Effen

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.

The "lump sum" is simply the present value of the monthly annuity at a specific point in time. The $1.5 M is simply the "value" of the annuity today. The plan has the obligation to pay the $13,525 monthly annuity for the lifetime of the participant. The value of the annuity will fluctuate based on interest rates and life expectancy. If he lives until 83, the annuity will still have significant value. However, if he dies, the annuity will have no value. If the participant is not making contributions into the plan, there is probably no real reason to continue it. It may be best to terminate the plan, roll the money to an IRA, and take the MRD's using the IRA rules.

It is a prohibited transaction. Assuming he had no distributable event, most likely the entire $472,950 would be reported. If he can put the money back you can call it a PT loan, in which case the excise tax only applies to lost earnings. There is an on-line calculator that will give you the amount of the lost interest - check the DOL site. This should all be handled and directed by ERISA counsel. Also, as a word of caution, I had a very similar situation occur about a year ago. The client ultimately put the money back and terminated the plan. Last week I got a call from a DOL criminal investigator investigating the situation.

I agree with everything said, but don't undervalue Andy's final statement that "the only published IRS opinion on this is in the IRS Gray Book". The Gray Book has no real legal authority, although most treat it like it does. There are some who disagree strongly with the current IRS position. Most actuaries will also tell you that deductability is an accounting issue. Therefore, the actuary can tell the client what they think, but at the end of the day, it should be the clients/accountants call.

(d) Other. It is the date which the funds leave the control of the Sponsor.

If it is a one life plan, and that one life is the owner, the plan would be top heavy, which would mean 3 year vesting.

An ASC user in our office says that is how ASC describes the table otherwise known as the 436 small plan combined mortality applicable for 2008, sex distinct. But it is still a good idea to ask for the q's.

I am not sure what it means either, but you can always ask the other actuary for the q's.

I don't agree. I don't think the lump sum needs to include the ER subsidy. The disparity in the value should be apparent in the relative value disclosures.

I think your assumption needs to be a little stronger. What you wrote implies that it can change year by year based on the actuaries best estimate in that year. That may be ok, but it feels a little vague. I typically use something like, the lesser of the 3rd segment rate or 7.0%. I also have some where we just use the 3rd segment rate without any static rate maximum. Unless the actuary is also an economist, I am not sure they would be qualified to estimate the rate of return from one year to the next. And yes, 7.52% would be the rate, if it is lower than the static rate assumption I am using.