I have another question ....by the way....I love this forum all you guys and gals are great!

Now on to the matter at hand....lol

How many of you use preretirement mortality when calculating the Target Normal Cost and Funding Target?

Most of my DB plans are under 10 lives....we're a small actuarial firm.

I was curious is anybody is still using 83 IAM these days or have you all switched to a more "modern" table?

Would investment management expenses need to be added to the TNC for 2009?

Do you see any issues with the following structure satisfying the 401(k) safe harbor rules.

Plan X provides for two safe harbor formuals. Employees in Group A get a the NEC. Employees in Group B get the basic match.

Does anyone have the Moody's Monthly Corporate Average Bond Yields for December 2007 and December 2008? I've searched this site, but haven't found this exact info. Thanks!

Ok, I'm not sure if anyone is aware but there was a major settlement involving two companies which I believe is going to have a drastic impact on the cost of Rx drugs. A class action lawsuit was filed against First Databank Inc. and McKesson Corporation. The issue was their raising the Average Wholesale Price of hundred of Rx drugs by 5% on an arbitrary basis.

Essentially, from what I gather, a manufactor creates a drug and sells that to a wholesaler. The wholesaler then sells that to pharmacies. The price pharmacies pay are based on a published index called the "Wholesale Acquisition Cost" (WAC). The WAC is set by drug manufacturers and published by companies such as First Databank. Wholesalers will then use the WAC to set the price they charge to pharmacies. The pharmacy is then paid by my (or the participant's) co-payment and a reimbursement from the Rx drug plan. The Reimbursement is based on a benchmark called the Average Wholesale Price which is also published by First Datanbank and other such companies. Simple economics show that the profit a pharmacy receives is based on the price they pay to a wholesaler (based on the WAC) and what they are paid by the insurance co under the AWP. The AWP is not based on what the pharmacy actually paid for the drug, but instead is supposed to be an estimate of what pharmacies generally pay for that drug. Moreover, the WAC-to-AWP spread does include a markup which is historically 20%

The essence of the litation is that First Databank and others arbitrarily raised the WAC-to-AWP spread by 5% on over 400 drugs beginning in 2002 and continuing until this court action (filed in the district court of Mass). From what I gather, the increase was added to the AWP of many drugs. The parties reached a settlement whereby First Data agreed to roll back the "WAC-to-AWP" spread from 25% to 20% on affected drugs.

As you can imagine, Prescription Drug Benefit Managers and Pharmacies are worried because this cuts into their profits. Our PBM has presented us with an amendment to the Rx plan whereby we would continue to use the pre-litigation AWP. Has anyone else received such an amendment? If so, have you executed it and if you have not, what was the consequence? Did the PBM terminate the agreement?

I would imagine that the premiums a plan pays are based on the AWP. Certainly, the Rx plan negotiates with a pharmacy to pay a discounted rate based on the AWP. For example, the rate could be equal to: AWP - 15% + $3.00 dispensing fee.

If the AWP is lowered, the members of the plan should be charged less for a particular drug. I'm asking because I don't see any benefit in signing this amendment other than keeping the PBM (my fear is that they will terminate the agreement). The rep indicated that pharmacies are worried and have indicated that they would terminate their participating network agreements if the new rates were imposed.

I need to advise a client on this and personally, I believe the whole pricing scheme is just that....a scheme. I feel like they should not sign the amendment and force the PBM to use the new AWP and have them fight it out with the pharmacies. What I don't want to do is have an interruption in Rx coverage for plan participants.

Any thoughts on this? Sorry about the length but I felt that background was necessary

Hi. We are terminating our DC plan. We have a suspense account with forfeitures. We want to distribute the forfeitures to the participants. The plan document is silent as to how to allocate the forfeitures. Is there a rule? How is this normally done? What proportion is proper?

Yes, there is a rule: no duplicate posts. Everyone see here - http://benefitslink.com/boards/index.php?showtopic=43194

I have a financial institution with an existing account for a participant in a deferral only, non-title 1 plan. The financial institution is no longer an approved vendor and does not have an ISA with the plan so they have stopped accepting deferrals from the employer. They have inadvertently been accepting contributions directly from the participant as non-deductible contributions (no plan involvement in this decision). They are going to distribute the contributions with earnings as an excess contribution. Do these incorrect contributions contaminate the entire account, or are the assets received prior to the ISA requirement fine? Is there anything else the institution should do? Thanks for any assistance you can provide.

We are terminating our DC plan. We have a suspense account with forfeitures in it that we want to distribute to participants. The plan document is silent as to how to do this. What is the rule in how to allocate the forfeitures?

Thanks.

I'm working with an individual who is wanting to explore the option of taking substantially equal periodic payments under Code Section 72(t). He has two investment accounts - a mutual fund account and a variable annuity. Can he take the payments all from one account until that account is exhausted? For example, he would like to take the payments from the mutual fund account and leave the variable annuity untouched for now. As long as the correct amount of distributions are taken, is this acceptable? I haven't found anything to say that it isn't, but wanted to see if you ladies and gentlemen have any thoughts.

Thanks!

I would appreciate any thoughts on this proposed administrative technique in trying to avoid the possibilty of a year end match true-up on catch-up contributions.

Situation: Safe harbor plan, permitting catch-ups, matching the first 6% of any combination of employee deferrals, after -tax contributions or Roth 401(k).

Safe Harbor plans are required to match (true-up) employee elected catch-up contributions at year end if these contributions along with the employee's other contributions turn out to be less than 6% of eligible compensation.

Since the catch-up section in the plan document allows such contributions to be made in accordance with rules adopted by the Administrative Committee, I am proposing that admin committee adopt a policy that requires employees to first make a minimum 6% contribution election before being allowed to elect any amount of catch-up contribution.

Any comments or guidance on this thought would be appreciated.

Thx's EEC

Hi everyone,

I've been searching the posts and couldn't find anything that quite answered these two questions, so any help from the experts here would be greatly appreciated.

#1 - I have a single employer, small DB plan which, before PPA, defined the applicable interest rate as the 30-treasury rate on the first day of the plan year, with the stability period being the plan year.

Can anyone tell me if applying 417(e)(3) rates for lump sum distributions in 2009 (no actual amendment adopted yet) changes the "time for determination" of the applicable interest rate and therefore we need to meet the 411(d)(6) requirements by offering "better of" distributions as described in 2008-30?

#2 - We have a certified AFTAP this year of 79%. Can that be recalculated or re-certified to get it above 80% so that full lumps sums can be distributed this year?

much appreciated

Does anyone really think that the 16,500 will be reduced to 16,000 due to deflation???USA Today - In 2010 IRS could cut 401(k) contribution limit to $16,000

A client wishes to satisfy the ADP and ACP safe harbors so that all of the HCEs may max out their deferrals (and any match is OK too).

The client wants to use a multi-tiered matching in order to satisfy the "safe harbor contribution requirement". Here's how the match would work:

Under the first tier, all eligible participants (NHCEs and HCEs) receive the "basic match", i.e., $1 for $1 on the first 3% of pay deferred plus $.50 for each $1 deferred on the next 2% of pay. Nothing strange or out of the ordinary with that. It will also satisfy the ACP safe harbor rules.

Under the other tiers (which apply only to NHCEs), the employer will designate participant-by-participant who gets what so that, for example, Jim may get an additional match of 300% of every dollar deferred in excess of 5% and Jerry may get 600% of every dollar deferred in excess of 5% and so on. There would likely be 4 or 5 participants (again, all and only NHCEs) that would receive extraordinary matches in addition to the "basic match". No HCE would receive a match greater than the basic match described in the previous paragraph.

The client's attorneys says no problem since only NHCEs will receive the "enhanced match".

The client is thinking that it can use the safe harbor to benefit certain HCEs by making bonuses and letting the HCEs defer some or all of the bonuses (up to the 402(g) limit, of course). At the same time, the client can benefit some of its "key" employees (I don't mean that in the technical sense) who are NHCEs (many on the verge of being HCEs through pay) by making extraordinary matches that are not counted as income, thus pushing their pay over the HCE pay threshold.

Any comments about whether such a design satisfies the ADP and ACP safe harbors?

A number of our clients have started receiving checks from a court settlement for a number of former participants who have been gone in most cases for more than 5 years. The question has come up as to whether we can "force" these out to a rollover vendor if the account balance at the time of distribution years ago was over $5,000 or will we have to treat these checks as if they were part of the original distribution, get consent to distribute or wait until the former PR is over age 62 to do a mandatory distribution?

I found that a prior tpa were filing the Form 5500 under Plan No 001 when in actuality it should have been 002. The Employer sponsors a Plan 001 and later sponsored another Plan but the Document and Form 5500 were marked as 001 instead of 002. Can I just fix this on Form 5500 where it asks if has a new adopting employer? I am restating the Document with 002.

Background:

An Israeli citizen worked in the U.S. for a few years and contributed to his U.S. employers 401K plan. He left and has been back in Israel for 4 years. He now wants to roll it over to an IRA.

Question:

Can he move it to an IRA if he is no longer in the US?

Thanks

Company A acquires a division of Company B on June 1, 2009 through a stock deal. Both companies sponsor 401(k) plans. The division of Company B is immediately allowed to participate in Company A's plan. Company B participants can opt to rollover the assets to Company A's plan.

For 2009 HCE determination, do I need to consider prior year compensation of all of the employees of the acquired division? If top 20%, would I consider all employees of the division in 2008 or just the ones active at time of acqusition?

What if Company B did not have a retirement plan, would I need to consider prior compensation?

What if the division of Company B assets were transferred/merged into the plan-For top paid calculation, would I consider all employees of the divison sold in 2008 or only those active at time of acqusition?

A terminated (2004) participant, who had not yet been paid his plan (profit sharing) benefit, died in November of 2008. When he died, he was remarried. I believe his current wife is the beneficiary. In addition, his beneficiary designation form (signed in 2000) names his first wife as the beneficiary but the form says that “if I re-marry the beneficiary designation below will no longer be valid”and provides that his spouse at the time of death will receive the death benefit (unless waived). What steps should be taken to make sure his current wife is the beneficiary and how can litigation be avoided from the first wife who thinks she is the beneficiary? I am aware that there are several approaches that can be taken (e.g., having the first wife complete a claim of benefits form and then show her why she is not the beneficiary, hiring an attorney to handle the situation, getting the estate lawyer involved, etc.). What would be the best way to handle a situation that ensures payment is made to the correct beneficiary and helps protect the TPA and the employer from possible litigation?

Draft: 8/26/2009

Section by Section Summary

Pomeroy Discussion Draft for Pension Funding Relief

TITLE I—SINGLE EMPLOYER PLANS

SECTION 101. Extended period for single-employer defined benefit plans to amortize certain shortfall amortization bases.

Allows a sponsor of a defined benefit plan to elect one of two alternative amortization schedules for the investment losses that occurred at the end of 2008. One alternative would extend the period for nine years delaying the seven amortization payments for two years with employers making interest payments in the first two years. The second alternative would fund the "2008 losses" over a 15 year amortization period; this would give employers a predictable and practical required funding stream that would not divert funding from other key business needs. To assure that the above funding relief is not undermined by other actions that would reduce the retirement security of employees, employers electing the funding relief would have to meet one of three maintenance of effort options. These include: continuing to provide benefit accruals under the plan; making a 3 percent nonelective contribution to a defined contribution plan for employees frozen out of the defined benefit plan; or, freezing all nonqualified deferred compensation plans and subjecting them to the restrictions that apply to the defined benefit plans that cover rank and file employees. These requirements would apply for different periods depending on the extended amortization schedule chosen by the employer.

SECTION 102. Expansion of corridor within which single-employer defined benefit plans are allowed to average asset values.

Generally, expands the asset smoothing corridor from the current 10 percent corridor by increasing the corridor to 20 percent of fair market value for 2009 and 2010.

SECTION 103. Election to use yield curve.

Allows employers that use the spot yield curve for 2009 to use the segment rates for 2010.

SECTION 104. Lookback for benefit accrual restriction.

Uses the plan's 2008 funded status to determine if the benefit restriction that freezes benefit accruals for plans that are less than 60% funded will apply in 2009 and 2010.

SECTION 105. Lookback for credit balance rule

Uses the plan's 2008 funded status for the purpose of the rule prohibiting the use of credit balances with respect to a plan that was under 80% funded in the prior year. This will apply for both 2009 and 2010.

SECTION 106. Clarification of the treatment of expenses.

Clarifies that plan investment expenses are not included in the plan's target normal cost.

SECTION 107. Information reporting.

Modifies the section 4010 reporting rules by repealing the PPA rule requiring reporting with respect to plans that are less than 80% funded and replacing the trigger for reporting. The new trigger would be when a plan had aggregate unfunded vested benefits of more than $100 million and would disregard plans that are at least 90% funded. Additionally, rules regarding the confidentiality of the reported information would be tightened.

SECTION 108. Benefit restriction effective date for collectively bargained plans.

Generally, with respect to collectively bargained plans, the draft delays the application of the benefit restrictions until plan years beginning after December 31, 2011.

SECTION 109. Social Security level-income options.

Social Security level-income options are excluded from the benefit restriction limiting lump sums and other prohibited payments.

SECTION 110. PBGC guarantee.

Changes the determination of the amount of the PBGC guarantee by using the date of plan termination, rather than the date that a contributing sponsor enters bankruptcy.

SECTION 111. Application of extended amortization period to plans subject to prior law funding rules.

Provides comparable funding relief and maintenance of effort rules to plans not yet subject to the PPA rules. This relief is limited to the deficit reduction contribution ("DRC") rules under the pre-PPA funding regime.

SECTION 112. Additions to funding-based limits on benefits and benefits accruals under single-employer plans.

Prohibits the adoption of early retirement window arrangements under which benefits are payable in a lump sum unless the plan after taking into account the additional benefits is at least 120% funded. Alternatively, the company could fund the full cost of the additional benefits.

If such an amendment does take effect, all benefits under the plan would be required to be 100% vested.

SECTION 113. Reportable events.

Revises the treatment of PBGC reportable events based on a specified reduction in the number of active participants in a plan so that such an event is treated as not occurring if: (1) there has not been the statutorily specified reduction in the number of active employees of the employer, (2) the plan was at least 80% funded for the 2008 plan year, and (3) the plan sponsor notifies the PBGC that it is using this special rule

TITLE II— MULTIEMPLOYER PLANS

SECTION 201. Adjustments to funding standard account rules

Allows multiemployer plans that meet solvency tests to elect one of two approaches, available for 2009 and 2010, to fund recent losses over a 30-year period; strengthens and streamlines existing amortization extension provisions.

SECTION 202. Multiemployer plans in endangered or critical status.

Extends the Rehabilitation Period and the Funding Improvement Period by 5 years, net of any extension in that period elected by the plan under section 205 of WRERA; authorizes trustees of a multiemployer plan in endangered or critical status to elect to treat any schedule of benefits and contributions adopted under their Rehabilitation or Funding Improvement Plan as the Default Schedule, once it has been approved in collective bargaining agreements covering at least 75% of the plan's active participants as of the start of the plan year in which the schedule is so designated; streamlines and clarifies certain technical rules for plans in endangered status.

SECTION 203. Multiemployer plan mergers and alliances.

Facilitates the merger of multiemployer pension funds though the creation of multiemployer pension "alliances." Authorizes the PBGC to facilitate alliances by providing direct or indirect financial assistance, when the PBGC determines such assistance is reasonably expected to reduce the PBGC's likely long-term loss. Provides fiduciary clarification to allow trustees to be deemed to meet exclusive benefit standard of ERISA.

SECTION 204. Strengthening participants' benefit protections.

Updates the level of PBGC guarantees for multiemployer plans that become insolvent, so that someone who had 30 years of service could be assured of receiving a maximum of roughly $20,000/year, up from roughly $13,000/year. Modifies existing provisions for multiemployer plan partitions so that eligible plans that have suffered substantial reductions in contributions due to employer bankruptcies and terminations to transfer liabilities attributable to those employers to the PBGC, if that would significantly reduce the likelihood that the eligible plan would become insolvent.