Effen

Definitely possible, lots of ways it could happen. The most obvious would be simply due to favorable investment performance during the year. In general, the required contribution is based on beginning of year assets. At the beginning of the year, the assets may be insufficient and create a required contribution. If investment performance is favorable during the year, the assets could exceed the value of the benefits by the end of the year, however a contribution would still be required. There are also scenarios involving prefunding/carryover balances that can produce strange results. There isn't a complete "disconnect" between funding liabilities and 415 maximums, but it is a pretty week rope, and if the actuary isn’t paying attention, they can easily come up with disconnected results. I believe you should recognize 415 limits in your funding, however I'm sure others can read PPA differently. Can you give us some specifics?

Ok, I'll bite. Yes, people with accrued benefits are "participants". Am I missing something here?

Assuming the plan document calls for excess assets to revert the the employer.

What does the document say about the allocation of excess assets upon termination?

I think if you are doing a general test, you would need to count those subsidized benefits if they are currently eligible, but not if they were not. This makes sense to me based on the intent of the rule, but I'm not positive and hope for other responses.

Generally not, unless it is a 401(k) plan. That said, often times people who don't want to participate are excluded from eligiblity by the terms of the document, but you need to be very careful that they are not waiving benefits in return for higher compensation. If it can be proven that they traded benefits for compensation, the IRS will rule it to be a CODA and apply the 401(k) rules, which isn't pretty if it is a db plan. Lots of other legal issues, so generally, no, you really shouldn't do it.

I would agree that it is "odd" and most likely should have been reported. My experience is that it is a "no harm/no foul". Just report it now and everything should be fine. That said, I read in a recent Ft. Williams statement that, "the IRS has informally indicated a desire to enforce the statement and collect penalties to help offset the cost of the new electronic Form 8955-SSA filing option". So, although in the past they tended not to bother you, maybe the future won't be so bright. Seems like a strange concept that the IRS creates something, then expects to pay for it by collecting fines for non-compliance. I guess it must be part of the new jobs bill.

I don't understand what you mean by the plan "has not distributed it's assets as of yet but because the plan has still been active". If it was terminated in 2008, what does "still been active" mean? How much of the termination was completed? Did they file with the IRS? Did they file with the PBGC? Did they notify participants? Seems like the plan might not really have been terminated.

How far back did you look? I'm sure you know that no one has filed SSAs since 2008. The new 8955-SSA replaces the old SSA requirements and is first due in January 2012.

I think it is a pretty risky stand to not issue the notice. Based on people I talk to, at all size firms, most are just putting a blurb into the SAR/AFN as Andy said. I don't know anyone who isn't doing it.

Defined Benefit Answer Book - McGhie,Q 28:54,Must employees be informed when an employer fails to meet minimum funding standards? Last Updated: 11/2010 Yes. When an employer fails to make any payment required to meet the minimum funding standards before the 60th day following the due date of the payment, the employer must notify each participant and beneficiary (including an alternative payee) of the failure. [ ERISA §101(d) ] There is no prescribed format for this notice. No notice is required if a request for waiver of the funding standard is pending. If the waiver is denied, however, the notice must be provided within 60 days after the denial. [ ERISA §101(d)(2) ]

As far as I know there is no defined methodology, in fact the regs still reference "current liability" which no longer exists. I think the critical thing is that the plan is (or is expected to be) at least 110% funded after the distribution. The safest thing would be to estimate the EOY FT and EOY assets, both after the payout, and make sure the projected assets are 110% of the projected FT, but I don't think that is the only valid test. It would probably be safest if the ER committed to making sure the plan was actually 110% at the EOY, but I don't think that is required either. In other words, if your current "reasonable, good faith" projection shows the plan will be 110% funded after the payout, but when the EOY actually comes it is only 105% funded, I don't think that is necessarily a problem, however if the ER makes a contribution to bring it up to 110%, then it would obviously be fine. I assume it is a typo, but shouldn't the last term of your equation be "Assets - (PVAB of Participant)", not +.

FWIW, after consulting with the plan's attorney as well as several other actuaries and IRS types, we decided that it was ok to make the retroactive payments because the disabilty benefit is fully subsidized and the participant has not reached their Annuity Starting Date. The retroactive payments are corrective.

We are just showing cash balance account and vested cash balance account. No monthly accrued benefits.

Added by PPA.

Just because I was doing the valuation anyway I decided to look at one of my plans with AFTAP < 80% and restricted lump sums. Of the 7 bifrucated benefits elected last year I have 3 J&100, 3 J& 75, 1 Life only. Nice game by the Cards last night, although it wasn't exactly baseball weather.

I agree with QDRO, but it also seems to me that setting up the unallocated funds account was probably also improper. Once the money hits the trust, it needs to be allocated. Generally, you just can't let it sit in an unallocated account. Seems to me the recordkeeper is a bit exposed in this as well. If they wanted to pre-fund without any commitment, they should have set up an account outside the trust.

After re-reading this, it doesn't appear that I can retro any payments, although I am wondering if I can argue the "annuity starting date" has not yet occured because this disability benefit is an auxiliary benefit?

I have a plan with AFTAP < 60%. Benefits and lump sums fully frozen. The plan has a disability provision that calls for 100% of the accrued benefit payable as of the date of disability. The plan uses Social Security as the ruling factor. As you may know Social Security often takes more than a year to rule on disabilities. A participant just received a SS disability award retroactive to October 2010. Normally, the plan would retro disability payments back to October 2010. However, due to the AFTAP, is that permitted? Seems to me that I can probably only retro back to 1/1/11 without violating the benefit restrictions. Agree? If you agree, I guess the plan would just have a "payable" for the other 3 payments until the AFTAP is > 60%? Comments?

Generally, no can do.

If things are that bad, why don't they want to go the distress route? Just make a phone call to the PBGC and they will help walk them through the process.

I think I would argue that the amendment can take effect because it doesn't really change the benefit formula. I guess you could end up with different result for a mid-year calculation, but I don't think you have really changed anything from a practical sense. What average comp will you use in the 12/31/11 ben calc? Will they get partial credit for the 7/1/2011-12/31/11 plan year?

I agree with Andy, why are we talking about this? If it is covered by the PBGC, there really aren't any options. PBGC will require the non owners to be paid or they won't approve the termination. I have heard that they will also "force" the owner to waive benefits in these small plans. I don't think they will take it as a distress, but you can try. You would need to prove the owner doesn't have any assets he can sell to fund the plan, which usually ends the discussion. The PBGC isn't stupid, or forgiving. You can't force anyone to take a lump sum, especially someone who previously elected a J&100. Some argue that you really can't even ask the question to a retiree. Plus, if you do, and they decline, and the insurance company knows they declined a lump sum for a second time, how much do you think that annuity will cost? The owner either needs to fund the plan, waive his benefit, or keep it going.

I agree with AtA, you have an obligation to the client, not the advisor. That said, you're the actuary, it's your EA number on the line. You are the one who decides what you want to see as proof of deposit. Just tell him you won't sign it until you get the proof you need. If you don't get it, don't sign it.

A client of our recently filed 5 years of EZs. We just filed with the IRS at the normal address with a letter of explaination. We filed about 2 months ago, and still haven't heard anything.