Effen

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.

Although technically the DFVCP does not apply to EZ filiers, my understanding is that the IRS will go along with the penalties stated in that program, assuming they have a valid reason why they didn't file. I would say you are looking at $1,500, not $150,000.

First and foremost, these are legal issues and should be handled by the ERISA attorney. I also depends on what your document says and what your suspension notice said. The document should tell you what to do. I am unsure of the legality of requiring "a participant to file a claim for benefits before payment of benefits will commence". I have heard about it, but have never actually seen a document that used it. I would be interested if any lawyer friends know if that language will stand up in court. For some reason I am thinking that the DOL regs would not let a benefit be suspended unless the participant was still working. Again, another legal issue. Assuming you can't really suspend someone until they file a claim, and assuming the plan contains no language for an actuarial increase, many attorneys I work with would say retro payments is the only option. They would look at this as a corrective action, not a benefit option. The plan never really had the right to suspend; therefore the benefits must be paid retroactively. I would say retro to 63, since that is when he last worked. Q2 - same logic, retro to 62. Q3 - QJSA gets tricky, probably best to correctively amend the plan to allow retro payments so you can obtain proper QJSA elections. Again, all these are legal questions. The lawyer has to be able to defend whatever the plan decides to do and they may have a completely different opinion. I think the answer hinges on the legality of not paying a benefit until requested, which would get into other issues. For example, did the plan clearly communicate to the participant that they were entitled to a benefit and that they had to formally request it in order to receive it? Did the plan provide benefit statements at least every three years?

"Emily Litella" - Wow, showing your age today... Awfully quite in Red Sox nation today...

My understanding is that technically the notice of benefit restrictions still must be provided, even though the restrictions may be lifted before the required due date of the notice. If you are going to do the notice, it seems to me there wouldn't be anything wrong with adding a statement to the notice that the employer made a contribution to increase the plan's funded status and the restrictions have been lifted.

Thanks for the cool link, although that wasn't really my question. You subtract both PFB and COB to determine if you have a shortfall. You only subtract FPB to determine if you create a shortfall base, unless you elect not to use it (more stupidity!). If you need to create a shortfall base, then you subtract both PFB & COB to determine the amount of the base. If you have a shortfall (not necessarily a shortfall base) you have quarterlies due. In my situation, the plan has a shortfall and therefore quarterlies are due. However, because the COB/PFB is sufficient to cover the quarterlies, they don't really owe any cash, assuming they make an election to use COB/PFB to satisfy the quarterlies. If they make that election after the due date of the first quarterly, technically, they have missed a required quarterly and they need to report it to the participants (I guess and potentially the PBGC depending on the amount). I was asking if people have been disclosing this "non-payment", and if so, what type of wording are they using? I ended up just saying they made a late election as opposed to a late contribution.

So after spending 3 hours trying to figure out how to report a $114 penalty for "missed" quarterly contributions, I am struck by another round of additional stupidity. The client has an overfunded plan with a significant carryover balance. Because of the carryover balance, the plan has a funding shortfall and therefore quarterly contributions are due. He elected to use his carryover balance to satisfy the quarterly requirements after the due date of the quarterly payment. Note the plan has enough excess assets to cover the current year's requirements as well. I am now wondering what type of language people are using, if any, to report this late quarterly payment to the participants. It just doesn't seem right to inform the participants that he missed a quarterly, when in reality, none was really required because he had the carryover balance available. Typically we would add language to the SAR/AFN that lists the quarterly due dates and the payment date, but it seems misleading in this case because he never failed to make a cash requirement. (I know the IRS would argue that cash was required because he hadn't signed the election.) Just wondering how others are handling this. Do I need to disclose the "missed" contribution? (I think so.) What type of wording are others using to disclose them?

Here is a DOL link to get you started. DOL link Long and short, it is a fiduciary decision and must be in the best interest of the participant. Immediate annuity rates are in the low 3% range currently, plus the expense load. I will most likely be significantly more than the lump sum, especially for a single annuity. Lots of people will help you, for a fee - try Brentwood or BCG Terminal Funding. They can also go directly to the insurance company and get quotes themself.

Rev. Proc. 2000-40 / 2000-41 Also $4,000 user fee for the request (Rev. Proc. 2011-8)