Plan is using average value method for 2009 and 2010 plan years for PPA funding. First question, can employer switch to Market value for 2011 without requesting approval?? If so, is there a minimum amount of years they would be required to stay with Market Value or would they be able to request approval to switch back to Average Value at any time after 2011 (whether or not approval is granted is another issue). Thanks.

Question 10h of Form 5500-SF says "If this is an individual account plan, was a blackout period? There is an error when e-filed (through Web Client) that says that 10h must be answered. This a filing error and must be amended. This error comes up in the latest Relius Govt Forms Form 5500 2011 update.

This is not a yes or no question. If it's a pooled account for a DC plan or a DB plan then I believe it would be left blank. The instructions say "Code section 401(k) and other individual account pension plans must complete line 10h. Other filers should leave line 10h blank."

What is everyone doing. Answer 10h "no" and amend the filing so it goes through?

I am restructuring into two component plans, as follows:

1) plan covering everyone getting profit sharing contriubtions, and

2) plan covering those not getting PS due to a last day rule

Is Plan 1 barred from treating anyone in plan 2 as a "term with a break" because restructuring requires that plans pass coverage "as though they were a separate plan."

Two members of a controlled group (owners are spouses and have their own corporations – community property state) are contemplating setup of a retirement plan for employees of their business.

Husband's business is a professional corporation (16 employees) while the wife operates a grocery store (4 employees).

Since this is a brother-sister controlled group, both businesses are considered a "Single Employer" (hope there is no disagreement here....!!!).

Questions:

Would the defined benefit plan be covered under the PBGC?

For purposes of deduction of contributions, what is a reasonable method?

Am I doing this correctly? I haven't done any 417(e) calcs using segment rates other than lump sums, so I wanted to be sure that I'm not missing something.

Facts:

Participant age = 71 = normal retirement age

Normal Retirement Benefit = $10,000

Plan normal form is single life annuity

A.E. is 5.0% interest and 94 GAR mortality (post retirement only) (age 71 a.p.r. = 119.2314)

417(e) factors are 2.47%, 5.07%, 6.10% - mortality is RP11CU (age 71 PV factor = 122.9886- assume this factor is correct)

Participant elected 26 year term certain annuity so they will receive the greater of 1) and 2) below:

1 - plan basis: $10,000 x 119.2314 / 15.0939 (26 year term certain annuity at 5%) = 78,993

2 - 417e basis: $10,000 x 122.9886 / 14.8326 (26 year term certain annuity with first 5 years at 2.47%, next 15 at 5.07% and the remaining years at 6.10%) = 82,918

In this case the participant receives the amount under the 417e factors of $82,918 annually.

Thanks in advance.

A plan document provides for a normal retirement benefit of a flat percentage of high 3 year pay - 254%, reduced for years of participation at retirement less than 25. The benefit is accrued fractionally over years of participation. NRA is later of 65 & 5th anniversary of participation.

Participant enters plan at age 66, so his NRA is determined by 5 years of participation and his normal retirement benefit before the accrual fraction is 254%*5/25=50.8% and has been for each of the last 5 years.

If he continues in employment past retirement, will his NRB reduction fraction increase for additional years of participation, i.e. would next year be 254%*6/25 = 60.96%?

Is a Critical Status Notice only needed for Multiemployer Plans with low funding, or is it also needed for Single Employer Plans in a similar position?

If fewer than 50% of eligible employees make elective deferrals, and all of the elective deferrals are disallowed, do the elective deferrals count against the annual addition limitation?

Thanks

Under the proposed regs, the amortization charge is prorated for the short plan year but the TNC isn't. This leads to (2) questions:

(1) How would you handle the expense portion of the TNC? We could prorate some or all of the expense. For example, suppose a SPY of 8/1/2010-12/31/2010. Let's say the expense assumption is that the current year's expense is assumed to be the same as the prior year's expense. However, let's suppose that during the SPY that no PBGC premium would be paid by the Plan. I.e., such premium would have normally been paid 1/1/2011-7/31/2011. Would make sense to exclude this from the expense before proration?

(2) How is the amortization factor determined -- over calendar years or Plan Years? Let's say there are no existing bases but a base is created 8/1/2010. Let's also say for the sake of illustration ease that all segment rates are equal. Would the amortization factor be determined as an annuity over seven years, or would it be 5/12 +v^(5/12)x annuity (6 years)? Thus, come 1/1/2011 we would determine the remaining unamortized base from either an annuity (6 7/12 years) or annuity (6 years). In either case, it would seem if there are existing bases and charges 8/1/2010 that they would need to be adjusted in some fashion for the change in Plan Year.

Can the schedule Q demos to the Form 5300 determination letter application be completed based on projected data? We have a new plan and would like the IRS to rule on the coveraged and nondiscrimination methodologies that will be used.

An employee is out on workers' comp on the date he would be eligible to participate in the plan. I searched the site, but I don't see anything regarding this. Would this employee be considered an eligible employee if he is not working due to workers' comp on his eligibility date or can we consider him terminated and not consider him eligible. The document says the employee must be employed on the eligibility date, but I'm not certain if he is "employed" if he is being paid from workers' comp. Thanks

The proposed regs on cash balance plans gave us new market rate of return options but left some unanswered questions in my mind particularly with regards to what interest credit for FUNDING purposes you would use to project the account balance to NRA if say you have a market return that is negative for the year or even say a modest 1%. Is this an actuarial assumption that can/should be different than the actual rate of return credited to the theoretical accounts for the year ? Any ideas/opinions ?

My client would like to know whether short-term disability compensation paid by the state of California should be considered compensation for the purpose of a

401(k) plan and to calculate company contributions?

Short-term disability compensation paid directly by Company is considered compensation by the client, but they don’t know if the disability paid by the state of California, which is the only state with such provision, should count.

Plan specifies that non 5% owners get actuarial increases the April 1st after age 70.5. Can anyone point to or provide guidance whether or not this applies if the participant has reached NRA (5 years participation is required.)

Thanks.

The partners have K1s with heavy loss. The CPA has also issued them W2 for some compensatoin paid to them. I think that the W2 is incorrect and is really just guaranteed payments that should have been reported on K1, but that isn't my question. Am I correct (I hope not) that the loss on K1 gets added to these W2 to determine if these partners have any plan compensation?

The interest is the greater of the actual interest or a market rate of interest. For the latter, do we use prime plus 2% (as suggested in the IRM), or can we use the 6621(a) underpayment rate?

My employer client has a divorce decree that has their employee giving half of his 401(k) to ex-wife. Employee wants to obtain a loan from his account, give the money to the ex-wife, and be done with it. I see some issues, but wonder if anyone has considered/done this. Employee's main reason is that he can get this done quicker via this route than by dealing with a QDRO. Any thoughts? Thanks in advance.

I hope I'm not breaking any rules, but I thought this was important for members of this board to be aware of an interesting developement coming off the COPPA board. If you are an actuary and a COPPA member, you should read this long message stream.

Basically, it comes down to Jim Holland (and many begrudgingly agreeing) that an amendment to increase in benefits that is adopted in the 2 1/2 months after the PYE CANNOT be recognized for funding in the prior year.

Maybe someone knows an efficient way to allow everyone on this board to see the entire discussion post, but in my opinion, it was just too long to cut/paste into a message. I just posted a link to the message and Jim's summary comments since he did a nice job with the sites.

http://finance.groups.yahoo.com/group/Coll...s/message/32388

From: CollegeofPensionActuaries@yahoogroups.com [mailto:CollegeofPensionActuaries@yahoogroups.com] On Behalf Of Jim Holland

Sent: Thursday, February 10, 2011 8:17 AM

To: CollegeofPensionActuaries@yahoogroups.com

Subject: RE: [CollegeofPensionActuaries] RE: Unfreezing the frozen

I will make what I expect to be my last comment on this topic. Prior to the issuance of the final regs, everything that Norm and Jeff have said could be a reasonable view of 412(d)(2). The final regs have an explicit provisions that

1. State that require that plan provisions adopted no later than the valuation date and that take effect by the end of the plan year be taken into account. 1.430(d)-1(d)(1).

2. Plan provisions that take effect in a later plan year are not taken into account even if adopted by the valuation date for the current plan year. 1.430(d)-1(d)(1).

3. An amendment for which a 412(d)(2) election is made is considered adopted on the first day to the plan year but when the amendment takes effect is unaffected by an election under section 412(d)(2). 1.430(d)-1(d)(1)(ii) and 1.430(d)(1)(iii) last sentence

4. If a 412(d)(2) election is made and the amendment takes effect by the last day of the plan year, the amendment is required to be taken into account. 1.430(d)-1(d)(1)(ii) last sentence

5. For purposes of paragraph (d)(1) (1.412(d)-1(d)(1), plan provisions taken into account, general rule), the determinatin of whether an amendment increasing benefits takes effect and when it takes effect is determined in accordance with the rules of section 436© and 1.436-1©(5). 1.430(d)-1(d)(1)(iii)

6. The regs under 1.436-1©(5) provide that an amendment that increases benefits takes effect under a plan on the first date on which any individual who is or could be a participant would obtain a legal right to the increased benefit. 1.436-1©(5)

7. The preamble discussion (sentence cited earlier) states that an amendment to provide increased benefits retroactively with respect to a prior year, but no participants benefits are increased until the amendment is adopted, the amendment takes effect at the time of adoption and must satisfy the requirements of section 436© for the plan year the amendment is adopted. 10-15-2010 Federal Register, page 53024, first column

All of the above statements should not be arguable because they come straight from the regulations, and anyone can look them up. The interpretation and effect can be argued about. The key words are the ones "take effect" because the regulation (IMHO) has now linked the taking into account for 430 funding (and by implication 404) and 436.

In doing so, it appears to change what all (including myself) had viewed as the interpretation of 412(d)(2). Now for a cautionary note. As I understand it, the Supreme Court decision earlier this year on the medical residents and FICA regulation addressed the deference given to tax regulations and gave them what is called Chevron deferance. That appears to mean that as long as they are a reasonable view of the law they will be upheld. (Let the attornies tell you the exact interpretation.) Even if you do not like a regulation, the question you have to face is what it actually says and means, and what risks you want to run for your clients or yourself in taking a view.

Is it problematic to allow payments to be suspended where the employer believes a participant is violating a non-competition agreement that would justify the forfeiture of remaining payments? I think it's okay provided there is no collusion between the employer and employee.

Got a situaiton where a client wants to take an in-service distribution of his 2010 profit sharing contribution (he's going to roll it to an IRA provider that does not allow 401k accounts).

Would it be acceptable to have him deposit the check to PenChecks (which allocates the money to an account in the plan's name, or at least segregates it at that level) and then have Penchecks process the rollover?

I'm sure there is not a separate account in the name of the plan, but since penchecks is acting as the agent of the Plan, then shouldn't this be OK?