Effen

If they were truly employee contributions (that is deductions from his paycheck), then he would be entitled to that money back, with interest. That is always the case, even in a plan that has no employer provided death benefit. It is not uncommon to have a pension plan that provides no death benefits for non-married participants. These are "retirement" plans by definition and only pay spousal benefits because Congress makes them. Was this a union plan? I ask that because sometimes union contribution rates are expressed as a $/hour contribution and negotiated. The members often think of this as their money and their contributions, but technically, they are employer contributions and therefore could be forfeit on death. The SPD likely contains the answer to all of your questions. If there are employee contributions, there would be a section in the SPD related to them.

It means just that. The sponsor is guaranteeing the EE contribution will earn 3.75% per year. The sponsor is bearing the investment risk and is guaranteeing the rate of return. Normally, the EE contribution goes into the value of the total benefit. If the EE terminates before becoming vested, they would get their EE contributions, plus interest back. Sometimes, there is a similar provision related to death where they are guaranteed at least a return of contributions. In other words, in most situations, the value of the EE contributions isn't really relevant since it just gets swallowed up into the overall benefit. The sum of the EE contribs would impact the taxation of the ultimate benefit, assuming they are post tax contributions. Typically the employee contribution rate is below 5%, so your example of $10,000 is very high, but not impossible for a highly paid person. Also, a typical calculation might assume monthly/weekly contributions and therefore, often 50% of the rate is credited in the first year. Therefore, it might be something like (10000 * (1.035)^.5) * 1.035. (Looking at your OP) Lots of variations and not a common provision outside of governmental plans.

Are you are participant in this plan? Is this a cash balance plan?

This same question was recently posted on the ACOPA Board. On that board people commented that if the last day worked rule only applied to HCEs, it might be ok.

I agree with Jpod. My understanding is the MRC must be cash, but any amount over that can be in-kind, but I would definitely get the sign-off of an ERISA attorney.

I think your best option is to address this in the amendment that changes the eligibility provisions to bring him into the plan. Make sure that amendment clearly defines if you want to count his past service, or if you want him to only accrue benefits from his date of entry. I don't think there is any "rule", but you need to follow the plan provisions. Is this person an HCE? If so, I would recommend that you only count future service. Otherwise you could have some non-discrimination issues.

What non-discrimination test failure are you looking to correct with an "11(g) amendment"? I don't think you can amended the plan now (in April), to increase benefits for 2018 and recognize it in your 2018 funding valuation. I think -11g is only used to correct a failed non-discrimination test. Am I misunderstanding something?

I think anything that you can demonstrate is non-discriminatory under the applicable regulations (410(b), 401(a)(4), etc.) would be acceptable.

I am not sure, but i found this old thread that says you can't. https://benefitslink.com/boards/index.php?/topic/36446-eliminating-actuarial-increase/

As long as the accrued benefit payable at 62 is protected, there is no problem setting an older age for new accruals. You may also consider simply changing your actuarial assumption to 65 for valuation purposes. That would avoid the need to change the plan document. You will need to also make an assumption regarding suspension of benefits notices (if your plan document calls for them.) In other words, for a one life plan you have a lot of flexibility. You can either actuarially increase the benefit from 62 to age 65 in your funding, or, if permitted, issue a Suspension of Benefits Notice at age 62 and ignore the actuarial increase - assuming they are still active.

I am sure someone else will chime in, but are you permitted to change eligibility for current employees? In other words, the requirement was 21/1 when you hired them. Are you permitted to change that to 21/2 after they have been hired? That feels wrong, but that doesn't mean it is.

No, there was no new guidance issued that I am aware of. 2018 expected compensation should be a reasonable expectation. Generally, that would be 2017 w/ a salary scale adjustment, or pro-rata adjustment if they worked less than a year. What is the basis of your question? What would you like to use?

Be careful of the disability provisions and make sure it really is a J&75 currently. If the P is younger than NRD and is receiving a "disability" benefit, this might be an ancillary benefit and not part of the "retirement" benefit. It is common that the disability benefit is paid until NRD, at which time the participant makes an election of their retirement option. Participants rarely understand this, so make sure you are reviewing the plan document. Make sure the QDRO addresses both benefits. If he is beyond NRD, the only option is to have a portion of the benefit previously elected to be directed to the AP. My opinion is that you can't change the form of payment once the payment has commenced.

What Larry described is not the way I typically see it. Most of the firms in our area, and the local ERISA attorneys, still charge on an "as needed" basis. That means there is a fee to restate the document, or amend the document, whenever a restatement or amendment is required. The advantage is that you are only paying for the service when necessary. The disadvantage is that you have a relatively large legal bill every 5 to 6 years. Larry - under your structure, what if the client leaves you after 5 years of advanced payments? Do they get that back, or is that considered "support"?

Maybe i misunderstood. Generally, in a "contributory DB" plan, the employee contributions are paying for a portion of the DB accrual. There is normally no need for separate accounting, except if the person terminated non-vested - in which case they receive the value of the EE contribs, with interest determined at a stated rate. I have also seen a minimum "return of ee contribs" for death benefits, but again, no need for separate accounting since the benefit is determined based on a stated interest rate. Also, a word of caution if you aren't familiar with multi-employers - because the contributions are negotiated, and sometimes considered part of the "total package", union members think of them as "employee contributions" when in fact, they are "employer contributions". In your situation, how are the "separate accounts" considered in the determination of the participant's benefit?

I don't really know, but I think #3 deserves more thought. I don't think you can convert the DB Plan into a DC plan, but you should be able to spin off the EE paid portion of the DB benefit into a new DB plan, then terminate that DB plan. You can also talk to the PBGC and see if they have any ideas. I have found them to be helpful when you are just considering options.

Due to anti-trust rules, we are not permitted to discuss fees on this board. Ask your accountant or other professional advisers for recommendations, or just search the internet for other actuaries in your area.

Again, look at the 2015 2016 5500 and see if there were deficiencies. It would also tell you the benefit formulas in effect at that time. This really doesn't make sense. Why would you start a plan, and then not fund it. Even if no contribution was required in year 1 and 2 (which seems highly unlikely), why would you pay the administrative costs to set it up and then not fund it. The only logical explanation is what Cusefan (what is a Cuse, and why are you a fan?) describes - that is, maybe they set up the plan and then didn't have the cash to fund it, so you should see unpaid contributions in year 1 and 2.

You are correct that you don't fund based on vested benefits. You stated the "funded status is over 100% in 2017" and which would imply they either actually made contributions (and the AFN is incorrect) or no contributions were required since either the assets exceeded the liability, or maybe the benefit was lower in 2015, 2016 and increased in 2017. Lots of possibilities, but having the plan funded at 100% is the most important statement on the AFN. You could also look at the actual 5500 filings which would give you a better picture. They are available for free on the DOL website. You have the EIN from the AFN and s/b able to easily find the 5500 for the prior years. By looking at the actual 5500, you will be able to see exactly what they contributed and what the funded status was at all points.

Be careful of 411(d)(6). Changing actuarial equivalences may be problematic since they are a right and feature of the benefit when it was earned. Therefore, all optional forms must be protected.

I had a plan that remained open until the last person was paid. I don't recall the PBGC having any issues with it. I believe we sent them a letter and informed them all participants were paid, and that was it.

in theory, but I have never seen it in practice. The only time I have heard this being applied is when the sponsor is being non-cooperative.

Good response Larry. I am wondering if this is a 2017 missed contribution, in which case he might also have a 2018 problem looming. Zak - are you talking about a contribution that was due in 2018 (ie: for the 2017 plan year), or a contribution for the 2018 plan year that is not required to be deposited until sometime in 2019? Larry - what did you mean when you said the, "penalty would apply ONLY for one year as there is specific action that can be taken to eliminate the funding requirement in 2019 and beyond. " Are you referring to terminating the plan before the 2019 plan year? If he doesn't terminate, why wouldn't the excise tax continue to apply each year? Even if he can get a $0 requirement for 2019, the 2018 (or 2017?) remains due and the excise tax still applies, doesn't it?

That sounds correct. If you are unable to make a required contribution, a 10% excise tax immediately applies. In addition, the required contribution does not go away and the excise tax applies each year until the contribution is made. If you haven't already done so, you can freeze the plan and/or terminate it. This may help avoid additional funding requirements for 2019 and beyond, but there might not be much they can do about 2018 at this point. There are some strategies that can minimize the damage, but they are outside the scope of this board. Ask your "retirement plan folks" or find an ERISA attorney what they suggest.

Sadly, it appears the spirit in today's media and politics has infiltrated into actuarial circles. Good to see you back Ishi!