the annual benefit of $120,000 you mention. The old regs would have required a minimum distribution of about $52,000. The new regs have options therein, as David referenced, which allow a minimum distribution in the first year of about $53,000, assuming all things fall into place, like the willingness and ability to amend the plan to provide for the options available in the regulations.

I'm feeling pedantic at the moment, so..... There is no prohibition against bottom up QNEC's in the new regulations. You can have them in your document and not run afoul of the qualified plan rules. However, you will be limited as to how much of said QNEC's are actually taken into account to assist in the passing of the ADP or ACP test.

Yes. Not off the top of my head and I don't have time to look it up. Sorry. Maybe somebody else will.

I'm not so sure. Well, actually, *I* am sure. I'm just not so sure that the IRS is sure. In fact, I know they aren't sure. Or if they are sure, they are sure in a way that is inconsistent with what I believe to be sure. What? An example: prospective (BOY) compensation shouldn't be "too" accurate, because getting it "just right" (as we would with a valuation that uses retrospective (EOY) compensation) is apparently not copcetic. I find it hard to believe that a judge would disallow a deduction based on the actuary being "too accurate", but I guess stranger things have happened. Of course, this should be litigated on your client's nickel, not mine.

Don, "it" can't speak to air. The writ may be real, but the previous postings are bogus. Therefore, I don't have a clue what issue you think the writ speaks to. Do you think it speaks to the issue of malapropism with respect to pigs and hogs? If not, what? BTW, 9th circuit cases are not unknown for their levity. Supreme Court decisions sending the 9th circuit home (proverbially speaking) with their tail tucked 'tween their legs are not unknown for their levity. There is levity all around, Don. Embrace it!

Huh?

Don, what issue? Fabrication or levity?

I'm not sure it is similar. It might be, but it might not be. In any event, the above is easily proven just by looking at the definition of a plan. In this situation, if you permissibly disaggregate, one of your plans is a safe harbor, the other is not. QED

Ignore.

Did you have anything specific in mind? If not, their website is the place to start: http://www.asppa.org/

This does seem to require a finely targeted question to ensure accuracy, but what was confirmed is that the 417(e) subsidy is ignored when determining MVAR's. This does not mean that any other plan subsidy is ignored, so an actuarial equivalence provision which involves a subsidy upon conversion will impact MVAR's. Usually, of course, the younger the individual the greater the subsidy, so this is rarely a concern in a4 testing, although one can not guarantee it 100%. The key is in recognizing a plan subsidy versus an ignorable 417(e). There are at least four cases, as far as I can tell: 1) no lump sum, but other forms of benefit are converted using rates which are less than the a4 rates in use. This will cause whatever optional form is available to result in a calculation that will modify the otherwise applicable MVAR's 2) lump sum tied to 417(e) rates, which I prefer to think of as having two rates in the plan: a) the use of a specific rate determined by reference to 417(e) which is the "regular" actuarial equivalence and therefore will give rise to a modified MVAR determination; b) the standard provision which requires the plan to pay the greater of the lump sum under plan rates and 417(e) rates. In this case, of course, (b) has no meaning because it is identical to (a). But (a) exists and creates an MVAR issue. 3) lump sum under terms of plan always more favorable than 417(e) rates, such as your 2% example. Again, going through the logic of (2), now (a) has no impact for two reasons - i) even if it did apply, (b) would be bigger, ii) but it doesn't apply because the 417(e) subsidy is ignored. 4) lump sum under terms of plan may be more or less favorable than 417(e) rates in which case it becomes clear that one merely ignores 417(e) rates and uses the plan's definition of actuarial equivalence for purposes of establishing the MVAR applicable to that benefit. Clear as mud, right?

It depends. While there is no legal requirement to change it for plan purposes, there may be an accounting requirement to change the mortality table for measuring long term liabilities. That would be up to the accountants, I suppose.

Mike, would you please elaborate? Would you not agree that this is a subsidy subject to inclusion in the MVAR calculation? What is being "confirmed"? Bad typo. Should have said "would not be the same if the 2% was 3%". Sorry.

Maybe. What you haven't defined is what the plan's definition of actuarial equivalence is when the lump sum form is elected. Is it 417(e)? Plan Rate of X% where X is different from testing assumption? Plan Rate of y% where y is the same as the testing assumption? Only in the third case are the MVAR's the same.

Too ambiguous a question. Try limiting it a bit. In the first case, the MVAR's will be different depending on whether the interest assumption for a4 purposes is higher, lower or the same as the 8% assumption. In the second, I need to know whether the actuarial equivalence *IS* the 417(e) rate or whether there is an actuarial equivalence provision that turns out to be irrelevant merely because the 417(e) rate always produces a larger benefit. In the third case, it seems pretty clear that the MVAR would be the same whether the 2% was 3%, which may answer your question.

Yes. In print. The 401(a)(4) regulations. Quite clear.

It isn't my interpretation, it is what I've heard from the IRS representatives. Yes, the key word is beneficiary. I just don't see how someone can be a beneficiary if they aren't even in the plan! That is the case cited by the OP isn't it?

Confirmed.