Andy the Actuary Posted December 20, 2012 Share Posted December 20, 2012 Has anyone an inkling of when the IRS may issue the MAP-21 interest rates for 2013? I have a couple clients who will need to know these rates to perform the 110% test under 401(a)(4) for lump sum distributions to HCEs. While I can estimate, the obvious preference is to use the exact rates. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
carrots Posted December 20, 2012 Share Posted December 20, 2012 ASPPA has just issued ASAP 12-32. It only shows MAP 21 rates for 2012 - BUT, it also shows a surprise increase in 417(e) First Segment Rate: 3.50%! Would anyone who is not surprised by this please let me know what has happened to result in this increase? Thanks, Carrots Link to comment Share on other sites More sharing options...
Andy the Actuary Posted December 21, 2012 Author Share Posted December 21, 2012 ASPPA has just issued ASAP 12-32. It only shows MAP 21 rates for 2012 - BUT, it also shows a surprise increase in 417(e) First Segment Rate: 3.50%!Would anyone who is not surprised by this please let me know what has happened to result in this increase? Thanks, Carrots Would suggest typo. Looks like second segment rate. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
carrots Posted December 21, 2012 Share Posted December 21, 2012 Andy: You are probably right - I'll have to learn to control my wishful thinking! Carrots Link to comment Share on other sites More sharing options...
Andy the Actuary Posted December 21, 2012 Author Share Posted December 21, 2012 Yup. Sure would like to get a one year CD that pays 3.50% The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
Effen Posted December 21, 2012 Share Posted December 21, 2012 The IRS is still battling about how to determine the historical rates. Their first comment was "we know you need them before March 31st...". It was then "clarified" to them that March 31st is WAY too late. They understand our need for the rates, but they haven't made any promises about when they will be released. My personal opinion, with no direction from anyone, is late January/early Feb. Obviously the rates will be lower, I am guessing around 30-50 bps on each segment rate. Less on the first, more on the third. What are others using? The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
mattmc82 Posted December 24, 2012 Share Posted December 24, 2012 The IRS is still battling about how to determine the historical rates. Their first comment was "we know you need them before March 31st...". It was then "clarified" to them that March 31st is WAY too late. They understand our need for the rates, but they haven't made any promises about when they will be released. My personal opinion, with no direction from anyone, is late January/early Feb. Obviously the rates will be lower, I am guessing around 30-50 bps on each segment rate. Less on the first, more on the third. What are others using? I know some are using Sep 10 rates as a conservative estimate. Seems that is overly conservative, but I also can't think of any solid way to estimate the rates without some off the clock nerd work Link to comment Share on other sites More sharing options...
KimberlyC Posted January 9, 2013 Share Posted January 9, 2013 Treasury Regulation Section 1.401(a)(4)-5(b) limits the annual amount of pension payments made to one of the plan sponsor’s 25 most highly compensated current or former employees (“restricted employees”) in any plan year to the amount that would have been paid to the restricted employee in that year if he or she had received a straight life annuity. This restriction ensures that a pension plan will not discriminate in favor of highly compensated employees by paying out their full benefits, while leaving plan assets that may not be sufficient to pay out the benefits of lower-paid employees. The restriction does not apply if (i) the value of the distribution amount is less than 1% of the value of the Plan’s current liabilities before distribution is made, (ii) after the distribution the Plan assets will equal or exceed 110% of the Plan’s current liabilities, or (iii) the Plan terminates with sufficient assets to pay out benefits to all participants.IRS regulation Section 1.401(a)(4)‐5(b)(3)(v) states “any reasonable and consistent method may be used for determining the value of current liabilities and the value of plan assets” for purposes of the high-25 restriction. Guidance issued to date under MAP-21 describes specific cases where MAP-21 rates apply and specific cases where they do not apply. However, the guidance does not address whether the modified segment rates under MAP-21 may be used to determine a plan’s “current liabilities” for purposes of applying the restriction on lump sum payment to the top 25 most highly compensated employees. Is ist reasonable to use the MAP-21 rates? Summaries of MAP-21 prepared by actuaries and consultants list this as an open issue. I heard that either Mike Spaid or Tony Montanaro said informally it was O.K. to use the rates during Qs and As following an IRS phone forum, but have not been able to verify this. I appreciate anyone's thoughts on this. Link to comment Share on other sites More sharing options...
Andy the Actuary Posted January 9, 2013 Author Share Posted January 9, 2013 I listened in on the conference. See my corresponding post. http://benefitslink.com/boards/index.php?/topic/52172-restrictions-on-lump-sum-distributions-to-hces/ The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
Hojo Posted January 31, 2013 Share Posted January 31, 2013 Anyone hear anything new through the grapevine? Link to comment Share on other sites More sharing options...
Andy the Actuary Posted January 31, 2013 Author Share Posted January 31, 2013 Spoke just yesterday with an actuary from Towers Watson. They have no inkling. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
tuni88 Posted February 7, 2013 Share Posted February 7, 2013 I got a memo from our actuary about the new rates to use for 2013. They are way up from last year (5.54%/6.85%/7.52% vs. 1.98%/5.07%/6.19%). Wow, do we get to use those for lump sum determinations? Link to comment Share on other sites More sharing options...
Effen Posted February 7, 2013 Share Posted February 7, 2013 I got a memo from our actuary about the new rates to use for 2013. They are way up from last year (5.54%/6.85%/7.52% vs. 1.98%/5.07%/6.19%). Wow, do we get to use those for lump sum determinations? Wow, really? Those are the 2012 funding rates. 2013 funding rates have not been released, and no, you can't use them for lump sum calculation. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
david rigby Posted February 11, 2013 Share Posted February 11, 2013 IRS Notice 2013-11, released 02/11/2013 http://www.irs.gov/pub/irs-drop/n-13-11.pdf I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice. Link to comment Share on other sites More sharing options...
Effen Posted February 11, 2013 Share Posted February 11, 2013 Wow, that is quite a drop. A little more than I expected. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
Hojo Posted February 11, 2013 Share Posted February 11, 2013 The Towers estimated rates of 4.72%, 6.09% and 6.78% weren't too far off from the actual of 4.94%, 6.15% and 6.76%. Impressive. Link to comment Share on other sites More sharing options...
SoCalActuary Posted February 11, 2013 Share Posted February 11, 2013 Wow, that is quite a drop. A little more than I expected. Corridor widened from 90% to 85%. Link to comment Share on other sites More sharing options...
Effen Posted February 11, 2013 Share Posted February 11, 2013 I know the corridor widened from 90% to 85%, but my surprise was that the underlying 25-year average decreased by 34 - 46 bps, or a little more than 5%. Seems like a pretty big one-year change in a 25-year average. Obviously they fine tuned their methodology and used something a little different for 2013. Let’s hope they have settled on a methodology so things are more predictable, at least until the next round of relief. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
Andy the Actuary Posted February 12, 2013 Author Share Posted February 12, 2013 Get ready for the fun. Suppose the September 2012 24-month average rates persist, we will have for 2014: 4.45, 5.64, and 6.23. In 2015, 3.96, 5.14, 6.04 (third 24-month segment rate), and for 2016, 3.49, 4.92 (second 24-month segment rate), and 6.04 (third 24-month segment rate). We're likely on-target for 2014 -- the good news being for the first time since who knows when we'll be able to reasonably estimate 2014 liabilities. In short, if interest rates stay down, Congress will have imposed a lot of overhead to accomplish far short of its intent. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
david rigby Posted February 12, 2013 Share Posted February 12, 2013 Congress has intent? I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice. Link to comment Share on other sites More sharing options...
Draper55 Posted February 12, 2013 Share Posted February 12, 2013 SInce we are on the MAP-21 subject, I have a question regarding 404. Is the at -risk floor calculation for the maximum contribution based on the unadjusted segment rates or the Map-21 rates for 2013? I am thinking the entire 404 calculation is based on the unadjusted rates but wondered if the statue was written this way. Link to comment Share on other sites More sharing options...
Hojo Posted February 12, 2013 Share Posted February 12, 2013 I'm fairly certian that MAP-21 doesn't address 404 at all and therefore the max calculations haven't changed (ie, you use pre MAP-21 rates). Link to comment Share on other sites More sharing options...
Mike Preston Posted February 13, 2013 Share Posted February 13, 2013 Hojo, Draper is talking about the floor stated in 404 that points back to 430. That is, the maximum is not less than the minimum using at risk rules. I don't have time to cross reference but I would think MAP-21 affects all things 430. So, if there is an at-risk bump up it will be muted due to MAP-21. david rigby 1 Link to comment Share on other sites More sharing options...
Andy the Actuary Posted February 18, 2013 Author Share Posted February 18, 2013 Get ready for the fun. Suppose the September 2012 24-month average rates persist, we will have for 2014: 4.45, 5.64, and 6.23. In 2015, 3.96, 5.14, 6.04 (third 24-month segment rate), and for 2016, 3.49, 4.92 (second 24-month segment rate), and 6.04 (third 24-month segment rate). We're likely on-target for 2014 -- the good news being for the first time since who knows when we'll be able to reasonably estimate 2014 liabilities. In short, if interest rates stay down, Congress will have imposed a lot of overhead to accomplish far short of its intent. You'll note from attached that even if we zero the 2012-13 24-month average segment rates, the 2014 MAP-21 rates would be 4.38, 5.48, and 6.04. In short, the leverage comes from the drop off the high early rates and replacing with much lower rates. For 2014, at least, the MAP-21 segment rates have little sensitivity to the 2012-13 24-month average segment rates. mAP21-13.xls The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
Guest Xerxes Posted February 19, 2013 Share Posted February 19, 2013 Andy, isn't the MAP-21 corridor compared to the the unadjusted PPA segment rates elected for the valuation? For instance, if you elected to use January 2013 unadjusted segment rates of 1.62%, 4.40%, and 5.45% for the 2013 valuation pre MAP-21 wouldn't the 2016 projected MAP-21 rates result in 3.49%, 4.67%, and 5.45% in your example? Am I misreading Notice 2012-61 example G-1? Link to comment Share on other sites More sharing options...
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