gle3186

I would appreciate help on this issue...including law/regulatory citations as appropriate. Some of our staff came from a meeting with a consulting group with a concept they indicated the consultant posited as able to be done. I suspect our staff did not correctly understand the concept and/or details if the consultant but this is what the staff indicated. A DC plan with a 401(k) component (ours is a pension plan under ERISA 3(2), a DC plan under 3(34) of ERISA, a plan meant to be compliant with 404©, a profit-sharing plan with a 401(k) component) could be amended such that from the effective date of the amendment forward, the company match could be done in a notional manner (that is, not actually making the company match contribution to the participant accounts) and then funding of the company match would only occur (I assume funding with gains/losses of the notional amounts associated with the company match) until a distribution was taken. I gather the theory here is that this is a way to preserve cash (and defer cash contributions) of the plan sponsor. I quickly searched for guidance/articles concerning when employer matching contributions should be made but other than following the plan document could not find other guidance (although it is probably out there).Of course, there is guidance about timeliness of putting elective deferrals in the participant accounts. Presently our plan indicates the company match goes into the participant account as soon as administratively practicable following the eligible pay period. I doubt our plan sponsor would embrace this concept even if it legal. However, I had never heard of such a concept and just wondered if the BenefitsLink retirement community had heard of such or had thoughts about whether such was legal. Again, this is mostly for my education and to "educate" our staff. Thanks.

In this FAE DB plan, there is an incapacity retirement that provides an unreduced age 65 annuity (sla or J and S options--no lump sum) if one is at least age 40 with 10 or more years of service and meets one of the two methods of being deemed incapacitated at the date of termination. These two methods are 1) a SSA disability award indicates that the person was disabled on a date prior to termination or 2) the person meets/met the "plan" definition of incapacity at termination. It would appear that it would consistent with the aforementioned final regulations to eliminate this type of retirement or alter the methods of being deemed incapacitated (remove the plan definition method and rely solely on the non-discretionary SSA method) if we amended the plan to do so by the end of this year. We would like to do so but want to feel that such is consistent with the relevant regulatory guidance. Trying to figure out how this "feature" of the plan is or is not an ancillary benefit that is otherwise not protected by the anti-cutback rule or is or is not a unpredictable contingent event benefit (as is a shutdown benefit) and thus potentially amendable out of the plan if done on or before 12-31-05 has been difficult.

This issue involves vesting and eligibility of individuals who 1) worked for companies that subsequently merged and 2) participated in DB plans of the companies that merged and the DB plan of the merged companies (which consists of the merged DB plans of the prior companies as various titles in the DB plan of the merged companies). Please excuse the complexity. Example: An employee was hired by Company A in 7/91 and left that company in 8/00. He had a deferred vested benefit in Company A's DB plan. Company A was acquired by Company B in 2001. The employee went to work for Company C in 6/02 and became a participant in Company C's DB plan. Company C and Company B merged in 8/02 to form company D. The employee continues to actively participate in Company C's DB plan (which was merged 12/31/03 into the merged DB plan then consisting of the DB plans of Companies A and B). Company C's DB plan was not amended to recognize service in Company A or Company B for eligibility or vesting at time of merger of Company B and C. As noted above Company C's DB plan merged with the other DB plans at the end of 2003. As of 1/05, the prior companies are all part of the same controlled group, all the employees work for the same company, and all the heritage DB plans are now merged into one DB plan (with various Titles--the titles consisting of the heritage plans). The employee had less than a 5 year break in service from termination from Company A to hire by Company C, less than a 5 year break from the date he left employment with Company A and the date Company B and C (he being an employee of C at the time) merged, and less than 5 years from the date he left the employment of Company A to the date he works for a company that contains the merged DB plan of Company A. He thus has a deferred vested benefit in Company A's DB plan (now a title of the merged plan) but is not yet vested in the Company C's DB plan (another title in the merged plan). Question--in this fact circumstance example, can the Titles of the merged plan disregard prior service in a different heritage company for eligibility and vesting in a merged plan? If so, what are the relevant dates? If not, from what date or dates must the prior service be recognized. Thanks for any help/guidance/thoughts on this labyrinthine issue.

This issue is in regard to a DB plan. The SSA instructions refer to termination of employment and break in service years, and say to delete a participant when they cease to be entitled to a benefit. The references to employment would seem to refer only to an employee participant, and when someone dies they are no longer entitled to a benefit -- although one or more beneficiaries may be. However, Form 5500 Item 7 asks for a count of deceased participants whose beneficiaries are receiving or are due future benefits. Upon death of a participant with a beneficiary due to receive future benefits, should we: 1. delete the participant from Schedule SSA if previously reported, and not to add any beneficiary for SSA reporting. So even if death benefits are still payable, the participant has been deleted and no beneficiary added; 2. when a participant dies prior to commencing benefits, if they have been reported previously on Schedule SSA, they are left on, and if they have not been reported they are added. No beneficiaries are added. When the LAST death benefit is paid out to a beneficiary, the participant is deleted from SSA on the next report. Under this process, the deceased participant remains on SSA and SSA "Notices" would be mailed to the deceased participant until ALL death benefits had been paid out. A difficulty with this process is the the beneficiary records have to be linked to the participant's record; 3. delete the participant and add the beneficiaries to SSA. This would allow SSA notices to go out without linkage being required to the deceased beneficiary for each participant. But this method does not seem to be called for by the instructions; or 4. Something else? Thanks for any guidance.

Plan 1 with a lump sum survivor benefit. The participant dies in her mid 40s with an age 65 sla that she could have accrued limited to $160,000. The calculation of the lump sum survivor benefit in the Plan assumes the participant terminated employment at the end of the month following death and received payment immediately (even if earlier than the earliest commencement date otherwise available). The lump sum is calculated at her age of death. For the 415 test, we convert this hypothetical lump sum to a sla at age of death. We then reduce the $160,000 limit to a limit at her age of death and if the limit is exceeded, we reduce the hypothetical lump sum until the sla equivalent equals the limit. From that sla (reduced if necessary), we compute the lump sum and pay the beneficiary. Plan 2 with a qualified preretirement surviving spouse annuity (qprssa) feature but no lump sum survivor benefit and the qprssa is not available until the participant would have been age 55 or older. Same scenario as above with respect to age of participant at death. The participant's 415 limited age 65 sla is fixed at death at no more than $160,000. Not knowing if the spouse will take the benefit at age 55 (or later), we can't run the 415 test as of the date of death of the participant. The spouse decides to take the benefit at the participant's age 55. We would develop a hypothetical scenario where the participant terminated just prior to death and elected a 50% J&S with the spouse as beneficiary commencing at her age 55 and died right after commencing the benefit. We would reduce the $160,000 limit to the limit at the participant's age 55. If the life annuity that would have been paid to the participant under the hypothetical 50% joint and survivor exceeds the reduceed limit, we would reduce the participant's hypothetical benefit until it was equal to the reduced 415 limit. The spouse (beneficiary) would be paid a life annuity equal to 50% of the participant's 415 limited hypothetical lifetime benefit. Does all of this sound correct? There doesn't seem to be much (any?) authoritative guidance on this unless someone can direct us to such. 415 is a limit on a participant's accrual but testing is done on a a benefits delivery basis and teseting is done at the participant level, not the survivor (we think).

Due to plan mergers, we now have folks with a deferred vested DB benefit in a FAE title of the plan and a deferred vested DB benefit in a cash balance title of the plan (this follows a retirement choice election process). This is now one plan with one plan number. Reviewing Schedule SSA, it appears that it doesn't allow an individual to have say a DB plan benefit under an annuity and another DB plan benefit that generally is stated in an account balance/lump sum manner (the Cash Balance benefit). Are we to convert the Cash Balance amount to an annuity, add it to the annuity due from the FAE title of the plan and thus report such in that fashion? Any other guidance?

The Thrift Plan of a company allows 4 types of periodic payment distributions (sometimes called installment payments) of which 2 avoid the 10% pentaly for early receipt of before-tax (BT) money. A participant terminates from the company (good-faith) and begins to receive periodic payments which may include BT and after-tax (AT) money. Two years later, for example, he returns to the employment of the company (re-hire). In such situations, the Plan allows the choice of either continuing the payments and not contributing to the Plan for this period of employment or discontinuing the payments and contributing to the Plan via employee contributions. Is it consistent with legislation/regulation that he may continue the periodic payments (to include BT contributions) during this second period of employment? The above Plan is later amended to allow rehired retirees to both continue receiving periodic payments and make BT and AT employee contributions to the Plan? Is this consistent with legislation/regulation? Any general guidance on these matters is appreciated.

Thanks so much. I want to make sure I am asking my question clearly and I'll use an example. Let's say the employee retires at age 65 and his non-spouse co-annuitant (he chose the 100% J & S option) is 45. We would use the table in adjusting the co-annuitant's payment, i.e., the MDIB requirement applies--correct?

Has the 100% J&S distribution option from a qualified DB plan ever required the application (exclusive of its application in MRDs) of the "minimum distribution incidental benefit" (MDIB) requirement and use of the table in 1.401(a)(9) for both spouse and non-spouse sole beneficiaries when the named beneficiary is more than 10 years younger than the employee? If so, when did such apply, has it changed and if so when? Thanks.