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As long as you are consistent and do a final true up at year end, I don't see a problem with doing it through out the year other than it could be more complicated and more chance for potential errors.

As always, the plan’s fiduciary decides what to do (except for asking an actuary to do a report contrary to her profession’s standards). If the fiduciary (which I imagine is the employer) pays this retiree a benefit greater than the plan provides (and this participant is none of an owner, key employee, or highly-compensated), it seems unlikely that the IRS should pursue tax-disqualifying the plan. And although it is a fiduciary’s breach to administer a plan contrary to the plan’s governing documents, the Labor department is unlikely to pursue such a breach (unless the facts suggest that other participants are or might be harmed by the overpayment). An overpaid participant might lack standing to sue the fiduciary. About using the correct facts to determine the correct benefit, why does anyone fear a problem might result from doing so? Does the fiduciary fear that the retiree might assert reliance on a previously furnished accrued-benefit statement? The plan’s fiduciary should get its lawyer’s advice, not your lawyer’s advice.

The biggest issue I have with the ASG "rules" (as opposed to the CG regs or the very obvious 2 practices owning a 3rd one ASG) is that they are almost always snapshots and subject to very subtle shifts that can change quickly OR slowly over time. So even if one gets a legal opinion that today, the arrangement is an ASG, that could easily change in the future without anyone doing very much. Too much liability for me to take on.

@AlbanyConsultant - I think you may be working yourself up a bit. To mirror what @Bri stated, the rate you use on the LID/LII is tied to the month-end, quarter-end or year-end for which you are preparing the statement. Since my plans are primarily ESOP and only provide an annual statement, right now I am preparing lots of December 31, 2021 statements. But even though it is now July 2022, I am still using the December 2021 interest rates for the LID because that is their plan's year end and that is the period end date for the statements. Based on what you are describing, that would be a total nightmare! So whether you don't get around to reviewing things right away or they sit on a client's desk longer than they should, it shouldn't cause you to have to re-run anything if you used the appropriate rate for the period end date you are reporting on the statement.

I wouldn't venture this far into the ASG waters without sending the client to legal counsel.

Good point, Bill. Whenever I have written a memorandum or letter to a client reaching a conclusion about CG or ASG status, I include a paragraph stating that it is based on a "snapshot" as you describe and that any change in ownership percentages, family relationships, or business relationships, even if seemingly small, could change the outcome.

Agree that benefits should be calculated using correct data and in compliance with plan provisions. This is also a good time to suggest an "internal audit" of plan data to verify completeness and accuracy given the previously described situation and, as the successor actuary you may want to insist or "strongly recommend". If an error in one direction gets corrected (in the sponsor's/owner's favor) but another error in the other direction does not get corrected, you/they got lots of 'splaining to do Lucy.

I had never had a DCP spin-off (or merger) that didn't meet one of the exceptions that exempted the transaction from filing. Maybe IRS will inquire about balance differences/unallocated accounts as a follow up, if they follow up at all, that would be my guess.

RBR - yes, the 3% is required. The real question is whether you want to revert to ADP/ACP testing or not, and whether to preserve the top heavy exemption. Since due to an asset sale, you have the option to pay the required 3%, and preserve the safe harbor status for the short year, preserve the top heavy exemption, and avoid ADP/ACP testing. (I'm assuming no other contributions that would otherwise invalidate the top heavy exemption anyway.) If you don't choose this option, then you still have to pay the 3% for the short year, but you must test for ADP/ACP, and you lose your top heavy exemption since now it isn't a safe harbor plan.

I think you left something out. Are you trying to make it a SH or is it already SH?

Since the restatement is required to maintain the Plan's tax-qualified status, which benefits the participants, it's administrative and may be charged to the Plan.

Exactly - current tax year deduction subject current year limit.