Effen

Interesting...however, the trustees of the plan are 50% Employer representatives, so is this any different than a private citizen not being permitted to sue Congress because their mismanagement caused them to pay higher taxes? I agree at one level it feels like taxation without representation, however, the reality is they are represented.

I think it time to fluff up the pillow. You thought they had quarterlies due, but in fact they did not. Your clients were very wise not to spend their cash foolishly.

How do you take over a plan in the first year? That would set off a lot of alarm bells in my head. The amounts you stated don't seem unreasonably high to me, assuming a fairly low interest crediting rate. I believe the theory many actuaries use to justify the deduction of the service cost in year 1 is that it is the at-risk funding target, assuming the plan offers immediate lump sums. If you search this board and the COPA board, you should find some discussions. I believe the IRS has agreed (although maybe not formally) that this is ok.

"It's a Volume Submitter plan, so that provision has the IRS blessing, at least." Ha Ha - I would certainly not hold that assumption. I assume you saw the EBSA Assistance Bulletin 2014-1 that was released early this week, but that only applies in the case of plan terminations. I think your only real option is the forced rollover. I would never recommend a forfeiture unless the amounts were very, very, very small.

I think there was a Grey Book question about this 5-10 years ago, but unfortunately I can't access my old Grey Books. I believe the IRS said that contributions must be attributed to a specific year and unless you could prove the contributions allocated after 2.5 months were attributed to hours worked in the prior plan year, they should not be counted. It used to be fairly common to count contributions after the 2.5 months, but I think everyone acknowledges that it is not proper and the practice has generally stopped. If you count the contributions will you avoid the deficiency long term, or are you just kicking the can down the road one more year? If you are only saving one year, why fight the battle?

Has anyone had one of their health fund clients do a HIPPA self-audit? The attorney for one of my clients is recommending they retain a firm to perform a HIPPA audit. The idea is to do self audit in order to minimize fines/penalties if the IRS/DOL came in for a real audit. This is a self funded fund with around a $5 million in assets and 300 members. It all sound reasonable except the only people they have found who will do the audits are the big national firms and they want $50K to do the audit. It all seems like overkill to me, but I am in no position to question the attorney. Has anyone else gone through the process? Are there cheaper alternatives? Are these worthwhile for a fund this size?

FWIW, everything I am hearing implies that Congress is fairly likely to change the law. The NCCMP proposals have some strong supporters and possible legislation is being drafted. It is still a long way from reality, but it isn't completely out of the question either. The current thinking is that Congress will most likely let the PPA provisions sunset, then they will jump into action in early 2015 and apply some sort of retro-active fix. Most people seem to want real change, but we might just get another band-aid.

A few things to consider: 1) Generally early retirement "reductions" in a multiemployer plan are really subsidies and are designed to provide incentive to take early retirement. Even though they are lower value, the reduced value does not compensate the plan for the lost interest. In other words, it is generally to the advantage of the participant to take the early retirement benefit. This is just a generalization, you would need to really review the actual factors being used to determine if this is true in this case. 2) consider the individuals life expectancy and general health. If he does not intend to live well into his 80s, less now is probably more valuable than more later. (This assumes that he is not currently "active" with the union or working in the industry. Would he have to terminate employment to collect his benefit, or has he already terminated? Obviously, many other considerations if the has to terminate employment to collect this benefit.) 3) It is very difficult for a participant to make an educated analysis of the plan's funding position. Participants often overreact to the plan's current status. Just because the liabilities exceed the assets doesn't mean the plan in in imminent danger of collapse. It could be in trouble, but if it isn't currently Critical or Endangered, it probably has a decent life expectancy. 4) If it is a dying industry and or dying local, that is a bad sign and could definitely lead to problems down the road. 5) Currently there is no way to ratchet down benefits to lessen the impact of an insolvency. Several unions are working with the PBGC and Congress to develop such a system, but so far nothing has come of it. The benefits would stay at their current level until the fund completely runs out of money. Once that happens, the benefit are slashed down to PBGC maximums (very low) and the PBGC loans the fund money to make the payments. This would then basically continue until in perpetuity. 6) If the plan is really going to be insolvent in the near future, it would be best to take less now, because the future will only bring even less. However, the participant is most likely overreacting to the plan's current situation. It may be in trouble, but still 20+ years to insolvency. It is really hard to tell without more information.

I believe the IRS killed these unless the mergers are for some other bonifide business reasons. I could find some cites and court cases if you need them. I don't think anyone is still out shopping these mergers anymore.

I don't know of any requirement to notify a non-vested terminated participant that they are not entitled to benefits. I also don't know of any statute of limitations on benefits disputes. It is probably good practice to notify them, but I don't think it is required for any reason. Also, make sure your document states that all non-vested participants are deemed to have been fully paid all benefits at their date of termination so the IRS can't argue they should become 100% vested if the plan terminated at some point in the future.

What kind of plan is it? DB or DC? Why did you think you were a church plan and what makes you now think you are not a church plan? Did anyone work with you on this determination? How many people are in the plan?

"He uses hours worked and compensation for entire year such that funding for the year is based on accruals required for the year" There was a time when people would do BOY valuations using EOY census data. The theory was/is that the "assumptions" just happened to match reality. The IRS has been fairly clear that this is not an acceptable method, however you still see some fighters left on the island who don't know the war is over. He could be doing it right as 2 cents points out, or he could be doing it "wrong" if he is really using EOY census data on a BOY valuation. You should just ask him why you can't get valuation results earlier and see what he says.

ditto

I have never seen a document that defines a valuation date - I am not even sure what it would mean or why you would do it, other than for top-heavy testing as 2 cents mentions. You just need to change your thinking. DB plans are not like DC plans. In your case the valuation is run as of the beginning of the year (BOY). Think of this like a "snap shot" date. Who is in the plan on that date gets included in the valuation. The actuary makes various assumptions about compensation changes, termination rates, mortality and determines the value of the benefits they think will be earned during the current year. The only thing that is generally "real" are the accrued benefits as of the valuation date (BOY). What really happens during the year creates gains/losses in the next valuation. If someone quits or is hired mid year, it does not impact the valuation. If you are using valuation software to produce benefit statements, you would produce the statements at the BOY based on real data from the prior year. Therefore, the person hired mid year just wouldn't get a statement until the next valuation date. It sounds like you might be having problem with the timing. If you aren't getting your BOY 13 valuations until mid 2014, then you either need to get the data to the actuary sooner, or you need an actuary who is more responsive. If the 13 BOY vals were done my mid 2013, would you still have the same concerns about the benefit statements? Doing EOY vals might help, but if timeliness is already a problem, they will just compound the problem by forcing a shorter window. Plus, they add complexities in other areas.

I don't think so, that is a significant problem with the program. They could consider terminating the plan and just not making the contribution. You would still report it as a deficiency, and they would owe a 10% excise tax, but that is much better than the entire amount. Then again, if you haven't terminated the plan yet, you probably owe a contribution for 2014 as well, which means another 10% for 2013, plus 10% for 2014. Once the plan has been terminated, I think the popular opinion is the excise tax clock stops running. There isn't much relief for small plans, charity or otherwise.

Deficiencies are not an "audit game" kind of thing. Since the SB was filed showing the deficiency, the IRS WILL send a letter asking followup questions. They generally don't ignore this kind of thing. Prepare the 5330 for them, tell them to file it and pay the excise tax. If they choose not to, at least it won't be your problem. Also, is this plan covered by the PBGC? If so, you also have a late reportable event with the PBGC to deal with as well.

I don't think so. You are correcting the reporting of a contribution that was timely deposited. They made a timely deposit, and properly deducted the contribution, but you just never put on the SB. You are now correcting that error. (Granted, they caused the error and you should charge them for the redo, but I don't see this as a problem.)

So the obvious question is, you currently don't guarantee your work?

I don't see any problem amending the filing, especially since they took the deduction.

Stolen from a similar post on the COPPA Board, but I thought it was appropriate: The IRS has made me remove the Circular 230 notice it formerly made me put here. Under penalty of law you may not rely on, and no inference may be drawn from, the fact that I have deleted the Circular 230 notice the IRS used to make me put here but has now told me not to put here. Further explanation of this notice of non-notice is available at my usual hourly rate. Personally, I never put it on anything in the first place because I thought it was stupid. But that is just the rebel in me, I guess. It is nice to know the rest of the professional world has come around and realized it.

Just an FYI, the pass ratios for EA 1 are very low, typically only about 20% or less pass. This is generally thought to reflect the quality of the student taking the exam, not the exam itself. Most "strong" students are going the ASA/FSA route and don't take EA1. The "weaker" students take EA 1 and therefore the pass marks are very low. Normally less than 100 students take the test each year. The material generally doesn't change much from year to year. Best approach is just get a bunch of old exams and make sure you know how to do all the questions. All the old exams and answer keys are available on the Joint Board site. Really no reason to buy the newest study material and solutions for EA1. You would probably be just a well off if you could find someones used stuff from a year or so ago and save yourself some money. The text books you mentioned are great, but practicing on old exams is the best way to go. Also, save the 2 or 3 most current exams and practice on them in simulated exam conditions. This will give you good insights on where you need help.

Definitely.

I think they are both ok, but don't forget about the other optional forms of payment. Some might be higher under the old assumptions and would need to be protected. As always, you should bounce this off the attorney, who should have the final say.

If your plan contains many optional forms of payment you are permitted to remove some of the options, if they are redundant or very similar to other options, but you can't just remove all J&S options from the plan. Remember, the J&S option is one of the basic provisions of any pension plan. You can't just eliminate it because a vendor thinks it is burdensome.

I don't think so, but others may offer different opinions. I believe because a MP is considered a "pension" plan, 411(d)(6) applies to all rights and features. You could spin the MP piece back out, then terminate the MP plan. Also, why would you have hired a vendor that couldn't handle this. Isn't that why you do vendor searches?