Effen

Is it a plan year which he worked less than 500 hours? If yes, then yes.

Only assuming the sponsor wants them to be allocated in a way they can demonstrate to be nondiscriminatory and in a way that complies with their plan document.

I say years, months, and days for both calculations. Never understood people who argue 417(e) calcs. should not be done to the day, but their calcs are not my issue. Although I suppose as long as you round everything up, you are ok.

Nothing prohibiting it, but you need to offset the benefit in the new plan by what he received from the old plan for 415 purposes. Since he is the same employer, his prior distribution counts against the 415 limit in the new plan. So if "no more deductible contributions could be made" under the old plan, the only thing he could fund would be the COLA increase in the 415 limit, which most likely is not worth the pain at this point.

Also, look at Q/A 39 from the 2009 Gray Book. Here is a link to previous discussion that contains the Q/A. prior discussion

Yes, unless your plan automaticly provides for an actuarial increase, however it is still probably good practice. Maybe, it depends on what the document says. You are permitted to give the greater of an actuarial increase or the age/service. In the past it was assumed that you could do this as standard practice, however the IRS has been saber rattling lately that you must have explicit language in your document for this, and lacking explicit language, you must provide both the rollup and the age/service benefit. Either way, you should make sure you are following the document, or amending the document to clarify. You must give at least the actuarial increase.Obviously, these are legal issues and your fund counsel needs to make the call. I have seen a wide variety of interpretations, so make sure the attorney is presenting the solutions.

Ouch! I am feeling a lot of negative waves about db plans on the db board. We don't come on the 401(k) boards and talk about how bad 401(k) plans are for society. Just like any other types of plans, dbs are not for everyone, but where they fit, and where they are understood, they offer a great benefit. Obviously different markets and different types of plans, but in the micro market vesting is generally 3-yr cliff, or 6 year graded - just like the dc world. And I would point out that most money flowing into 401(k) is deferred comp, not employer money. Micro db plans are generally designed as tax shelters for selected individuals, just like micro dc plans. We can debate pro/cons and all the social implications you want. Both types of plans have advantages and disadvantages, both types are often "sold" to people who don't understand what they are buying, both types have problem situations. Bad consultants produce bad plans. Where they fit, they can offer power tax advantages, however if sponsors can’t fund them, you end up with a bad situation.

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.