Tedterrific

Has anyone actually had a client’s plan (DC or DB) disqualified for not being permanent enough?

Are you making this change for the plan year ending 12/31/2021? If so and you have the usual 1,000 hour accrual rule, I would guess it’s too late to change the accrual for 2021 for anyone with 1,000 hours. What am I missing?

I am more concerned about the impact on the former participant who is a friend. Additional facts I have just learned: NRA was in 2017. Plan was a cash balance plan. Plan administrator has records of communication asking for a benefit election. Nothing was received according to them so they issued checks on a default 50% J&S annuity. I do not think any checks were cashed. The administrator has agreed to reissue a check or checks for the missed monthly payments and to continue the monthly payments. They say that the form of distribution cannot be changed to a lump sum. so I think the only option is to get the past due checks and start cashing the monthly payments as they come in. The participant is a friend but I think she screwed up. Nothing else to be done, right?

This has apparently been “going on” for a few years. I’m assuming they started the monthly payments from the DB based on the default 50% J&S and husbands DOB. and just to add to the confusion they just got a notice from IRS on undeclared income for the uncashed checks. I would think 1099s had to have been issued even if the checks weren’t cashed? Most of this might be the fault of the participant. Though I thought administrator would have sent something by certified mail return receipt at some point - maybe they did. Particularly since the cost of doing so is infinitesimal compared to size of plan. So to sum up - OY!

Former employee attained NRA 65 a few years ago. She never received any distributions maybe*. She was a participant in a DB plan and 401k plan. Plan sponsor says they paid a monthly benefit once she reached age 65 based on 50% joint and survivor. But checks were never cashed and they assumed she was dead. She is now asking for a lump sum payment as she insists she asked for this to be paid at NRA when she terminated employment several years previously. What is she entitled to now? * Employer is a large insurance company that obviously has vast experience administering qualified plans, including their own. Employer insists she was contacted by mail but never responded. So it’s possible some fault for all this lies with the former employee. Nevertheless she should be entitled to something, yes? She has communicated she would accept the lump sums determined as of her NRA without additional earnings. But I’m not sure plan administrator can unilaterally approve that. So what does she get? Can she contact DOL to expedite resolving this?

I believe there is a Revenue Procedure that specifies that if a participant had less than 1,000 hours in the prior year (and therefore no benefit accrual according to terms of the plan ), you MUST assume they will have 1,000 hours in the current year. This is for purposes of a BOY actuarial valuation. I thought it was in RP 2017-56 or 2017-57, but I cannot seem to find it. I’m asking because client (of owner only plan) wants to minimize cost for 2020 and if they confirm <1,000 hours in 2019 we can assume same for 2020 and not have a normal cost.

We have a cash balance plan with NRA of 62+5 and a 401k plan with NRA of 65+5. For 401a4 testing what NRA do you use? Note that software seems to only allow one NRA assumption. I am inclined to use 62+5 since that would be the least advantageous for NHCEs in the k plan. But technically should you test under both NRAs? Or somehow test using different NRAs for each plan?