Effen

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.

I doubt the financial institution would be willing to just rename/reclassify the account. Different types of trusts have different requirements.

I pretty much agree with AndyH - just not a believer in offsets. I find you can generally accomplish pretty close to the same net allocation without the risk associated with offset plans. Look at leaving the PS alone in 13 and adding a cash balance, Use the Dc allocations in your general test and see how much you can put in your DB. Then, figure out your plan design for 2014, which might involve an offset and a different Cb formula. Don't assume you need to cut the PS allocation to make the overall design work. Adding a third plan for just one year usually just creates a lot of admin charges that can be hard to justify.

I am not sure exactly what you are asking, but you cannot just add the .5% db accrual to the 6.5% dc contribution and say it is worth 7% gateway contribution. You need to convert the .5% db into a dc like contribution before adding it to the 6.5% dc contribution to see if it satisfies the gateway. There is also averaging that can be used that is often helpful.

I haven't heard any discussions about this, but that doesn't mean it isn't true.

I am not sure I understand your concern regarding the 133% rule. Each year stands on its own. The 133% rule is typically not an issue with fluctuating interest rates in cash balance plans. I think your bigger issue might be 411(d)(6) since each time you change the rate you need to protect the old rate on those past accruals. That seems like it could get very complicated. I think the regs indicate that a 5% rate is acceptable. If your fixed rate is higher, I don't know if any solution exists.

Why not just use the 3.79% as an estimate, then true it up later. I think the estimate would not be materially different from the actual number and would be sufficient to make an election on the form of payment. Then, once the real rate is know, you can adjust the payment accordingly.

No, the LS should have been restricted to the 415 maximum regardless of the amount of the monthly AB. It makes for a delicate take over, but you should notify the client of the issue and make sure it doesn't come back on you if they choose not to correct it.

Sorry, but I am still confused, but that doesn't really matter. If your client is really bumping the 415 limit in a cash balance plan, you should be thinking termination, not freeze. Depending upon the age of the HCE and the plan's NRA, his maximum lump sum may actually start to decrease. Not only that, but if he is at the maximum, excess assets can only be allocated to the other participants, or reverted to the sponsor. Small plan sponsors typically don't like either of those options.

I don't understand what you are asking. What do you mean the "HCE has fully accrued benefits"? Did they hit the 415 limit or is there some plan imposed maximum benefit? Assuming the accruals were all complaint with the applicable non-discrimination rules at the time they were earned, there is no problem freezing them.