Top Heavy DC & DB Plans for Mid-Size Physicians Group

[Guest Jaym32]

My wife is a participant in a PSP (no 401k provision) and a DB plan maintained by a mid-size physicians practice. She has separated from employment there after over 9 yrs of service. The Trustees terminated the DB plan a/o 12/31/08.

There are 18 participants in the DB plan and a/o 12/31/07 it had about $750,000. Though she is an RN who had relatively high compensation within the group, we are being told her lump-sum benefit is only around $9,000.

Assuming both plans are top-heavy a/o 12/31/07 and 12/31/08, what could the employer do within the PSP to preclude top heavy benefits in the DB plan from kicking in?

The Plans' putz attorney has advised that top-heavy DB benefits are not applicable b/c the PSP "provides top-heavy benefits." Zero PSP contribution was made for '08 and the '07 and prior contributions were all compensation-based. The PSP has a 5 yr vesting sched, 20% per yr.

We are having a very difficult time collecting benefits from the DB plan (in part because we caught the Trustees' error in failing to notify participants of an intended benefits freeze for 2008 - now they evidently have to re-do the 2008 valuation and appear reluctant to absorb the addl cost.)

Sorry for the complexity but the Trustees have turned me over to an attorney who doesn't understand ERISA and I can't afford heavy-duty legal fees to sort this out. Is it true that the Trustees don't have to disclose results of top-heavy testing to a participant who makes a formal request?

Maybe I should just turn this over to EBSA for investigation - does anyone have an opinion on whether EBSA would take something like this seriously?? Thanks for any feedback, all the best for success!

[Mike Preston]

My guess is that you will get a better response if you eliminate the yiddish.

Be that as it may, it sounds like you have caught the plan sponsor doing something that it didn't want to admit doing. As such, you really, really should engage competent advisors, such as ERISA counsel, to help you press your claim.

At the very least, you should get a copy of the Summary Plan Description, file a claim for top-heavy benefits and then follow the procedures in there meticulously to ensure that whatever claim you have for benefits does not evaporate in to thin air because of inaction on your part.

[david rigby]

Mike's advice is usually very good. No reason to think otherwise in this case. And when he says "ERISA counsel", he means exactly that.

The facts you present may indicate a possible error by the plan administrator (perhaps unintentionally). If so, multiple plan participants may have been "shortchanged". Mention that to legal counsel.

BTW, some of the readers here will be curious about the outcome. It's OK to post the results, omitting any confidential details.

[K2retire]

Part of what they are telling you is correct -- it is entirely possible that the plans are structured to put the top heavy minimum contributions in only the defined contribution plan. If there was no contribution to that plan, it sounds like there may be a problem, but you said "assuming they are top heavy" as though you aren't sure if they are or not.

Benefits, top heavy or otherwise, are correctly calculated based on compensation, so I don't understand that concern.

The lump sum payout in a DB plan is based on many variables, so the folks here are unlikely to be able to tell if the calculation is reasonable or not.

Involving the Department of Labor is an option, but not one that will produce a speedy result. Getting your own ERISA attorney truly is the best alternative.

[Guest Jaym32]

Part of what they are telling you is correct -- it is entirely possible that the plans are structured to put the top heavy minimum contributions in only the defined contribution plan. If there was no contribution to that plan, it sounds like there may be a problem, but you said "assuming they are top heavy" as though you aren't sure if they are or not.

Benefits, top heavy or otherwise, are correctly calculated based on compensation, so I don't understand that concern.

The lump sum payout in a DB plan is based on many variables, so the folks here are unlikely to be able to tell if the calculation is reasonable or not.

Involving the Department of Labor is an option, but not one that will produce a speedy result. Getting your own ERISA attorney truly is the best alternative.

Thx K2 I really appreciate your feedback - the reason I am uncertain re: the top-heavy status is that the lawyer will not confirm or deny. Are they obligated to reveal top-heavy status if a participant makes a formal request??

[Guest Jaym32]

My guess is that you will get a better response if you eliminate the yiddish.

Be that as it may, it sounds like you have caught the plan sponsor doing something that it didn't want to admit doing. As such, you really, really should engage competent advisors, such as ERISA counsel, to help you press your claim.

At the very least, you should get a copy of the Summary Plan Description, file a claim for top-heavy benefits and then follow the procedures in there meticulously to ensure that whatever claim you have for benefits does not evaporate in to thin air because of inaction on your part.

Thx Mike I greatly appreciate your time and comments. What is your opinion, are the Trustees obligated to inform us whether the Plans are top-heavy? The Trustees' dope (see I lost the yiddish!) attorney told me to quit asking because they are not obligated to provide results of the test to a participant. . .

[Guest Jaym32]

Mike's advice is usually very good. No reason to think otherwise in this case. And when he says "ERISA counsel", he means exactly that.

The facts you present may indicate a possible error by the plan administrator (perhaps unintentionally). If so, multiple plan participants may have been "shortchanged". Mention that to legal counsel.

BTW, some of the readers here will be curious about the outcome. It's OK to post the results, omitting any confidential details.

Thx David I will post further as the situation develops. The latest is that the Trustees' attorney is ignoring my requests for my wife's recalculated lump-sum DB benefit based on additional '08 service and comp credits that must now be included because of the Trustees' deficient notice of the intended '08 benefits freeze. . .