Effen

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.

What is the question? In general, you shouldn't "convert" any dc into a db or dc into db. Always better to terminate and start fresh. P.S. I believe 411(d)(6) has been around since ERISA was passed.

You need to set up a profit sharing plan. You can add the 401(k) feature if you want, but it isn't necessary. If you fund the SEP, you lose the ability to deduct the db contribution.

The IRS is still battling about how to determine the historical rates. Their first comment was "we know you need them before March 31st...". It was then "clarified" to them that March 31st is WAY too late. They understand our need for the rates, but they haven't made any promises about when they will be released. My personal opinion, with no direction from anyone, is late January/early Feb. Obviously the rates will be lower, I am guessing around 30-50 bps on each segment rate. Less on the first, more on the third. What are others using?

Not moot. The sponsor needs to formally revoke the prior elections. From IRS Notice 2012-61:

It's an exam on administering defined benefit plans. What I meant was, who is sponsoring the test? ASPPA? IBEBP (CEBS)? Other? Specifically, what exam are you studying for.

What kind of exam are you studying for? I have several problems with this question, but the number of years of average compensation used to determine the TH minimum benefit cannot exceed 5. Therefore, I would probably use the 5-yr ave. comp. to determine the minimum, unless it says somewhere else in the question that the plan is using the 3-yr ave. for this purpose. M-2 Q. What is the defined benefit minimum? A. (a) The defined benefit minimum requires that the accrued benefit at any point in time must equal at least the product of (i) an employee's average annual compensation for the period of consecutive years (not exceeding five) when the employee had the highest aggregate compensation from the employer and (ii) the lesser of 2% per year of service with the employer or 20%.

Just throwing in that it in addition to the wording in the plan, it might also depend upon the status of the participant. If the participant is actively working beyond 65 than the discussion is on point. However, if this is a terminated participant who simply did not claim his benefit when he reached NRD you may have an added issue. If you plan is silent, or doesn't specifically state that not requesting the benefit is the same as an election to defer, you may have no authority to suspend his payments and therefore may need to pay the benefits retroactively. I throw this in because you said "I believe ...", when in reality the document should tell you what to do and it shouldn't be a question. Generally, a plan only gives the ability to suspend a benefit payment if the participant is actively working.

Deductions are based on fiscal years, therefore the critical date in your situation is 6/30.

Interesting thought. Have you seen this in practice, or are you just wondering if it can be done?

No offense, but based on these statements your actuary boss should probably review the ASOPs and determine if he/she is qualified to do this work. Floor offsets are very complicated and high on the IRS target list. They are nothing to dabble in if you don't really know what you are doing. You could be doing a large disservice to your client, and your firm if it explodes.