Effen

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.

I'm sorry, but you said, "just want to contribute up to the maximum he would be allowed to take as a lump sum after everybody else is cashed out". Now you are saying, "there is no excess asset and the owner just want to contribute what he can take out" Is the plan currently frozen? I think you said it was frozen in 2003 Does the plan currently contain sufficient to cover the frozen accrued benefit? If not, he can contribute enough to cover that accrued benefit without concern of 1.401(a)(4)-5. If he "contributes up the maximum" I assume the plan will have more assets than it needs to provide the previously frozen accrued benefit. If you then re-allocate those excess assets to him, the re-allocation of those excess assets is considered to be a plan amendment that must comply with 1.401(a)(4)-5. The fact that you said the plan was frozen, then you were asking about his current 415 limit, lead me to believe that he ultimately planned to receive more than the value of his previously frozen benefit. If this is true, I think you need to consider 1.401(a)(4)-5. If he is just going to make a contribution to bring the assets up to cover his previously frozen benefit, I think you are ok.

Definitely! Too bad they aren't like us actuaries who speak as one voice on all topics.

I would argue this is an accounting question and not in the actuaries area of expertise. You should refer the client to discuss this with his/her accountant unless you are willing to take the repercussions if you are wrong and the deduction is disallowed. That said, I think it would be deductible, but different accountants have different opinions about how, and over how many years.

Be careful of the rules related to the timing of a plan amendment or series of amendments has the effect of discriminating significantly in favor of HCEs (1.401(a)(4)-5). The allocation of excess assets is considered a plan amendment that must comply with the applicable non-discrimination rules. What you just described fits the perfect example of what this rule is targeting. I would not want to be on record as the one who recommended it.

Quick - someone help out John. I think Ned Ryerson has taken over his handle.

I think we are all saying the same thing. 1) You only need to include the value of the early retirement subsidy in the lump sum IF the plan says you do. Nothing in the regulations require you to include it, therefore, if the document is silent, you should ignore it. 2) If there is a subsidized early retirement benefit, the relative value disclosures should be providing clear information that the value of the lump sum is lower than the value of the immediate annuity.

I would say yes. Did the participant accrue any benefits after 1/1/2011? If so, than I think post 2011 comp would definitely count in determining the 415 limit.