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Ah, The Good Old Days

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that was about the time I started in the business. the one actuary called me in his office, and said the IRS agent had asked him to justify using something like 9% interest in the DB plan. Way too high.

The actuary pointed to the assets (over the last 3 years or so) and said "based on this, I should be using something closer to 15%" and that ended that conversation.

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Tom I don't remember the issue of too high being the big deal back then but too low assumed rate of return. I remember my first job from college in 1986. I worked for the IRS. I got a small dr office Sch C to audit. The thing that stood out was the huge pension deduction he was taking. I knew nothing back then about qualified plans at all. So I asked some questions and the thing that stuck out to me was the actuary was assuming a 5% return. This was back when a passbook paid 5.25% and simple money markets were paying close to 8%.

I was told by my boss I had to take my objections to the IRS group that handled retirement plans. I was told by them to forget it they just took the actuary's word for it when it came to the assumed rate of return.

I went to work shortly after that with a TPA that did both DC and DB work. Every DB plan they had assumed a 5% rate of return. I seem to recall a few year later the IRS did in fact start to question the 5% ROR and the assumptions went up and the people's deductions started to go down.

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Not quite. Actuaries still assumed 5% and then the IRS started their infamous audit program where they believed that 'all' plans should be using 8%. You could show them a Dr plan (they are famous for thinking that they are good investors <G>) where the plan did not have a positive rate of return for the last 5 years and the IRS still wanted to assume 8%. [The IRS ultimately lost the battle but the start of the attacks on DB plans had only just begun]

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