Effen

I think there are lots of things we need to know before we can answer this question. How much was the person paid? Was the recipient an HCE? What are the circumstances surrounding the payment? If this was a $150 payment to a NHCE, then probably not an PT. However, if the recipient was the HCE owner who wrote himself a check, then you probably do have a PT.

I am not sure what you are asking. Lots of multiemployers have DC plans. Through the bargaining process they can allocate contributions any way they see fit, however, even a frozen DB plan may still require contributions, so you probably couldn't just shift all Employer contributions from the DB into the DC.

You may, or may not, know, the .5% thing is not statutory. Technically, there is no legal requirement to provide a .5% benefit. It is just a basis the IRS uses if they don't like your design. That said, I wouldn't worry about it, if it is a "one off" situation caused by declining interest rates. Maybe explain the situation to the plan sponsor, and ask them if they want to take the risk, or if they want to increase benefit in case the IRS makes it an issue.

Good point about the reasonableness issue, but continuing your argument, how do you argue that it is "reasonable" to use different rates for different groups inside the same plan? Why is it "reasonable" to use 5% for HCEs and 8.5% for NHCEs? Have you seen studies that NHCEs are better investors and generally earn more than HCEs? "the IRS has already explained to use what interest rates are allowed for crediting, so why not allow the NHCEs to have better conversion factors for their accrued benefits than the HCEs." - because they are not stupid. In reality, there are probably people out there doing what you are suggesting. If you are comfortable with the design, just make sure the client is fully aware of the potential problems, and let them make the choice. It is the client who has the problem if it blows up, so make sure they are willing to take the risk before you proceed.

My first reaction was the same as ubermax....pigs get fat, hogs get slaughtered... I would say, why push it, but I know lots of people make a nice living pushing things that aren't cricket and just fix them if/when the IRS creates a rule to stop them. Anyway, if you look at this from the other direction, what stops you from creating a traditional plan where the lump sum for an HCE is determined using 1% and RP 2000 projected to 2050 by BB, and lump sums for NHCEs are based on 417(e) rates? Would you argue that is acceptable? I know you are going the opposite direction, but you are ultimately doing it to get more $ for the HCEs. Couldn't the IRS use the same argument to attack your potential design? Wouldn't the conversion rate be considered a right and feature that would need to be tested? You may say, fine, the HCE is getting a lower monthly benefit, so it is all good...but wouldn't you need to normalize that benefit for testing somehow?

In what year did you deduct the DB contribution that was way over 25% of comp? if you took the deduction in 2013, then you have to comply with the 2013 combined plan deduction rules. Is the plan covered by PBGC? If so, than the combined plan deduction rules do not apply.

If you "know" the past work was bad, you don't really have any choice, you are required to report them. I have spoken to the ABCD several times and always came away feeling better. Even if you don't report the person, you should give them a call and talk it out. As a profession, guys like him make us all look bad and he should be reported. PRECEPT 13. An Actuary with knowledge of an apparent, unresolved, material violation of the Code by another Actuary should consider discussing the situation with the other Actuary and attempt to resolve the apparent violation. If such discussion is not attempted or is not successful, the Actuary shall disclose such violation to the appropriate counseling and discipline body of the profession, except where the disclosure would be contrary to Law or would divulge Confidential Information. ANNOTATION 13–1. A violation of the Code is deemed to be material if it is important or affects the outcome of a situation, as opposed to a violation that is trivial, does not affect an outcome, or is one merely of form

The interim amendment has nothing to do with the funding election.

Well, ya, but I just assumed it was some broker type who just didn't know any better did that.

I think I am coming around with Frizzy, why does RC say,"where, clearly, the minimum funding requirement will be $0?s", and Hojo say, "the plan is obviously over funded on a funding basis so you know that there will be excess assets for valuation purposes". Just because it terminated doesn't mean it is over funded. The plan could be underfunded, in which case you could have a required contribution for the one day the plan year, couldn't it?

The default was to use MAP-21. Plan sponsors could elect NOT to use MAP-21 in 2012. This was done with a written election to the actuary. Since MAP was passed so late in the year, many 2012 valuations had already been completed based on the PPA rules. In order to avoid requiring everyone to redo their 2012 valuations, the sponsors were permitted to defer the impact for funding until 2013. I would argue the funding elections have nothing to do with the good faith amendment.

When you say it "fails the 414(s) compensation test", do you mean the definition has been determined to be discriminatory? If so, you need to amend your plan to correct the problem. You can't just, "go back and INCLUDE overtime and commissions in covered compensation" unless the document permits it.

It maybe in the process of terminating with the PBGC, but it sounds like it isn't "terminated". It isn't terminated, until all of the assets have been distributed. Sounds like you, or your client, has some bad information. I agree, buyer should have no responsibility, but I haven't read the sale agreement.

In general, the buyer would not assume the pension plan's liabilities or assets. Asset sale is just an asset sale - bricks and mortar. The original corporation still exists and still maintains control of the plan. All that said, if the plan is underfunded and covered by the PBGC, the PBGC will not let the seller escape the liability just because they sold the company. This is a reportable event and they could block the sale and/or go after the proceeds to fund the plan, if needed. Also, there are other considerations if the plan is collectively bargained.

You should also take a look at the "listed transactions". I believe it is a $200,000 fine if the insured death benefit exceeds the plan's death benefit by more than $100,000. You can just search "listed transaction" on this board and you will a lot of posts on the subject.

I agree with AtA, but if the death benefit is 100% of the present value of the accrued benefit, you could argue that the use of pre-retirement mortality would not be reasonable because there is no forfeiture on death. Therefore, even though it is not explicit in the document, an argument could be made that any other interpretation would not be reasonable in that specific situation.

No change. You can use, or not use, pre-retirement mortality based on the provisions of the plan document.

Obviously you are much deeper into this and closer to the issue than me. You sound like you have a pretty good grasp of the situation, so without specific details, I can't offer much. However, a few things sound a little strange - not that they might not be correct, but someone would need to dig deeper. - it seems strange that a frozen benefit can decrease due to a increasing offset. I would have thought once the plan was frozen, it was frozen and future COLA changes to SS bens would not impact it. But, I don't work on any plans that use an offset, so I am certaianly no expert. - What does it mean that "ss offsets increases with age"? SS bens are not payable at 55, so how could your benefit at 55 be offset with a SS ben at that age? The SS bens do increase for COLA each year at age SSRA, which could decrease the projected, and therefore the accrued, but not to the scale you mentioned. (1) can an early retirement benefit go down with age like this and yet the plan be compliant just because a defined Age 65 accrued benefit does not decrease with earlier retirement age? Maybe, but it would be a VERY rare situation. Generally ER reductions decrease with age, therefore, the relative benefit increases. (2) Can an early retirement benefit decrease with age, in absolute dollars ($700 vs. $650, for example), due to a SS offset even when a service/compensation freeze is distorting the formula? Maybe, I would need to see the actual formula to see how it works. It would not be a typical situation. (3) Should actuarial equivalence be taken into account when making comparisons between benefits at two different ages? I would say not until after NRA has been attained.. Early Retirement benefits are often "subsidized", which means they are worth more than the straight actuarially reduced benefit from NRA to ERA. They are subsidize to provide an incentive to retire. If you don't retire, you are entitled to the subsidy and it goes away. Normally the benefit at 55 has more subsidy than the benefit at 56, and so on, but it typically doesn't actually decrease in absolute dollars without something else happening.

Curious- I just reviewed some of your older posts. Are you still talking about a PEP plan? That is a bit of a different animal and may require that you actually hire someone to review all the documents. It might be difficult to get specific advise off this board with out really digging into your specific situation. Good luck!

As you suspect, what you described would not be legal. IRC 411(d)(6) states the accrued benefit can never go down. However, there are situations where bad communication can lead to misunderstandings. We would need more information to answer your question. Also, plan administers don't always understand their own plans, so it might not be as they describe either. In general, under fractional rule, if you were hired at age 30, and retirement age was 65 and your projected benefit was $1,000. At age 55 your accrued benefit would be $714 (25/35*1000). At age 56, it should be $743 (26/35*1000). Both of these numbers represent monthly benefits payable at Normal Retirement. Early Retirement benefits may be significantly lower. A few question: - how is the projected benefit of 1000 determined? Is it a fraction of your compensation? Did your compensation go down? - Could this be a "cash balance" plan, or some sort of "retirement equity" plan? - Are you sure you are calculating the age 55 benefit and age 56 benefit correctly? Are they your calculations or are you looking at a benefit statement? - Has your employer changed the way the projected benefit is determined? Also, your concept of "actuarial equivalent" is a little off. Generally actuarial equivalents only come into play if the person defers receipt of their benefit to after their Normal Retirement Age. Also, keep in mind that your accrued benefit is payable at your normal retirement date. If you are eligible for an Early Retirement Benefit, it may be significantly lower than your stated accrued benefit because it would be payable at an earlier date. Ask for a copy of the "Summary Plan Description" and a detailed calculation of your accrued benefit. You have a legal right to both of these items. Keep asking questions until you are satisfied. Just because the employer says it "just is", doesn't mean that it really "is", but it could be.

It could be correct. Check with the actuary and see if the DB satisfies the applicable non discrimination tests on its own. If it does, then you don't need to be concerned about it, expect maybe for the Top Heavy requirements.

Let the other firm do the ND testing. If you "have very little knowledge of DB plans", your learning curve could get very expensive. Other than that, the rules are all there in 1.410(b) and 1.401(a)(4) and (a)(26), plus a few significant IRS internal memo's that have become public.

I am not disagreeing with anything said so far. I agree that naming names is generally a bad idea. That said, I see it all the time, especially when describing benefits for HCEs. In general, I don't think the IRS cares so much about writing an HCE out of the plan. A bigger problem that we have encountered in this situation is even though the other shareholder is excluded, his is still just as responsible for making sure the plan is properly funded. The plan is sponsored by the corporation, not the individual members of the corporation. We had a similar set up that worked great, until the shareholders had a falling out and the shareholder in the plan quit. The shareholder who was not in the plan was not to happy when he found out the corporation still had an obligation to fund the plan, especially when a large chunk of the required contribution went towards the ex-shareholders benefit. Lots of potential problems with your solution. Make sure everyone has their eyes open before proceeding.

"so a 3/1/2014 term date" You would also have a 2014 short year funding requirement, that may also become a deficiency if unpaid. It also wouldn't surprise me if the PBGC asks a lot of questions about the deficiencies and possibly gets the IRS/DOL involved.

I moved this to the multiemployer board thinking you might get better responses. I don't think you will find any formal guidance as the withdrawal guidance has not been updated for PPA. My thought is that it would be considered in the calculation of the w/drawal payment.