EGTRRA & Cutbacks Under 411(d)

[Guest nikomendy]

one section of egtrra, which still seems

vague and in need of guidance, is the section

allowing "reductions in retirement subsidys",

if they are "complex for a plan and participants,

and the cutbacks do NOT IMPACT ANY PARTICIPANT

MORE THAN de minimis"

observations:

-complex for plan and particpants is vague

is deminimis 1 % 2%, or other ????

-this section (not withstanding conf report example), could be used by fiat of plan amendment, eg.,NOT JUST IN PLAN MERGER scenarios

-Treasury is ordered to issue final regs(by 2003)-

How can treasury "quantify what is deminimis or

not?" What might be de minimis to a highly

compensated employee could be hugh impact

to a lower paid employee ? LAW STATES NO

MORE THAN DEMINIMIS IMPACT TO ANY particpant

-Does the above allow retirement subsidy cutbacks,

retroactively ?

-Could a DB plan use this new 411(d) language,

to summarily reduce payouts to retirees (*already

in pay status) prior to egtrra enactment?

-Does this 411(d) deminimis cutback, have any affect on current law and regs governing

plan terminations ??

any observations on the above would be appreciated:

[Larry M]

I have mixed feelings about generalizations in statutes and specifics in regulations.

My preference is to allow the sponsor to have leeway and permit common sense approaches to interpretations of the law.

Too often, the regulations become so specific as to prevent

a. an employer from complying with a reasonable interpretation of the law,

b. the actuary from using common sense in funding for plan benefits,

c. the employer from providing a needed and prudent benefit

(the list goes on and on)

The only advantage to specific regulations is that they allow us to follow a cook book literally and provide the employer with a relatively risk free approach to qualified plans. (although we still get people arguing about whether "60%" means "59.87%" or "60.00").

The problem with the specific interpretative regulation approach (in additon to their length and complexity) is that it is similar to requiring everyone to wear ready made suits without allowing us to make alterations to fit the idiosyncracies of our unique bodies.

Let the ambiguities remain - keep the regulations simple - let us use our best judgment - that is my preference.