Effen

FWIW, look for the SOA to come out with a "BB" projection scale to replace the current "AA" table before the 2014 tables are released. Apparently mortality improvement has been better anticipated and therefore they are creating a new projection scale.

Ft. Williams does nice job for a reasonable fee.

If you are asking, for a 2011 actuarial valuation, what is the maximum benefit I can fund for participant who is expected to retire at age 55, then I would say the answer is somewhere near $120,886 as a annual life annuity. (I don't think the expected retirement year is relevant.) This assumes the actuarial equivalents in the plan document use 5% interest and the applicable mortality table. It also assumes there is no forfeiture on death. There are lots of other issues to consider, but I think this is what you are looking for. This also assumes your participant will have 10 YOP and YOS. If the plan pays lump sums, this opens up a whole new set of issues where the answers depend on the actuarial equivalents stated in the document. I am sure you will get other opinions, but that is what I would generally use.

I am a little confused by your question. You said he was retiring at 12/31/15, but then you asked for the maximum benefit as of 12/31/11. Is this a valuation question or a benefit calculation question? The benefit at 12/31/15 can't be determined until we know the 415 max for 2015.

PBGC coverage isn't optional (except maybe for church plans). You either are, or you are not, covered.

From the IRS website: From the 5305-SEP instructions: Is it a prototype SEP or an indvidually designed SEP? If not, then it can't have a db plan at the same time.

you can't deduct a SEP contribution and a DB contribution during the same plan year, so one of them is improper. Seems to me if he funded the SEP, then it clearly exists and would be hard to claim it was a "mistake in fact", but that is a legal question. What fact did he mistaken? I guess I would say the db never existed because it was not permitted because the SEP existed first. That said, if the accountant and attorney agree that the SEP was improper, I guess you could go the other way as well, but I wouldn't want to be the one to make that call. You also need the IRA Trustee to agree as well that it was a mistake, which isn't always easy. Don't know why you are suggesting 6% would be permitted? Safest play is revoke the db since nothing has been contributed or filed, and make it effective in 2012.

You are correct, however you still project to retirement for the At-risk liability and the determination of the maximum deductible contribution. I beleive that is a PUC calculation, not a UC.

I don't think there is anything wrong with using a 1-yr average, just be careful of 415 limit, which is a 3-yr average by statute. Not sure what you mean by this question. For what purpose are you "applying the formula"? If you are doing a ben calc, then you need to follow the document. If you are doing a valuation, then you can use a reasonable assumption of what you think comp will be under the plan definition at retirement.

436 restrictions are still applicable for a terminated plan until the instant that the final distributions are paid. If the plan is subject to 436 restrictions, they still apply until you are ready to make the final distributions.

I agree with mbozek, the MRDs should be based on the monthly accrued benefit generated by the cach balance account, unless you are making a complete distribution.

I don't think there is anything wrong with the actuary being "involved" with the asset allocation as long as the involvment is informational. I would rather have an investment advisor discuss what he is thinking before he just buys something that really doesn't fit. The actuary should explain the plan and make sure they understand how the plan works so that the investment advisor can do his job. That said, the ultimate responsibility should stay with them.

This may be true, but it is by no means the right answer. 1.401(a)(26) is not a "snap shot" test. It must be satisified every day of the plan year. So yes, if on July 1 you have 8 eligible employees, then 4 must benefit. However, if of June 25th, you have 15 eligible employees, then 6 must benefit. To really answer this question we would need to know the plan's entry dates, eligibly provisions, and demographics for the entire year.

Technically, 401(a)(26) must be satisified every day of the year. So, when you have 8, 4 of them must be benefiting, and when you have 5, only 2 of them must be benefiting.

I agree with SoCal - this is a document issue. Amend now with retro effective date, maybe consider VCP. I don't necessarily agree with your actuary that 3.75% cash balance is not "meaningful" under a(26) (regardless of whether or not it produced a .5% accrual), but that is between you, him, and the IRS. I think it would be very difficult for the IRS to argue that 3.75% is not meaningful; especially considering the TH min in the DC plan is only 3%.

I suggest you give Kristina Archeval of the PBGC a call. She will explain your options and work with you and your client. You don't have to give the clients name until they are ready, but I have found her to be very helpful.

I don't really understand your question. You make a statement that the plan "complied operationally with the meaningful benefit requirement", but then say "the amendment to increase the NHCE by 1% was never done". What is the significance of "an amendment to increase the NHCE by 1%"? Since you say "the" amendment, was this something the IRS required? Increase the NHCE what? by 1% of what? I'm just a bit confused. When most people talk about meaningful benefits they talk about the need to provide a .5% of comp. accrual for each year, but this is based on an internal IRS memo and is not statutory or "required". "Meaningful" is never actually defined in the code or regs. You ask how it should be "fixed", but if you "complied operationally with the meaningful benefit requirement", why do you think it is broken?

Maybe. If the plan is Critical there are surcharges that apply without opening the agreement until the parties adopt a Rehabilitation Plan. If the plan is Critical or Endangered the Trustees develop a Rehabilitation Plan or a Funding Improvement Plan. Once bargaining contract is opened, the parties need to adopt one of the plans, which generally forces contribution increases. These subsequent increases may be more or less than the surcharges. It is fairly complex, but yes, surcharges can apply without negotiations if the plan is in Critical status.

Just a few words of caution, a few questions you should ask yourself.... 1) Since you work "exclusively" on DC plans, what makes you think you have the expertise to do DB work? Do you have anyone on your staff who knows how to do it? How will you (the owner) know if the work is being done correctly? 2) Will the clients be asking your staff for direction on DB issues? How will they respond? Who will pay the price if they respond incorrectly? 3) How will you be able to tell if the actuary you are outsourcing things to is doing it correctly? Much of the work we take over comes out of situations where the db work was outsourced. The TPA fronting the work had no idea what they were doing and assumed the actuary was watching out for their interests. Many actuaries who are willing to sign outsourced work are not of the highest professional character and often take a "garbage in, garbage out, is not my problem” approach. I personally know several who admit up front that they feel they have no obligation to do anything other than confirm the data, and check the valuation. They give no thought to 401(a)26, 410(b), 401(a)(4), etc. If the plan doesn't comply with the discrimination rules, that isn't their problem. So, whose problem is it? DB/DC Combos and cash balance plans are nothing to dabble with. Sure you can make some money, but just make sure you make enough to cover any corrective actions you may be asked to pay for if/when something blows up. There are some good ones out there if you choose to go that route, but I suggest you find an actuarial firm to partner with instead. Let them do the db work, and you stick to the dc work. It may be a little clumsy for the clients, but that way you won’t have to assume that something with your name on it is actually correct.

You funny man! Actually, the last I heard is that there may be a flicker of hope because funding relief can be pitched as a revenue enhancer, but I wouldn't expect much any time soon.

not sure I understand your question. Why would it be different than any other type of db?

I don't know. I think the IRS has said the interest crediting rate is protected regardless of whether or not it falls under a safe harbor. Be happy you aren't one of those people who were using a 5.5% crediting rate. I think if it is in the document, you are probably stuck with it. I don't see the IRS allowing you to lower it, but who am I to say.

My initial reaction is the 4% is a protected right and feature of the benefit and cannot be reduced for past accruals. I think you could reduce it on future accruals with proper 204(h) notice, but what a mess that would be administratively.

Hugh?

IMHO, I think you are probably SOL. I think the IRS would argue that if you didn't notify the PBGC, then you never really made a 430©(2)(D) election. You might have to redo valuations, pay excise taxes on deficiencies and move on. I suggest you give one of the IRS actuaries a call and see what they say. I'm sure they have heard this story before and they might have a reasonable solution.