RTK

The 401(a)(9) rules should trump the regular distribution rules, including the spousal consent requirement. I have seen one (non-qjsa) profit sharing plan that requires spousal consent for distributions in excess of $5,000, and that was the case for that plan.

My copy of ERISA 4044(a)(4) states the same phrase. It appears to exclude the (otherwise covered) fixed benefit plan from a guaranteed benefit calculation. I would really like to say that I know what it means in the context of a 4044 allocation, but unfortunately, I have never seen a concrete application.

K Johnson, note that the portion of the Rev. Rul. you highlighted is still subject to the allocation required by ERISA 4044(a)(1), (2), (3) and 4(A). Thus, I believe that you could terminate a non-pbgc db plan and not allocate any funds to nonvested participants, even if all hces were 100% vested so long as the hce allocation was in the above allocation categories (and with the correct plan language). pension222, I believe the typical language you cite addresses vesting upon termination, and not the allocation of assets upon termination. Regarding the allocation of assets, ERISA 403(d)(1) provides that upon termination of a pension plan to which 4021 does not apply, the assets are allocated in accordance with 4044, except as otherwise provided in regs.

Question: Is there specific IRS guidance that concludes that an overpayment is not "eligible rollover distribution"?

For what is worth, I set up a cross tested plan in 1995 or 1996 under the 1994 field memo standards using tiers of compensation (without regard to 401(a)(17)) for the allocations, and thought it was ok then. I can't recall seeing any guidance to the contrary since then.

My initial reaction to the question was whether there is a cash or deferred arrangement issue. If the electing participant were to be provided with cash or other taxable benefit in exchange for reduced benefit accrual under the election, this would fit within the cash or deferred arrangement and election definitions of the IRS regs.

Let me understand this in the context of a client with 72 pension and profit sharing plans in the US and a worldwide controlled group of 60 companies. Each db plan has a compensation based formula and requires 1,000 hours to accrue a benefit. Each dc plan has a compensation based contribution or allocation formula that requires 1,000 hours for a contribution or allocation, along with a 401(k) feature. Are you saying that each db and dc plan must be tested for a 414(s) nondiscriminatory alternative definition of compensation unless each plan recognizes all controlled group compensation and employment for benefit accrual and contribution purposes?

Bill, I think you nailed it. The proposal is consistent with Bush's philosophy, and the financial firms must be ecstatic. Also, I am amazed about how much Bush and his buddies have managed to push through DC.

$7,500 for my LSA, $7,500 for my RSA, $7,500 for my spouse's LSA and $7,500 for my spouse's RSA

My cynical ear heard that the goal is to shift pre-tax saving to after-tax saving to maximize short term revenue. Note that the combination of LSA and RSA permits $15,000 of "tax-preferred savings" per individual per year (subject to RSA compensation). Now, ignoring the kids for the moment, I wonder where I can find that extra $30K for me and the spouse each year.

For what it is worth, I routinely include death an an event of default permitting the plan administrator to require repayment of the entire loan balance. I know the DOL regulations require that plan loan provisions specify the events of defaults, but I am not aware of any specific cites or guidance on permitted or prohibited events of default.

IRC and ERISA provide that spousal consent is not required if it is established to plan representative's satisfaction that there is no spouse, that spouse cannot be located, or that such other conditions exist that may be presecribed by IRS regs. I have never seen any other guidance (case, reg, notice, etc) on this provision or what documentation or evidence would be required to establish no spouse or a missing spouse. I encountered this recently with a missing spouse in Thailand, but the participant's father was going to Thailand to look for the spouse. The Plan has put on the decision on this issue on hold until father's return. In that case, if the spouse is not found, I am thinking of securing affidavits from the participant and father regarding steps taken to locate spouse. I may also require a PBGC type commerical missing participant/spouse search.

I have never had a request from the IRS to define QDRO, either in my individually drafted plans or my volume submitters. I have given up and now define "leased employee" in all of my documents (although it only mirrors the statute). I have been asked many times to state that the top heavy minimum contribution does not require minimum hours or minimum compensation,but have managed to avoid that change on the basis that the document properly describes who is entitled to the top heavy minimum. As far as the consequences of resisting the IRS requests, I think the more important perspective is that the plan document is a legal instrument that participants (and others) may sue to enforce. Also, I have found most reviewers to be receptive to an explanation of why no change is necessary.

David, you are right. I misread her question. Thanks for putting me on the right track.

The temporary regulations have a specific provision at 1.401(a)(9)-6T, Q&A 1(d), on calculating how much of a single sum distribution made from a db plan is the required minimum distribution. One of the methods generally permits the single sum distribution to be treated as an individual account and the required distribution calculated accordingly. The other generally treats one year of annuity payments as the required distribution.

Here's my stab at this based on final 401(a)(9) regulations. When the IRA owner died after rbd, assuming son is designated beneficiary, regs would permit distribution (beginning with calendar year following calendar year of death) to be made over longer of life expectancy of son or life expectancy of IRA owner. When the son dies, the son's wife cannot "rollover" the IRA into her name. (I believe that a spouse must be the beneficiary of the IRA owner in order to treat the beneficiary interest as the spouse's own IRA.) She could continue payments from the IRA using deceased husband's remaining life epectancy. She cannot use her own life expectancy. The five year rule applies to death before rbd. If I recall, you could get to similar result under the 1987 proposed regulations. However, at the death of the IRA owner after rbd, the remaining life expectancy of the IRA owner (or remaining joint life expectancy of IRA owner and designated beneficiary would be used for distributions to son). Note that the IRA owner's life expectancy could be recalculated under 1987 regulations, which could result is a zero life expectancy at death. In any case, the distribution provisions of the IRA documents should be reviewed .

I believe that the same mdib provisions are in 1987 and 2001 proposed IRS regulations.

Assuming the plan is subject to 401(a)(9), you would have mdib issue. Take a look at 1.401(4)(9)-6T, Q&A2 of the 2002 401(a)(9) regulations.

This issue has been around for years. I do not know of any case where a tpa/consultant/actuary has ever been sanctioned for the unauthorized practice of law, even though it is fairly clear to me that the preparation of a plan document establishing legal duties, obligations and rights is the practice of law. That said, I believe that most tpas, consultants and actuaries, in order to protect themselves, note that they are not lawyers and the documents are "drafts" prepared for review by counsel.

Rosemary, I am not aware of any guidance addressing when and if an irrevocable waiver may be revoked. I assume you have reviewed the applicable plan terms and the hce's waiver to make sure that both provide the waiver is irrevocable in all cases. From an ERISA perspective, nothing I am aware of in ERISA requires a waiver to be irrevocable. Of course, plan terms must be followed. However, even if a plan requires a waiver to be irrevocable, I see nothing in ERISA that would prohibit an amendment providing for revocable waivers. In such case, the waiver itself should be reviewed to determine if the parties have the right to modify or revoke it. The only ERISA exposure I see off hand is if the plan terms/waiver required irrevocable waiver, revocation of the waiver would not be in accord with plan terms with potential resulting fiduciary liability depending on impact. The Code perspective is different because of 401(k) regulations. As you likely know, regulations provide that a cash or deferred election is a choice between taxable cash and plan contribution and that a one time irrevocable election between the cash and a plan contribution is not a cash or deferred election. Some IRS agents have applied this as requiring a plan waiver to be irrevocable. However, I don't believe this is required. All is that is required is that cash not be provided in exchange for the election not to participate. This could be an important issue for you, because if your hce in fact received cash compensation in exchange for the waiver, allowing the hce to revoke the waiver could turn the waiver into a 401(k) election. In such case. you would have to review the income tax and plan qualification consequences.

However, it looks like (A)(ii) distribution must be made by April 15th though.

If I recall, and for whatever it is worth, the consensus of the attorneys, actuaries and consultants with whom I discussed Rev. Rul. 2001-62 when first issued was that an amendment would be required to comply with the Rev. Rul. only if the plan specifically referred to the applicable mortality table under Rev. Rul. 95-6 (although those who may have heard of Jim Holland's opinion may have changed their minds). In any case, if the IRS's position is that all defined benefit plans will fail to provide definitely determinable benefits unless amended to reference the specific applicable mortality table that is to be used during 2002, this position should be set forth in public guidance or a ruling (rather than in unofficial guidance from one or more sources that may or may not in agreement).

It is not in EGTRRA. Nonetheless, the impact of EGTRRA on the existing IRS regulations is not clear to me. The EGTRRA committee report is not much help. Althought the report notes the existence of the existing IRS regulations, it does not provide any guidance on Congress' intent with respect to the ongoing validity or invalidity of those regulations. Nor is the intent of the reference in the EGTRRA provisions to "Except to the extent provided in regulations" clear to me or explained in the committee report. Presumably this refers to regulations the IRS is directed to issue. I suppose it comes down to a good faith reasonable interpretation of EGTRRA, or anticipating what the IRS may require in additional regulations. In my case, I think I will continue to provide advance notice of the elimination of a form of distribution until I see some guidance on the issue.

I find this an amazing thread from the perspective of why does all of the legislation/guidance in the employee benefits area result in even the pros standing around and scratching their collective heads and asking "what does this mean." And where is the statutory underpinning for the 4% limitation on discretionary contributions? And why did the IRS make the GUST compliance dates so complicated that there is still discussion on proper certification and amendment adoption dates? And what were the rules in Rev. Rul. 98-1? And whose idea was the HIPAA EDI and privacy requirements? I think I will stop now.

Lynn, the 90-day notice requirement is in 1.411(d)-4, Q&A-2(e)(1)(ii) and is used in part to determine the participants to whom the amendment applies.