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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
A defined benefit plan that accepts a direct rollover of an employee's or former employee's benefit from a defined contribution plan, such as a 401(k) plan, maintained by the same employer does not violate the survivor annuity rules of Code Sec. 411 or the benefit limit rules of Code Sec. 415 if the DB plan provides an annuity resulting from the direct rollover that is determined by converting the amount directly rolled over into an actuarially equivalent immediate annuity using the applicable interest rate and applicable mortality table under Code Sec. 417(e), the IRS has ruled. The ruling does not apply with respect to rollovers made before January 1, 2013. However, plan sponsors are permitted to rely on ruling with respect to rollovers made prior to that date.
CCH Note: For an employer that sponsors both a 401(k) (or other defined contribution plan) and a defined benefit plan, the ruling provides a "road map" for offering employees the option of transferring some or all of their 401(k) plan payouts to the defined benefit plan in exchange for an immediate annuity from that plan, according to a Treasury Department fact sheet.
If the defined benefit plan provided an annuity from the rollover amount using a less favorable actuarial basis (such as a lower interest rate than the rate specified in Code Sec. 417(e)(3)(C) or a mortality table with longer life expectancies than the table under Code Sec. 417(e)(3)(B)) the plan would not satisfy the requirement under Code Sec. 411(a)(1) that the benefit derived from the employee's own contribution be nonforfeitable.
On the other hand, said the IRS, if the plan were to use a more favorable actuarial basis for calculating the annuity resulting from the rollover, then the portion of the benefit resulting from the amount directly rolled over that exceeded the benefit derived from that rolled over amount would be subject to the nonforfeiture rules applicable to benefits derived from employer contributions and would be included in the annual benefit for purposes of Code Sec. 415(b).
Source: Rev. Rul. 2012-4, I.R.B. 2012-8, February 21, 2012.
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For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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