HEART Act and Schedule R Question 9

[Guest Tudor Fever]

This question came up today from a DB plan sponsor of a plan that we audit (I am a CPA) and, while I am far from the most seasoned practitioner on this board, I was stumped. Any help would much appreciated.

Schedule R, Part III, Question 9 asks whether any amendments adopted during the plan year increased the value of benefits. The instructions indicate that the "increased" box should be checked if the amendment increased the value of benefits "in any way", and include in the examples "earlier eligibility for some benefits" and "more rapid vesting."

The HEART Act, among other things, requires 100% vesting in the case of death while performing qualified miliatry service. There are other provisions that can increase the value of benefits.

Does this mean that the "increased" box should be adopted in the case of all adopters of HEART Act amendments? Based on the instructions, I see no way around it. However, I have seen several Schedules R where this was not done.

[Guest Tudor Fever]

The crickets are deafening. FWIW, here's what I ended up telling the client:

Based on a literal reading of the instructions, I think that the “increased” box should be checked. I am still not 100% convinced of this, though, because the increase to benefits is very narrow and targeted and because I know of no other plans where this box is being checked due to the HEART act. That said, there does not appear to be any downside to checking the box.

[GMK]

I think your reasoning is correct (vesting was accelerated, check the box, and no downside).

I do not, however, have the experience or expertise that others on this board have in this matter, so I too listened to the crickets while waiting to see if anyone posted.

[Guest Form5500]

Most of our clients provide for 100% vesting at all times so no amendment is required under the HEART act for those plans. For those plans that don't provide for 100% vesting at all times (i.e., 100% vested on date of entry into the plan) they usually provide for 100% vesting upon death. The wrinkle would be death while performing qualified military service. It really all depends on what the plan was amended to do in those cases. When you receive the summary of plan provisions with the Schedule SB from the actuaries look for vesting, it will say fully (100%) vested at all times or avert 3 years of service or some graded vesting with 100% at 3 years. Those who say fully vested at all times, you can safely assume the vesting requirement under HEART had no impact, but there were other changes that plan sponsors had the option to elect under HEART regarding compensation and service, and those could have caused increases in benefits if adopted (plan sponsor was not required to adopt some things).

Nicola