figure 8

Good advice. Thanks.

This is exactly my understanding, and it seems pretty clear-cut to me. I just don't know what to do if the other parties involved don't agree. I had even calculated the proper amounts to be paid out, and they just ignored my calculations.

My thoughts are that I will send an email to the attorney expressing my concerns with the QDRO wording- that I think the AP would have a very strong argument for more money if she decided she wanted to fight for it.

Thanks for the replies. The QDRO only specified a % of the "account balance." I'm just the actuary on the plan and not a fiduciary. But it's clear that the attorney, participant, and AP thought the thing to do was just take X% of the assets, and then everything is good. So, whether or not a QDRO "can" say just take a % of DB plan assets, that is clearly how they all interpreted it. However, I still have the separate issue of the AP had accrued a decent benefit under the CB plan. They say that "everything is good" and that the AP is due no more money from the plan, but did they take into account that the AP would have her own benefit payout in addition to the QDRO payout? I have a feeling they just treated the CB plan as if it was all the owner's money, but this is something I'm still waiting to hear back on. If they come back saying that the QDRO payout was meant to completely pay out the AP from the plan (which is what I am almost certain they will say), and all parties are okay with it, do I just let that stand as well? For what it's worth, the payout she received was larger than her CB benefit. This would effectively mean that she received her CB benefit, in addition to a QDRO amount that was less than X% of the assets (it would basically mean that the QDRO's wording does not match the actual QDRO payment, even though all parties are okay with the payment). I guess this all is a long way of asking - does it matter what the QDRO says if the attorneys, participant, and AP all agree with the payments?

I work on a plan that is an owner/spouse CB plan. The couple got divorced, and the QDRO says the AP gets X% of the owner's account balance as of a certain date. The parties involved apparently all agreed to a dollar amount based on X% of plan assets. However, when I look at the actual benefits as of that date, the AP should have received tens of thousands of dollars extra, if I take X% of the Participant's CB benefit as of that given date. When I initially received the QDRO and reconciled the plan assets and determined more money was due, the attorney who drafted the QDRO came back and said there is nothing more due, because both parties received what they had agreed on. I'm curious if anyone has opinions on this. I'm thinking it's a case of a poorly worded QDRO and/or a misunderstood attorney, but I suppose I let it go if everyone's happy? Are there legal ramifications to be wary of here? Or maybe the QDRO is perfectly fine, and the way they have handled everything is okay? Thanks in advance.

I agree. I don't see how the 10-15 deadline isn't extended.

(d) Single sum distributions. In the case of a single sum distribution of an employee's entire accrued benefit during a distribution calendar year, the amount that is the required minimum distribution for the distribution calendar year (and thus not eligible for rollover under section 402(c)) is determined using either the rule in paragraph (d)(1) or the rule in paragraph (d)(2) of this A-1. (1) The portion of the single sum distribution that is a required minimum distribution is determined by treating the single sum distribution as a distribution from an individual account plan and treating the amount of the single sum distribution as the employee's account balance as of the end of the relevant valuation calendar year. If the single sum distribution is being made in the calendar year containing the required beginning date and the required minimum distribution for the employee's first distribution calendar year has not been distributed, the portion of the single sum distribution that represents the required minimum distribution for the employee's first and second distribution calendar years is not eligible for rollover. The above is from 401a9-6 and the bolded emphasis is mine. The portion that is an RMD is determined by treating the distribution as if from an individual account plan. It then follows that if we treat the distribution as if from an individual account plan, the law (thanks to the cares act) says that the RMD requirements do not apply if the distribution year is 2020. Just wondering if this is a loophole due to inadequate explanatory language in the cares act... I know it is a stretch, but just curious if anyone else agreed there could at least be gray area.

Mike, thanks for the reply. Are you suggesting that if one were to take my theoretical approach, then they’d have to double up next year? Or are you just saying my whole idea is contradictory because a DB RMD is required no matter what, since the cares act doesn’t specifically say DB plans are exempt?

What if the DB plan language says something like this: "The RMD, if the participant takes a single sum distribution, is determined as if the RMD was for an individual account plan." Well, for 2020, such an individual account plan would require no RMD. Couldn't such interpretation possibly exempt DB plans from the RMD for 2020, but only for participants who want to take (and are allowed by their plan) a single sum distribution? On the one hand, seems like quite a stretch, because that doesn't seem to be the spirit of the law (I'm assuming); on the other hand, you're following the literal language of the plan document and the law, aren't you?

There we go: https://www.irs.gov/retirement-plans/deadlines-extended-for-403b-plans-and-pre-approved-defined-benefit-plans

Has anyone heard any updated information about this? I saw that the CARES Act is supposed to address amendment deadlines, but I haven't seen anything yet that address the DB restatement deadline.

A small CB plan (~25 participants) currently requires 1 hour to benefit for accrual. They want to freeze for 2020. Obviously it is too late to issue a 204(h) notice by 12-31-19. Could they get around this by amending the plan to require 1000 hours for 2020, and then just make sure to freeze before 1000 hours are worked in 2020? I do understand they could just freeze ASAP and limit the 2020 accrual to be based on comp through, say, the first week of January (assuming it only takes a few days to confirm with them and get the 204(h) issued). But it'd be easier to just have no accruals for the year. Thoughts? Thanks in advance.

Just wanted to follow up on this post I made earlier this year. This plan just happened to get audited. The audit conclusion is that, hey, you can't just turn a DB plan into a PS plan. Which is what I had always thought. So now I am doing actuarial work for 3 past years and creating a separate PS plan document, and then we will have to properly terminate the DB plan. It's a bit of a burden (especially for an owner-only case) that could have been easily avoided.

My initial interpretation is that if the asc 715 report is going to play a role in determining what the plan sponsor is going to contribute for the year, then asop 51 applies. If the report has no bearing on what they are going to contribute, then it doesn’t apply. So, perhaps for some plans it will apply, and for others it won’t?

Thanks for the replies. I'm sticking to my initial reaction that you just can't do this stuff. Unfortunately, the more I look into things, the more it looks like the prior actuary just wasn't on top of things. I'm seeing a valuation that used a 5% interest rate and the individual aggregate cost method. There are just issues everywhere.

Anyway - I know there are issues here. The main reason I posted was because I was curious if it's even possible to take a defined benefit plan and restate it as a profit sharing plan. The prior replies in this thread seemed to indicate a resounding "no," and I was wondering if anyone had a different opinion.

Thanks, Bird. I agree that at least the end result should be the same as if everything was done properly. My concern is the stuff that happens in between the DB plan and the PS plan. If you don't have to do things the proper way, then what's the point in having the rules in the first place? And moreover, what's the point in hiring an expert who is going to follow the rules? These are some of the issues I am seeing: 1. DB plan never frozen or terminated 2. No election form signed except for the one election I mentioned ("eligible rollover amount will stay in the plan and be converted to an account balance and paid in accordance with the provisions of section 401(a)(9) as they apply to distributions from an account balance") 3. PS plan has the effective date of DB plan - so basically DB plan was just restated to become PS plan. Also, I may have overlooked this, but I don't believe PS document makes any mention of the prior DB structure. 4. DB plan assets in excess of 415 5. 2017 5500 filed as if there is only one plan in place (basically, both plans were combined together for filing, which I guess makes sense if you are treating both plans as the same plan): 5500 has code characteristics for PS plan, but there is an SB too. 6. Nothing changed with the investments - they are still in the name of the defined benefit plan.

Thanks for the replies. This particular situation is a one person, non PBGC defined benefit plan that was restated as a profit sharing plan. The DB plan was also in excess of 415.

I never thought it was possible to "restate" a defined benefit plan to a defined contribution plan. The only reason I bring this up is because I am looking at a case done by another actuary who did just that. The client signed a form saying that their eligible rollover amount will stay in the plan and be converted to an account balance and paid in accordance with the provisions of section 401(a)(9) as they apply to distributions from an account balance. Then there is a new profit sharing document that is a "restatement" of the old DB plan. It doesn't appear that the DB plan was ever terminated. I mean, this is just wrong on multiple levels, right? I would never think otherwise, except for the fact that another actuary apparently thought this was all perfectly fine. That's the only reason I even bring it up - the fact that another actuary thinks this is okay makes me want to make sure that I am 100% correct here.

Well, it does make some sense if you are saying the 3% allocation in the CB plan will be earning 0% return for all future years. But that return assumption seems ridiculous. Personally, I would feel comfortable justifying it is a meaningful benefit. But, it is a good idea to check and see what the plan document says about meaningful benefits and 401a26 first. That could change my opinion.

I think it would make sense in this case to assume a positive projected ICR for purposes of 401(a)(26). If the ROR is negative and you use that rate for 401(a)(26), you're basically saying that you assume the ROR will be negative (or zero, if that's what you've assumed) for all future years, which seems unreasonable.

This article may be helpful: http://www.penchecks.com/what-to-do-with-missing-participants-and-required-minimum-distributions/ I don't think there's a rule on how often you need to search. Once every year or two is probably not a bad idea though.

Thanks, I think this seems like a good interpretation of the regs. However, I'd still be curious if anyone stands by a 12-31-21 (or 1-1-22) starting date, and why. I've seen threads that end with that date being the answer. 4-1 seems to make more sense to me though.

Even if you say that the first distribution calendar year was technically the year of 70.5 (even if no distribution was required because of no vested benefit), I think A-5 just says that the annual payment should commence at the same time each year. Which would be as of 4-1, right? Since that's the initial required starting date?