Effen

If compensation is zero, how can they receive an allocation without violating the 415 limit?

The NCCMP released their report a few weeks ago. I believe this group has strong support within the industry and Congress. It is worthwhile reading for anyone practicing in the multiemployer arena. http://www.solutionsnotbailouts.com/

it depends on what the owner wants. An "owner only" plan can really do whatever it wants. There is no problem paying the annuity, but it also isn't a problem to terminate the underfunded plan and distribute the assets to the owner. Most owners choose to terminate and rollover the assets into an IRA because an IRA is much cheaper to operate than a qualified plan. Read the Plan Termination section of your document and you will see language allowing this. Since the plan is not covered by PBGC, you don't need to be fully funded to terminate it. Also, there is no reduction of accrued benefits to approve, since you are just following the plan's provisions.

Mike, I was just about to comment the same way when you posted. I agree that I don't think it is that simple. First, I am assuming you are asking specifically about the actuarial assumptions used to calculate lump sums and not those used to determine monthly annuity options. Secondly, because the plan is still using the 30-yr rate for lump sums (and didn't change within the approved window when the law changed to the segment rate method) I think you are stuck with the 30-yr rate at least on benefits accrued before the change. Rev. Rul. 81-12 provides that a change in actuarial assumptions that results in a decrease in the accrued benefits of any participant would violate the benefit protection of IRC 411(d)(6). 1. In general, a plan may only change actuarial assumptions without regard to IRC 411(d)(6) if the change is limited to additional benefit accruals after the later of the date the amendment is effective or adopted. 2. However, Rev. Rul. 81-12 provides a permissible method of changing actuarial assumptions so that the new assumptions may be used with regard to all benefit accruals, including those accrued before the date of the change. To use this option, the plan must provide that the benefit determined under the new assumptions will not be less than the benefit that had been accrued as of the date of the change, determined under the prior assumption. I think the one-year window only comes into play if you are changing things like stability periods or look back periods. I think changing from 30-yr rate to 5% would fall into a protected 411(d)(6) benefit.

Your document really should explain how to do it. Since you know you have the issue, you still can amend the plan to codify your intent. I think a stricter reading of the document will probably tell you that the lump sum is simply restricted and therefore not an option. Therefore, the plan may not give you any authority to pay the $20,000 benefit unless the participant elects the life annuity. So if they elect a lump sum, and instead of the lump sum you pay $20,000, what exactly is it? Is it a partial lump sum? Is it an installment? Is it eligible for rollover? What if the participant dies, what does the beneficiary receive? What if there is no beneficiary? All of the optional forms of payment must be defined in the document, so what option would they be electing? Another way to handle it is to add an option specifically for restricted participants that allows them to make an election now, then to change their election at a later date if the restriction is lifted. They could elect a life annuity or a J&S option now, then, if/when the restriction is lifted, they can convert the annuity into a lump sum.

Andy - I have had fairly good luck just sending them an email. In general, I find the PBGC very forthcoming in "what it" situations. You may need to work your way through the system, but eventually you get someone who will answer you questions.

Did he sell his shares when he retired? I would put all the facts in front of the PBGC and see what they say.

I believe only "Substantial Owners" can waive benefits in a PBGC standard termination. You need to own at least 50% of the company.

The AFTAP is certified as of one point in time. It doesn't change based on what happens after that date. If the AFTAP is above 80% and lump sums are not restricted for the year, then you really can't do anything to restrict them.

Another base problem with your calculation is you don't use MAP-21 rates for the maximum. You only use MAP-21 for the minimum. I am also bothered that you say your TNC = 0. Are you saying the plan bases the AB on past service, and therefore the AB that you earn at the moment the documents are signed is attributed to past service and therefore in the FT and not the TNC. I know people use that argument, but I don't understand how you can accrue a benefit that is based on participation, before you actually have any participation, but that is just me. I guess the IRS accepts it, if you recognize past service for benefit accrual.

Great response Rex. Much better than "never let legalities get between an insurance salesman and his commissions", which is what I was going to say.

Yes, you probably should talk with an actuary, and possibly an attorney. There are probably some actuaries who would help you at very little or no cost. Ask around to your professional friends for a recommendation. I think some of the American Academy of Actuaries was talking about creating a network of actuaries who would work with participants, but I don't know if that ever got off the ground. If you have specific questions you can try posting them here, but as many will tell you, you get what you pay for. You should also ask your employer for a copy of the plan document and the Summary Plan Description. The plan document will contain the specifics of how the plan is operated.

I know the corridor widened from 90% to 85%, but my surprise was that the underlying 25-year average decreased by 34 - 46 bps, or a little more than 5%. Seems like a pretty big one-year change in a 25-year average. Obviously they fine tuned their methodology and used something a little different for 2013. Let’s hope they have settled on a methodology so things are more predictable, at least until the next round of relief.

Wow, that is quite a drop. A little more than I expected.

Wow, really? Those are the 2012 funding rates. 2013 funding rates have not been released, and no, you can't use them for lump sum calculation.

That is really the point. We wanted to make sure that we were covered so we could take a higher deduction.

Good idea. Spoke to the PBGC and they confirmed the group would be covered.

A doctor's practice and his wife's business are determined to be an Affiliated Service Group. The doctor's practice is considered a "professional services company" and his wife's business is not. The group sponsors a pension plan with 10 participants (8 with physician, 2 with wife). Are they exempt form PBGC coverage under the professional service exemption, or because the wife is not a professional service company they would not be able to meet the exemption? What if we excluded the wife's company from participation?

discretionary. You are only required to offer a spousal death benefit, and even that has some restrictions (married more than a year, etc...)

If you choose to over fund, that is your decision. The biggest reason to avoid overfunding a pension plan is to avoid the problem of a 50% excise tax on those excess assets. DB's are a little tricky, you can generally put in way more than you need, but you can only take out a limited amount. There is a maximum distributable benefit defined by law, in IRC Section 415. This effectively limits the amount you can take out of the plan. Ask your actuary how close you are to the 415 limit currently. Also ask him/her to estimate the 415 limit at your anticipated retirement age (55). Also, consider how much your pension investments will grow over the next few years. Then compare those two numbers and decide if you need to put in more money. Worse case, you loose 50% of the excess assets, which would then be subject to corporate income tax and maybe personal tax if you pay it to yourself, so you are probably going to loose around 90% of it. If that is a risk you are willing to take, go ahead and put the money in the plan.

Kimberly - glad to have you on the board and posting, however please try to refrain from "double posting". It makes it difficult for other who may be following the thread. I have closed this thread, with a link to the other thread where this question was posted. http://benefitslink.com/boards/index.php?/topic/52669-map-21-interest-rates-for-2013/ Edit: Sorry, I guess I can't close a thread on the new format. Please don't post further messages on this thread.

I leave that kind of stuff for the lawyers and accountants to decide.

if they had already funded the Sep then they would not be able to deduct the db, unless they were somehow able to withdraw the Sep deposit, which I didn't think was kosher. I assumed the Sep had already been funded, which meant no db. Are you suggesting they could deduct the db but not the Sep?

Looks like I learned something today. I always had thought prototype SEPs were possible, but didn't really exist in the real world. This is good to know for future reference.

My understanding is the only way they could maintain both a db and a SEP is if it is a "prototype SEP" or an "individually designed SEP". Both are generally cost prohibitive and most likely not what is being used. However, you are correct, that it is possible, but not very likely.