Effen

I guess I would ask on what basis do you think they do not qualify? The Reg is fairly clear - A. Generally, every non-key employee who is a participant in a top-heavy plan must receive minimum contributions or benefits under such plan. However, see Questions and Answers M-4 and M-10 for certain exceptions. Different minimums apply for defined benefit and defined contribution plans. You can amend the plan to exclude them in the future, but based on what you said, I would say he is a participant.

I guess with a name like "ubermax" you can't just shut it down, even when on vaca

I agree with Andy - it is just really good practice. Keep in mind the PA is supposed to be sending them SARs, SPDs, and benefit statements, so there really is no excuse not to know where they are. It doesn't really save the plan any money, it just puts off a problem that continues to compound over time.

411(d)(6) still applies to past accruals and the crediting rate is part of the accrued benefit. Therefore, you can't really change the accrual rate on the previously accrued benefits without at least monitoring them to make sure the participants would never get less under the new formula. It may be easier to term the old plan and start a new plan.

You really need to check the document. It most likely a 4044 procedure which is not necessarily pro-rata, but it could work out that way. Either way, you need to follow the language in the document, especially if you are going to be reducing NHCE benefits.

Just cleaning up my earlier post...if he is taking the distribution in the year in which he terminated, than I agree, it is only the current year's MRD that is not eligible for rollover. I was thinking of the typical case where they defer receipt of the MRD until the April 1 following, in which case you end up with 2 distributions (one for prior year & one for the current year) that are not eligible for rollover.

yes. You also need to be careful because if he takes a lump sum, the piece not eligible for rollover it probably 2-yrs of MRDs - current year's and the prior year's.

I do not think it is unclear any more. Post NRD, but pre MRD: 1) must provide additional accrual based on additional age/service/compensation. 2) If plan provides for SOB, and SOB is timely provided, no actuarial increase of the NRD AB is necessary 3) if PA does not provide SOB, or document is silent about the SOB: a) plan can state that late retirement ben is greater of AE of prior AB, or AB based on additional age/service/comp b) if plan doesn't have specific language, need to provide BOTH rolled up value of prior AB AND additional age/service accrual (This one is a little gray, but recent IRS pronouncements indicate this is their current thinking. I don't think this is the way most people have been doing it, but that may be changing, or documents are getting clarified. In the past, I think most people just did "a", regardless if the plan had specific language or not.) Post MRD: need to provide BOTH rolled up value of prior AB and additional age/service accrual. This assumes plan contains provision to allow participant to defer receipt of benefits beyond MRD if they are still working. If they are receiving a benefit, no rollup is required since they received the value of the benefit. So, yes, I agree that "post 70 1/2 benefits must be both the actuarial equivalent of the 70 1/2 benefit plus future accruals plus the actuarial equivalent increases on the future accruals". I think of this as a day by day calculation, but I think you are permitted to do it once per year. Also, keep in mind the Gray book is NOT official. There are lots of conflicting and incorrect responses in them. They really only represent "current" IRS thinking.

I agree that it is probably compensation, but why not amend the plan to exclude it like the PA wants, then make sure it satisfies the applicable non-discrimination rules.

I recognize I am responding to my own question, but I put the difference in the amortization charges on that line, even if the MRC is $0 before and after the extension. I don't recall any formal IRS guidance, but I probably talked with people from other firms to get some consensus. I think you could properly answer $0 because the question asks about the MRC, but I don't think that is really what they are looking for.

My first reaction is the plan should not permit this. Once the benefit has commenced, it seems like it should be a done deal. From the plan's perspective, I would be worried about adverse selection issues and would counsel them not to do this. Oops - sorry, just realized this was an old post that capitalqdro resurrected for a shameless company plug that I deleted. Either way, I still would argue this should not be permitted.

If you had a plan that uses a 30-yr Treasury rate for lump sums, and you assumed 100% of the population take the lump sum, I would probably determine the accounting liability with two interest assumptions. First being the assumed 30yr rate at the time of the assumed distribution (probably the current rate), and second, a discount rate used to discount the assumed lump sum to today. The discount rate should be based on the expected cash flow, so you should plot the expected lump payments on the current yield curve to determine the effective rate. I agree with the auditor that it should be two different rates, but I don't think I would ignore the lump sum assumption and use the annuity payments. Ignoring the lump sum payments in your expected cash flow could produce a significantly different (most likely higher) discount rate. With assumed lump sum payments, your duration, and discount rate, will be lower.

Prior exams are available on the Joint Board Website: http://www.irs.gov/Tax-Professionals/Enrolled-Actuaries/Joint-Board-Examination-Program Maybe someone who recently passed would be willing to send/sell you their materials cheap. The Actuarial Outpost seems to have a more active exam board - maybe that would be a place to look.

I don't remember exactly, but the 2007 gray book may have been was written before this was clarified in the regulations.

Also, even though it is a hypothetical, suspensions are only permitted if the participant is in "suspendable service" which generally means he is still actively employed, therefore, you cannot suspend the benefit for terminated vested participants whether or not you issued a SOB.

It it too early to do anything except speculate on what we think the IRS will do. They are currently accepting comment letters and are reviewing the opinions of the commentators. They have given no information on the direction they are leaning. I wouldn't be shocked if they go full generational for 436 and 417(e)(w/ unisex adjustments) They will be getting a lot of opinions from the ivory tower folks that fully generational is the only way to go. Other groups will argue for simplicity, at least in the 417(e) area.

Yes, I would be concerned. It isn't as bad as other designs I have seen, but I would make sure the client understands your concerns. Also, make sure the clients attorney is also on board unless you are prepared to defend the formula yourself. A few years ago a lot of people were basing cash balance credits on a "special bonus". The IRS accepted this for a few years, then they stopped accepting it and started to challenge it. They even went as far as revoking previously issued determination letters. If you have a determination letter for the plan you are in a much stronger position, but even then, I would be a little concerned. Also, just because I would be concerned doesn't mean it isn't accepted in certain circles and hundreds of people are doing it.

All good points, but as an actuary, I would prefer that actuaries were responsible and not lawyers or judges. I see your point that it does put a lot of pressure on the plan's actuary, so maybe they could have created a panel of actuaries who would serve as an impartial arbitrator. Sort of like an Oversight Board make up of 3 or 5 actuaries to spot check/peer review the projections before a cutback is approved. Maybe as the law develops, we might see this kind of oversight.

What other options would you have suggested? These proposals primarily came from the NCCMP and therefore were at least somewhat the result of joint concessions from employers and unions. I agree that it is a tragic situation, but unfortunately, the tragedy occurred. There were other proposals dealing with the future that were not moved forward. Those include new plan designs that would eliminate withdrawal liability and creating a self-correcting benefit based on investment returns so we don't have this problem in the future.

Fiduciary Counsel - Actuaries, with input from the Trustees, already exhibit professional control of the plan's funding status. With required 10-20 year projections already required, a small tweak in the expected rate of return can produce significant swings in the funding status. Could a fund that is projected to be 35% funded in 25 years decide it would rather be insolvent? Sure, and the actuary might be able to make a small adjustment to get it there. BUT, actuaries have Standards of Practice to comply with. If our assumption set is not in compliance with the ASOPs, we can be sanctioned or even loose our ability to practice. Is there a potential for some "bad" actuaries to push too hard? Probably - people are people, we have bad doctors, bad lawyers, bad accountants - why not bad actuaries? But, the Academy and the ABCD, and the SOA, and ASPPA, and all the professional organizations are trying to keep it in check. 2 Cents & Andy - the PBGC does not come into a ME situation until the fund is completely insolvent. Once it runs out of money, ALL benefits are slashed to PBGC minimums and the PBGC begins "loaning" money to the fund to cover the benefit payments. Everything else stays in place - contracts are negotiated and employers keep contributing. There are no priority categories like the single employer side. The new law will give funds the ability to stall insolvency by reducing benefits. If the fund is going to run out of money, why wait until it completely runs out of money to start reducing payments?

You can fund whatever you want in the current year as long as the total AB doesn't exceed the 415 limit.

In addition to everything Andy said, if you opt for the actuarial rollup, we would typically do that year by year based on the rate applicable for that year. I think only using the current rate could be problematic because a changing interest rate could cause an accrued benefit to be lower in a particular year that it would have been based on the interest rate applicable to that year.

Happy Holidays everyone and a prosperous New Year!

If it is a non-ERISA plan, I don't think you have QJSA requirements. Seems to me since you don't need to offer spousal coverage, DOMA wouldn't have any impact. But Fiduciary gives the best advice - this is a legal question best handled by lawyers. I would however like to know how this works out.

No, this is a fairly common occurrence and isn't really even considered to be a problem. Many employers simply choose not to make quarterly deposits.