mbozek

I think you need to call the plan admin and review the Summary plan description for what expenses can be charged to participant's account. $900 is a lot of money just for plan admin- many funds do it for $15-30 a year. Are you sure it isnt the management fee from the fund? Do you have a directed brokerage account under the plan? Under ERISA a plan can charge fees that are reasonable for the service provided.

Given the litigation risk involving cash balance plans regarding age discrimination and lump sum values why would anyone advise an employer to establish a CB plan?

See Cooper v. IBM, 2003 WL 21767853 S.D. Ill Jul 31, 2003 for court decision on how Pep plan formula results in age discrimination.

If the PS plan permits separate accounts why not just terminate it and roll the funds to IRAs where each participant can direct investments? Or if one or more participants has an outstanding loan just continue the PS plan until the loan is paid off? Why bother with the complexities of maintaining separate accounts in a DB plan? Aslo if the PS plan is continued the partners could make discretionary contributions in future years if there is spare cash.

In a well drafted early retirement or severance plan there will be a provision that prohibits the employee from coming back to work for a stipulated period of time usually two years. The reason is to prevent the employee from double dipping: taking the early retirement benefits and then returning to work and collecting a salary. Your former employer could view your working for the temp agency as continuing to work for the employer because the employer is paying the temp agency's fees. Even if there is no written provision prohibiting the employee from returning immediately after taking early retirement there is nothing to prevent the employer from refusing to allow a former employee back into the plant because the owner can set any rules it wants for persons who set foot on its property.

Legally the award should be divided among those participants who invested in the fund and paid to them as a distribution. However, there is a question of whether the plan admin has any records of those participants. If the participants cannot be located then you could treat it as a forfeiture and check the plan rules for disbursement after termination of the plan. There really isnt any guidance on what to do with latent plan assets which surface after a plan has been terminated. I once had a client who received a check for $80,000 from an insurance co. that had demutualized for a group annuity contract used to fund a DB plan that terminated pre ERISA. The client elected to deposit the funds in another plan.

Maybe the difference is between good managers and great managers such as Torre who showed no hesitation in pulling Roger Clements in what could have been his last game in the 4th with the Yanks behind 4-0 and putting in Mussina who had never relieved in 400 previous pitching appearences. Maybe I dont know enough baseball to know why a manager would not use two fresh relief pitchers to protect a 3 run lead in the last two innings of the most important game of his career instead of keeping in a starter who had already thrown over 100 pitches. Maybe some managers rely too much on their instincts of when a pitcher should come out.

In the interest of helping the rest of us understand what the proposal is, why not post the f/o illustration used by the actuary to determine whether it would pass muster under IRS regs.

If the participant is not married at death then the death benefits are those paid to a non spouse beneficiary under the plan which is usually nothing in a DB plan. The larger issue is whether the state court retains jurisdiction over the property settlement after the divorce and could issue a DRO to the plan providing the ex spouse with the 50% survivor benefit. There is case law permitting post mortem QDROs under the terms agreed to in the divorce. As a matter of equity the ex spouse should not be denied the right to the benefits agreed to in the property settlement because of the death of the employee if such benefits were vested at the employee's death and would have been payable under the plan. If the LI policy is not employer provided then the benefits will be paid to the designated beneficiary. However, some states (CA, WA and HI) have statutes which automatically remove the spouse as beneficary upon divorce. Need to check state law.

This question is probably best answered by the actuaries but I thought that a floor /offset between DB and DC plans would have pass cross testing under Reg. 1.401(a)(4)-8 which does not permit employee contributions to be used to fund the stated benefit (in other words can't use employee contributions to pass cross testing). Also a top heavy plan must provide a minimum benefit of 3% of comp in the dc plan or 2% to the DB plan. If a 401(k) plan is top heavy then the employer must make a 3% contribution to all non key employees in any year in which a key employee makes a 3% contribution to the plan.

A the time the 401(k) regs were last revised in 1994, non profit employers were not permitted to adopt a 401(k) plan. The proposed regs reflect the 1996 change in the law which permits a non profit employer to establish a 401(k) plan as well as a 457(b) plan in addition to a 403(b) plan or a SIMPLE IRA, none of which was permitted when the regs were last revised.

Jevd: The receiving IRA custodian will not want to be involved in any prior beneficiary designatons or restrictions on payment which were imposed on the transferring IRA since the transferred assets will be subject to the terms of the new custodian's IRA including the designation of beneficaries. The transferee/beneficiary as the owner of the new IRA can designate primary and contingent benficiaries as permitted under the tems of the custodial account. Also in answer to Barry's question, an IRA beneficiary designation can give discretion to an IRA custodian to determine the beneficiary of an decedent's IRA since the IRA is a contract between the owner and the custodian. However, IRA custodians routinely decline to accept such beneficary designations to an IRA because it makes the custodian a fiduciary subject to law suits by disgruntled beneficiaries. An IRA owner can permit discretion in determining the beneficiary by providing for the IRA payments to be made to a trust where the trustee determines who is to receive the income.

IRAs are contractual arrangements between the IRA owner and the IRA custodian. A beneficiary usually becomes the owner of his or her interest in the IRA upon the death of the owner, including the right to invest or transfer the funds to another IRA. The IRA funds are now subject to the rules for inheritance as proscribed by the reciving IRA, not the transferring IRA. If the IRA owner wanted to limit the rights of a benficiary to assign the IRA benefits or eliminate the right of contingent beneficaries at his/her death then the owner should have provided for the IRA payments to be made to a trustee who would make payments as required under the terms of the trust to prevent the beneficary from being able to assign his interest in the IRA.

I thought that non qualified plans were not considered to be successor plans which is confirmed by the proposed regs.

Who is responsible for the Error? The plan admin, TPA or the insurance co? you need to review the contract with the party who caused the error to see what is the remediation for the mistake and who is responsible for making the employee whole. I dont see how the ins co can back date a distribution paid this year to 2000 since the employee is a cash basis taxpayer who is taxed in the year the payment is received.

The california extension of COBRA applies to employers who maintain insured health plans for employees working in Cal. It is not related to where the contract was issued. Employer maintaining insured plans for cal. employees need to consult counsel to determine if the Cal extension is preempted by ERISA. The earliest that the additonal coverage will have to be offered is July 1, 2004 since the law only applies to employees terminated on or after 1/1/03 who have exhaused their federal COBRA benefits.

Conversions require amending the original tax return. The s/l for amending a 1998 tax return expired on 4/15/02. See IRS pub 590 P. 57-59 for time limits on recharacterizaton of Roth IRAs.

Section 401(a)(4) only prohibits discrimination in favor of HCEs. There is no prohibition if a plan discriminates against some or or all HCEs. E.g., a Q plan could provide lower level of contributions for all HCEs. A 401(k) plan that meets the ADP test will be deemed to comply with IRC 401(a)(4). IRC 401(k)(3)©. I dont know what other discrimination would apply to HCEs as a group.

The current low interest rates that have lead to exaggerated lump sum values are the result of the short term roiling of the financial markets. The increase in demand for risk free investments in the last 3 years and the end of the issue of 30 yr bonds have driven the yields on 30 year bonds down to ridiculous levels that were not though possible when the calculation of interest rates was revised in 1994. (DB plans are large purchasers of such securites). Allowing participants to take lump sums in such exaggerated amounts depletes plan assets needed to fund future benefits which requires larger contributions by plan sponsors who do not have surplus capital. GM recently issued $10B in long term bonds and contributed the proceeds to its underfunded pension plans. (By the way GMs unfunded penion plan liabilites exceed its stockholders equity.) The combination of final average retirement plans and retiree health costs will be the end of the American industrial corporations because the increasing costs cannot be passed on to customers. Almost every us steel co has gone through bankruptcy to shed those liabliites (Bethelhem Steel stopped its pension plan and retiree health benefits for 95,000 persons in March.) Eventually the airline, auto and telecom industries will have to reduce or eliminate pension and retiree health benefits either voluntarily or though bankruptcy. Congress can change the interest rates for lumps sums at any time and even retroactively.

See Rev ruls 72-368 and 73-79. Failure to meet 401(a) requirements in one year does not prevent plan from qualfiying in a later year.

purchase of primary residence should be evidenced by contract to purchase residence. land alone would not qualify.

Since pre nups are not valid waivers of spousal rights under an ERISA plan, the widow is entitled to the entire death benefit, e.g., 100% of the account balance. The trustees are at risk if any of the death benefits were paid to the children and therefore should consult counsel. The death benefits payable to the spouse are not require be distributed within 5 years after death. The spouse could rollover the balance to an IRA at any time. There may also be collateral liability for the attorney who drafted the pre nup if the owner was advised that it would eliminate spousal rights to an ERISA covered plan. One big Question: does the spouse know that she is the beneficiary of all the death benefits or are the kids and H's estate assuming that she is not entitled to amount paid to the kids because she signed a pre nup in return for the Life insurance. I think the Plan admin has a fiduciary duty to tell the spouse of her rights to the payment to the kids.

The nonalienation provisons of IRC 401(a)(13) do not apply to church plans which are exempt from vesting under ERISA. See last sentence following the end of IRC 401(a)(34). Therefore there is no prohibition on paying benefits to an ex spouse under a church plan. Second reg 1.401(a)-(13)(g)(3) permits payment of retirement benefits under a QDRO to a ex-spouse prior to the date the benefits would otherwise be payable under the plan. Also (p)(4)(A)(ii) deems the date payments begin under the QDRO as the date the participant retired.

Some non ERISA 403(b) plans permit distributions of retirement annuities at any time. Need to find out the withdrawal rules. Or she could take out a loan which would not be treated as a distribution (But loan would have to be paid back). Finally if permitted under the plan, she could elect to take a distribution of substatially equal payments which would be exempt from the 10% penalty. worst case scenario is for her to terminate for health reasons and take a distribution. To limit audit risk why not permit a distribution on account of disability if the custodian gets a Dr statement conforming to the requirement of IRC 72(m)(7) that she is unable to engage in substantial gainful activity, since a 403(b) plan is not required to be administered in accodance with plan terms?

The trustee / plan admin needs to ask vanguard why a distribution was paid out without the approvial of the Plan admin. since the fund co is a custodian who does not have discretion to make distributions of plan assets without approval of a fiduciary. After getting an answer from Vanguard counsel should be retained to determine how to fix the problem.