Retroactive Annuity Starting Date (RASD)

[Dinosaur]

Have a defined benefit plan (owner and wife) with excess assets. The owner is still working and beyond NRD. This is what we propose to do to use up some of the excess assets:

- amend plan to allow for distribution at or beyond NRD and allow for Retroactive Annuity Starting Date (RASD);

- owner will make election to receive RASD (only 12 months so do not effect 415 benefit);

- terminate plan (and file with the IRS)

- owner and wife elect to roll over benefit to IRA

- any remaining excess asset will have 50% excise tax or may be transferred to existing 401(k) plan (qualified replacement plan) and reduce the excise tax to 20%.

Question: what would be the RASD? If the owner was making his election today is the RASD 9/1/2010? Then the calculation date for the optional forms of benefit would also be 9/1/2010?

Anyone see any problems?

[ScottR]

IMO, all benefits received by a participant in the current limitation year would count against his/her 415 limit. Thus, what you describe wouldn't help if the final lump sum is paid in the same limitation year as the catch-up monthly payments.

Assuming a participant is subject to the %-of-pay limit (and not the dollar limit), I would pay him 12 x monthly limit during 2011, and distribute the lump sum in Jan 2012. I don't believe the 12 monthly payments for 2011 would have any adverse impact on his lump sum limit in subsequent limitation years.

Also, the 20% reversion tax applies if 25% or more of the surplus is transferred to a qual successor plan. I would transfer ALL of the surplus to that plan. Since no money reverts to the employer, 20% x $0 = $0. No reversion tax.

.. Scott

[david rigby]

Annuity form = 100% J&S?

Why terminate?

Got COLA?

[Dinosaur]

IMO, all benefits received by a participant in the current limitation year would count against his/her 415 limit. Thus, what you describe wouldn't help if the final lump sum is paid in the same limitation year as the catch-up monthly payments.

Assuming a participant is subject to the %-of-pay limit (and not the dollar limit), I would pay him 12 x monthly limit during 2011, and distribute the lump sum in Jan 2012. I don't believe the 12 monthly payments for 2011 would have any adverse impact on his lump sum limit in subsequent limitation years.

Also, the 20% reversion tax applies if 25% or more of the surplus is transferred to a qual successor plan. I would transfer ALL of the surplus to that plan. Since no money reverts to the employer, 20% x $0 = $0. No reversion tax.

.. Scott

Since the participant is only receiving 12 retro payments then the 415 limit is not affected (I thought).

Also, if the participant is paid, say $160,000 as 100%JS, and the participant receives the lump sum benefit as of 9/30/11 (say plan terms 9/15), the participant would receive $160,000 more than if received lump sum only.