Effen

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.

I have worked on plans where the cash balance formula referenced the applicable DC limits and never had any problems getting approval letters. As SoCal said, as long as it is definitely determinable, you should be fine.

Anyone else having trouble with the site identifying new posts? It doesn't seem to be remembering what posts I have already read and which ones are new. The only way to get it to clear is when I click "treat all posts as read". Is it just me or are others having this problem?

I think that is the concept, but I am a little confused by the terminology. Lets say NRD is 1/1/12, I assume you mean: AB at 1/1/12 (NRD) = $400 AB at 1/1/2013 = $450 AE of 1/1/12 AB at 1/1/13 = $470 If so, than you have the right idea. That said, just because it is in the grey book doesn't make it law. Often the IRS uses the grey book to raise a point about something they see in the field, but don't like. People have been using the "best of both" for years without worrying if the document explicitly expressed it. I think now people need to be aware this is a potential problem so they can fix their documents going forward. (Obviously, just my opinion.) In many ways these are legal questions that the actuary should stay out of, especially if it is grey area (no pun intended). Let the lawyer tell you how to interpret the document they wrote. If it is a prototype, call the provider and ask them.

I think we are saying the same thing. The SOB notice only suspends the actuarial rollup, it does not suspend the age/service/comp increase. So, if the AE of the prior benefit is greater, than you are ok - assuming your document says you can pay the greater of the two. All hail the Almighty Grey Book - 2009 - Q/A 39 Question 39 Other DB Plan Issues: Post NRD Actuarial Increase Not Stated in Plan Defined Benefit Plan A provides for additional accruals under the plan’s benefit formula for service after attaining normal retirement age. The plan does not contain a suspension of benefits rule. While normally a plan must be operated in accordance with its terms, the plan administrator needs to consider and abide by ERISA requirements in general. To comply with ERISA, the plan administrator administers the plan by providing retirees post normal retirement with the greatest of: • The benefit with additional accruals • The actuarial equivalent of the benefit at normal retirement • The actuarial equivalent of the formula accrued benefit at the beginning of each subsequent plan anniversary date (see 2000 Gray Book, item 34.) Is this acceptable? RESPONSE No. To take advantage of the offset inherent in providing the greater of the accruals or the year-by-year actuarial increases on previously accrued benefits the plan has to specifically provide for this. Where the plan does not so provide, ERISA would require that the plan provide both the actuarial increase and the additional accruals. In light of the Supreme Court’s Heinz decision, a suspension of benefits rule could be added to the plan for future accruals to avoid the need for the actuarial increases, but it would not apply to accrual earned before the adoption of the amendment.

I think we are on the same page, but I am not 100% sure. The AE represents the value of the benefit NOT paid. Therefore, if in your example the participant is actually receiving RMDs, then no AE is required since he is receiving the payments, however, you would need to increase the AB each year for additional age/service/compensation changes. If the person is working beyond the 4/1 following 70.5, and NOT receiving RMDs, then the AB increases for both age/service/comp and the AE of the prior AB. The theory is that since the prior law required RMDs at 70.5, you can't take that benefit away from the participant and therefore you must apply the AE if you delay payment. Also, age/service/comp increases are always required and therefore post 70.5 you must grant both. It should also be noted that the IRS has also stated that if a plan document is silent about post NRD benefits, then the plan must grant both AE and age/service/comp. The only time when the greater of the two can be paid is when the document explicitly states it.

I agree with AndyH that post 70.5 need to grant both AE and Age/Service - Suspension Notice has no impact post 70.5 Yes, that is what I am saying you "should" do, otherwise you might need a SOB notice as you might be decreasing the Acc Ben. Well, I never really thought about it, but I guess IF you issued a SOB notice you could get away with only looking at the AB at NRD. However, if you don't issue a SOB notice, then I think you must look at every point after NRD to make sure the AE of that AB, at LRD isn't greater than the AE of the NRD AB at LRD. In other words, you can't just look at it at NRD and LRD. You need to check the AB at all points in time in between. From a practical matter, for a longer service person, with modest accruals, the AE of the NRD AB will most likely be the greatest, however, if they have a large accrual in one year due to a high pay or a benefit increase, you could find the AE of an AB from a later date is higher.

A - I would say Yes, assuming you interpret AB at NRD to also include the AB at any point thereafter. B - I would also agree that it can't hurt, assuming it is true. You should check the document to be sure it is true. In other words, you would need to look at the AE of the AB at NRD, as well as the AB at all points thereafter. Typically, if the AE applies, it would be the ben at NRD that is the greatest, but it is possible the the AB at a later date, when rolled up to the benefit commencement date would actually produce a larger benefit. If you don't pay that larger benefit, then I think you would have needed the suspension notice.

Thanks. That should be sufficient information to generate a few responses from people in that area. Unfortunately, it would exclude us.

What type of entity (police, fire, municipal, library, school, etc) and what state is it in? Each state has their own rules, so a little more information would be helpful. Also, what type of work are they looking for?

I don't think there are any restrictions related to starting a new plan, however I would want to know what they are trying to accomplish. What "problem" are they trying to solve by doing this? Have you given them your fee quote to terminate the plan and establish a new one? That usually goes a long way to cooling things down. Then again, if they proceed - work is work.

If the value of the lump sum is $5,000 or less, you can pay 100% of it, even if benefit restrictions apply. If the lump sum is > $5,000, benefit restrictions would apply.

Jim Holland wrote a nice article about this in the most recent ASPPA quarterly. Basically Jim agrees with everything posted, but it might be helpful to read the article. I agree that you can't suspend a terminated participant because they are working in "suspendable service". If your plan does not provide for an actuarial rollup, or a retro-active payment, you may need to prepare a VCP filing to correct the problem.

During the 9/27/12 IRS teleconference on MAP-21, Mike Spaid said that absent regulations you should "do something reasonable" and he went on to say that if using the Funding Target is reasonable, and MAP-21 impacted the Funding Target, it might also be reasonable to use the MAP-21 Funding Target. ATA posted this here post

IMHO I think you should always use the exact age a the date of distribution. The only Reg. I will cite is 411(d)(6). However in your example, the APR declines with age, so depending upon the date of the accrued benefit you are using, you could be overpaying if you use the age 70 factor. I suggest you discuss this with the plan's actuary.

I agree with SoCal, that the "TPA's assumptions" are most likely not supportable, however the important thing to note is that the assumptions belong to the actuary, not the TPA. Have I seen this kind of thing before - sure, there is a lot of crappy work out there. If you are the signing actuary, and you let other people prepare your valuation reports, you shouldn't complain about the "TPA's assumptions", because the assumptions are yours. Just ask them to change it to something you are comfortable with and re-run it.

I agree, but what is the point? Why would they spam that?