Mike Preston

Mike got it from Larry. Although Larry was fond of thinking that it was a Walrus, not a seal. He has since been disabused of that, but not by me.

OK, would somebody please read the reg with me????? There are a number of confusing options in the section I quoted. But there is no specific timing associated with an amendment that implements GATT rates as long as the specific timing of the GATT interest rate selection conforms to the section indicated. Didn't I say that before? I'm gonna hafta workie on my Englishie. See (i) which is the rule that says you have until 12/31/99 in the case of a calendar year plan to adopt an amendment that implements GATT in any way you want, and you get 411(d)(6) protection. Now, see (ii) which generally says that if you adopt after 12/31/99 (again, in the case of a calendar year plan) you must use the 1 year "better of both worlds" method and then, after that year, the prior method goes away. Now, see (iii) which says you can adopt an amendment at any time, even after 12/31/99 as long as the specific choice for the interest rate is the first full calendar month preceding the calandar month that contains the annuuity starting date. In order for this to apply, the interest rate being replaced must be the PBGC interest rate. If that doesn't get you where you want to go, see (iv) which expands on (iii) and allows you to change not to the rate of "the first full calendar month preceding the calendar month that contains the annuity starting date" but instead, to the rate that "contains the date as of which the PBGC interest rate (or an interest rate or rates based on the PBGC rate) was determined immediately before the amendment, or for one of the two calendar months immediately preceding such month". In other words, if you wanted to use a 5 month look back, you had to adopt before 12/31/99. But if you are happy with the timing rule that exists in the plan, you can use that same timing rule or use a timing rule that is based on a one or two month lookback from that timing rule and still have 411(d)(6) protection. Now, see (v) which gives you even more options. What you are implying is that the rule of (i), dealing with the implementation date deadline, still applies to (ii) through (v), even though each of those sections includes the phrase: "notwithstanding the general rule of paragraph (i)....". Gary, if needed, you can just adopt another amendment that conforms to one of the amendment options now and issue an SMM.

Phil, I'm sure that you know that I know about the resonance, so I won't go further down that path. That is precisely what my previous comment was about: ("However, (i) is more troublesome than (ii) for the multi because if a non-multiemployer plan has been previously terminated, then the multi is disqualified.") And while the Guilds may go after the little guy, they are not going to go near the loan out companies on the basis of non-eligibility. They may, in fact they have, enforce the 415 limits as they see them. But I was talking about total dismembering (pun intended) when dealing with loan outs. Not gonna happen.

No arguments from me, there.

I think the regulation is pretty clear. If you adopt the amendment now and as long as the replacement of the PBGC rates with the GATT rates is faithful to the requirements as to the timing of the interest rate selection, the amendment doesn't violate 411(d)(6). You could even give the participant an SMM. The question is whether the IRS's regulation is enough to satisfy an ERISA claim. Since, I believe, that the IRS has regulatory authority over this section of ERISA, I think that it should. That won't be enough to stop a participant from suing, though, unless they contact me for my opinion beforehand, which certainly isn't likely.

Not being a hockey player (cite available upon request) I'll just let the loan out issue as to validity rest. From my viewpoint the only issue is whether the plans need to be aggregated. If they don't provide any benefits, then aggregation wouldn't matter, would it? I can't see the Guild plans taking away benefits that have been promised and funded on the basis that the individual was technically a non-coverable independent contractor. Not in this lifetime. So, assuming the benefits are there and they aren't going away, the only thing I care about is how much the loan out can fund for in their own plan. I would love to see something that suppors the parallel universe view. That is, if the multi's don't need to be aggregated with each other, they don't need to be aggregated at all. Nobody has come up with anything, yet, that supports that.

I think it depends on the language of the SPD. Does it have the standard language in it which states that the plan controls?

Phil, I lthink it is (e) not ©. So, I take it you believe that in the absence of multiple corporations where said corporations are not aggregated under 414 aggregation is effectively required at the single employer level of all of the multi's when determining how much may be provided in the single.

Here is the text of that Q&A: Q-6. May a plan that uses the 401(k) safe harbor matching contribution method suspend matching contributions on future elective and employee contributions during a plan year and instead use the current year ADP (and, if applicable, ACP) testing method for the plan year? A-6. A plan that uses the 401(k) safe harbor matching contribution method will not fail to satisfy section 401(k) (or section 401(m)) for a plan year merely because the plan is amended during the plan year to reduce or eliminate matching contributions, provided: (1) A supplemental notice is given to all eligible employees explaining the consequences of the amendment and informing them of the effective date of the reduction or elimination of matching contributions and that they have a reasonable opportunity (including a reasonable period) to change their cash or deferred elections and, if applicable, their employee contribution elections; (2) The reduction or elimination of matching contributions is effective no earlier than the later of (i) 30 days after eligible employees are given the supplemental notice and (ii) the date the amendment is adopted; (3) Eligible employees are given a reasonable opportunity (including a reasonable period) prior to the reduction or elimination of matching contributions to change their cash or deferred elections and, if applicable, their employee contribution elections; (4) The plan is amended to provide that the ADP test and, if applicable, the ACP test will be performed and satisfied for the entire plan year using the current year testing method; and (5) All other safe harbor requirements are satisfied through the effective date of the amendment.

I think they can amend the plan to provide that the match will no longer apply after a certain date. I think the 'cost' is that the plan loses reliance on the safe harbor for the year where the amendment is made. As a practical matter I'd recommend that the plan sponsor ensure that particpants can modify their elections as of the date that the match will no longer be made. If this requires an amendment to the plan to accomplish, make that part of the amendment to cease matching contributions.

Even if the document states otherwise, and has a letter of determination?

I'm not sure I understand the use of the term "411 protection" as it has been used. The regs under 417 (1.417(e)-1(d)(10)) define the circumstances in which a plan may amend the existing 417(e) rates to GATT rates from PBGC rates without offering 411(d)(6) protection to the participant. If done in conformance with the regulations, I have always felt that SMM or no SMM, the provision of the SPD that states the plan provisions control is the determining factor. Of course, it wouldn't surprise me to see a particularly egregious case give rise to case law that reverses that long-standing position. But in the absence of that, the plan document controls. Now, if an employee were to ask whether the plan was contemplating changing to the GATT rates and the employer gave false information, then I think recent cases have made it pretty clear that the employer had a duty to tell the employee what is going on behind the scenes.

I think you should look at the document. It will probably say something to the effect that an employee's election may not exceed a certain threshold. That threshold is likely defined as compensation exclusive of tips. If so, it seems the employee made a bad election and the employer should follow the terms of the document in how to deal with it. Is your document really silent?

I don't think that RR is on point with respect to forfeitures, although I suppose one could read that into it. I have run across a plan that spells it out in great detail that forfeitures are subject to allocation ONLY if and when a plan sponsor says so! In this particular case, the document is provided by a very large provider to thousands of plans, and the provider operates as the Trustee. The document states that the Trustee allocates forfeitures at the earlier of the regular statutory events (distribution of vested or 5-year rule) or, if later, the time when the Plan Sponsor sends a note to the Trustee saying: "Aw, go ahead, allocate the forfeitures." So, do those plan sponsors have 7805b relief? If so, then I'd say you need to look at the document provision you have in place and see whether you, too, have such relief available and can have the forfeitures held in suspense until "whenever."

Should be very easy to do, especially if you start from a position that mimics your name. Or maybe that makes it extremely difficult to do? (g, d & r)

Can I go back to an issue that was started a few messages back but never followed up on: Does the above apply to the multi's only? Or does it also apply to the view from the single? Or, does the view from the single look like: Actors multi plus Directors multi plus Writers multi plus single.

No cap. But you don't have to purchase the bond. The alternative is to have an audit instead.

You didn't give any information that would corroborate the excess 415 issue, so there is no way to give complete advice. Blinky has it right, though. Be prepared for the participant to ask a question: Why wasn't I told in time to pull the excess out of the IRA and avoid the 6% tax on excess contributions to my IRA?

Yes, there are differeing opinions. However, those that say you include the statutory excludables in the ABT when testing 410(B) on a disaggregated basis are wrong. ;-) Even the IRS has changed their position on this. This has been discussed quite a bit on this board. I suppose I should have the link to the long message I posted a while back which details the support for the above conclusion. Maybe somebody else saved it?

What does the Safe Harbor notice to ee's say? Is it the match safe-harbor, or the er contribution safe harbor? If the latter, does it talk about committing at the end of the year or at the beginning?

Here we go........ The plan will have a default option. If you don't elect, the default option will be deemed elected at some point. You most likely don't want this to happen. You indicate that you work for a "company", meaning that the plan you are retiring from is an ERISA covered plan (as opposed to a plan provided by a governmental organization, which has rules which are quite different). Have you read the Summary Plan Description? It sounds like you might have, but I just want to be sure. That is supposed to lay out all of your options in easy to understand English. Easier said than done, though. So, even after reading it you will likely have questions. I'll assume you have read it and it says exactly (no more, no less) than what you have already posted. Is this something they can do? Most likely, yes. Federal law (ERISA) requires that the plan offer only a single form of benefit. That benefit is generally known as the "qualified joint and survivor" benefit. The beneift that you described which provides for $X as long as you live and 50% of X to your spouse, if then surviving, satisfies the ERISA definition of "qualified joint and survivor". To the extent the plan offers other options, though, you should be able to elect them. Your description indicates that they offer only one other option: a 60 month guaranteed payment option, where your spouse gets 50% of what you get, but only until the end of the 60 month period. This is a somewhat unusual benefit, so I can't comment on it. It doesn't sound like it violates any rules, though, as long as your wife has to agree to it before it would actually become your elected benefit. To answer whether it is legal, you'd need a lawyer to respond. But it sure sounds like everything is on the up and up to me. You might want to read that Summary Plan description to see if there aren't other benefit options available to you. For example, does the plan offer a lump sum feature? This is unlikely in that you would probably already know about it by now, but it is worth at least one double-check. If the plan only offers the benefits you have defined, then the only thing you can do to change the options is to self-fund them. For example, if the plan offered a 100% joint and survivor option (rather than the 50% option you defined) your benefit might have been reduced by 22.5%, rather than 15%, but the continuation to your spouse would be 100% of that benefit. I'm not saying that 15% for the 50% joint and survivor or 22.5% fo the 100% joint and survivor are the "correct" numbers. I'm just giving an example. You could take the "exta" amount you are being paid and purchase life insurance with the net (after tax) proceeds of that payment such that the life insurance proceeds would provide additional lifetime income to your spouse upon your death. There are a number of insurance agents that will quote on this type of policy, as it is a somewhat common planning technique. Caveat: I'm not saying that this option is neccessarily a sound economic one. It depends on what is available on the insurance market for you. Be sure to analyze the financial impact. Good luck.

I strongly disagree, and I don't say that too often on BenefitsLink. The issue as to whether or not a merger of a money purchase into a profit sharing is a termination (partial or otherwise) is far from a done deal. There are many, many people who would disagree with the position you say Peat, Marwick espoused. They certainly didn't espouse that when I was there (many, many moons ago). Whether they do or not, or even whether you or I do or not, though, is not the issue. The issue is whether the plan in question is treating it as a partial termination (read: 100% vesting everybody). If they are, then I guess it isn't a problem. But I would not want to be asked why I filled this question in with a "yes" if the plan sponsor had decided, upon advice of counsel, that the merger was not going to result in 100% vesting. Especially, if a plan participant used the answer to that question to make the plan sponsor's life less than comfortable.

I would seriously question a plan design that has potential forfeitures (that is, anybody is less than 100% vested), a 0% formula and a provision that calls for forfeitures to reduce contributions. Nonetheless, in the absence of the IRS getting upset, the net result of these provisions is that forfeitures are not allocated...they are kept in suspense. Did the plan get approval from the IRS on this plan design? I would expect the IRS to pick this up in a regular LOD application. Assuming there is no desire to retroactively change the past (which I suppose the IRS would not object to if it turned out to be non-discriminatory through a filing under EPCRS, probably CAP), you merely change the document with respect to a year where you don't want this to happen. You can amend up to the 412©(8) deadline without a problem, I would think. So, you have until 2 and 1/2 months after the end of a year to modify the document and take that modification into account when doing the allocation.

I don't think there would be a problem with rounding up as the code and DOL regulations deal with minimum vesting rules, not maximum vesting rules. The limitation would be if there was prohibited discrimination. This is unlikely, although I suppose there is always a situation or two where it might apply.

While discussing things that probably have no relevance, I'm not so sure the maximum permissable is infinite. Something about the exclusive benefit rule causes a deja vu with respect to an employer that decided to conttribute dollars well in excess of the deductible limit and the IRS found that the sheltering capability with respect to future earnings was enough to make trouble over. OK, OK. I know. I know. (g, d & r)