Effen

Thank you. That is exactly what I was looking for.

Can a QACA safe harbor match be applied to deferrals over 6%, assuming the statutory requirements are met? In other words, can I have a QACA safe harbor match that provides 100% on the first 1%, plus 50% on the next 9%?

Was that like Dragnet..."the following conversation is true, the characters were changed to protect the innocent"

Assuming the plan document permits such a form of distribution. Most plan's only give one bit at the apple and won't let you change from an annuity to a lump sum at a later date. Personally, I think the 415 limit is determined at the time the benefit is paid, which may result in a lower lump sum than it was on the date the plan was terminated.

You need to check the plan document to see what it says. Also, I would ask about past practice. I have seen it done many different ways. - Absol-fn-lootly. That is what the "relative value" requirements and the "consequesnces of failure to defer" are all about. You are required to put this information into the benefit illustration package. 0 another absol-fn-looty. All of your assumptions need to be your best estimate, including retirement rates and expected form of payment. Depending on your system, these may or may not be possible. If they are not possible using your current software, you may need to rethink your software vendors. Typically on a plan like this we would look at the recent experience to see what percentage retire at what age. For example, you may have an assumption that 75% retire when they are eligible for the rule of 80 and the other retire at various rates. Of those retiring 60% will elect a lump sum and 40% will elect an annuity. This may change with age and service.

Don't know, but their cabana is the hottest spot north of Havana.

It would depend on how the amendment is worded. If the plan is amended effective 1/1/2010 and simply increases the formula from 50% to 75%, how can you argue someone who is an active participant on 1/1/2010 would not be entitled to it? I suppose the amendment could be written to exclude people who terminated before the adoption date, but then I think you would need to test it for discrimination. If the person that termed is an HCE, probably no issues, but if you they are a NHCE it seems like it would be difficult to prove that the timing of the amendment was not discriminatory.

From 2011 Grey Book - Q/A - 4 QUESTION 4 Funding: When to Reflect a Plan Amendment Adopted Within 2-1/2 Months After Year End The final §430 regulations provide that a plan amendment is reflected in FT and TNC if adopted no later than the valuation date for the plan year. In the case of an amendment adopted after the valuation date, the amendment is reflected in FT and TNC if the plan administrator makes the election in §412(d)(2). However, in both cases, the amendment is taken into account only if it takes effect on or before the last day of the plan year. Assume a discretionary amendment (i.e., an amendment that is neither required for qualification nor integral to an amendment that is required for qualification) is adopted within the §412(d)(2) period of 2-1/2 months after the end of the prior plan year to increase the benefit formula for prior service for all participants that worked at any time during the prior plan year. If the plan administrator makes the §412(d)(2) election, can the amendment be reflected in FT and TNC? Does the answer depend on whether a §436 contribution is required? On whether plan operations had actually reflected the amendment in the prior year? On whether the amendment is reflected for coverage and nondiscrimination purposes? RESPONSE In this situation the amendment is only reflected if it is adopted and takes effect by the end of the prior plan year. In general, if a discretionary amendment is adopted after the plan year that provides for increases in the prior year, there is no legal right to the increased benefits until adoption. Such an amendment takes effect when adopted (assuming §436 permits), and could be taken into account for the adoption year if a §412(d)(2) election is made for that year. If a discretionary amendment is implemented operationally during a plan year (thus creating a legal right in the plan year) adoption is required by the end of that plan year [see Rev. Proc. 2007-44]. Any corrective amendment that meets the requirements of §1.401(a)(4)-11(g) that is adopted after the end of the plan year is treated as being effective in the year preceding the year the amendment is adopted for purposes of coverage and nondiscrimination, but that treatment will not apply for minimum funding (or deductions) as noted above. 2011 -4 The above Response is a summary, prepared by representatives of the Program Committee, of the oral responses to the question posed to certain staff members of the Treasury and IRS, which represent only personal views of the individuals who provided them. Accordingly, the Response does not necessarily represent the positions of the Treasury or the IRS and cannot be relied upon by any taxpayer for any purpose.

I am not a lawyer, but my understanding is that "Adopted" means they have made a formal decision. Ideally this is demonstrated by a corporate resolution, signed plan document and an opened trust. We tell our new plan clients to make sure they open a trust before year end and deposit at least $1,000. Documents can be backdated and therefore are subject to scrutiny, however it’s hard to argue with a trust statement showing an opened trust before year end. For me, if they don't show me a signed document for before year end, they don't have a plan. Regarding IRS submission, there is no requirement that you submit a plan to the IRS. If the plan is individually designed, and you want to submit for a letter, most attorneys I work with just hold it until the proper cycle. No need to submit before you are required.

Thanks for the explanation. I was also wondering why the strange posts were occurring. If nothing else links to sites selling depression drugs might fit right in on this board, especially during AFTAP season. I really hate PPA - we shouldn't have fought so hard to keep credit balances, because it is a clear case of "be careful what you ask for". Two hours figuring the PFB because they elected to use part of it to meet a quarterly, after the quarterly due date, then made a contribution later to cover it... and 15 minutes to check the actual valuation results... Whats wrong with this picture!

Yes they still apply, yes they can be a real problem, no there isn't any new guidance related to re-org.

What is the AFTAP? If less than 80% the NHCE should have also been restricted. Edit: Never mind, I see now the plan was frozen before PPA took effect. I think the IRS's current position is that restrictions stay in place until the instant the assets are distributed.

Probably. I think this is an area where common practice doesn't necessarily fit with the law. What you described is a relatively common practice; however I don’t believe it is defensible. You can only suspend a person’s benefit beyond Normal Retirement if they are still employed. If they are not employed, the plan has no authority to suspend their benefit. That said, I have seen many plans operate under the idea that if the person doesn't ask for their benefit, they don't have to pay it, but most attorneys will tell them that position is incorrect.

I don't see why not, assuming your benefits comply with all of the applicable non-discrimination rules (401(a)(4), 410(b), 401(a)(26)). I don't know what an "IDP DB document" is, but I expect that it is some sort of prototype like document that doesn't want you to do it. Just because it doesn't fit into their box, doesn't mean you can't go buy a new box.

Four lefts make you a NASCAR driver!

I agree, great rule Dave. It is still a copywrite issue if the author is posting his/her own article? However, I was wondering, when a Sitewide Moderator executes their power and deletes, moves, or closes a thread, do you get notified?

You aren't getting any real responses because there aren’t any good solutions. If you ask the IRS, or consult the actuarial standards, you are supposed to go back to the prior actuary and ask them to redo the work. Once you sign the current SB, according to the IRS, you are accepting everything in the past. Therefore, if you know the past is wrong, you really can't sign the SB until it is corrected. Now, who does that work and who pays for it? Why did the prior actuary do the work without seeing a signed copy of the amendment? Maybe they have one? If they did the work without it, they should agree to redo the work. Do they have something telling them the amendment was signed? Was there a Board resolution adopting the changes? If so, it might not matter that the amendment wasn't actually signed. If you are convinced the past is wrong, and if the prior actuary won't correct, you have three choices. First, you can do the corrections and footnote the current SB reflecting any changes. Will the client pay for this? Second, you can resign. Third, have the plan properly amended with a retroactive effective date and just ignore the problem with the past SB, although that makes you just as responsible as the prior actuary. Since the formula they used was too high, they were actually over contributing, which with the high deduction limits is less of a problem. Maybe wipe out all the credit balances and say "no harm, no foul" and move on. (Keep in mind, this might not be an option under actuarial standards, but you can always run it past ABCD and see what they say. I have found them to be very helpful.) Sometimes there are no good answers and in those cases, I say just do what you think is best. I often argue with people who say "you just can't do the work and you have to resign". All that does is create a plan that no one can work on and what kind of solution is that? That said, if the sponsor is at fault it this mess, you need to think carefully before you proceed.

Agree, #1

Sorry, I'm just an idiot. Probably trying to do to many things at once. I guess the theory is the 26-year certian is subject to 417(e) and therefore needs to have the same value as the lump sum. Is the plan lump sum based on the greater of 5% or the 417(e) rate or just the 417(e) rate? If it is the greater of, than I think the 5% would produce a larger lump sum, but lets assume the lump sum is solely based on the 417(e) rates. If it is based soley on the 417(e) rates, then I think the 26-year certain would be 10,000 * 122.9885 / 174.578 = 7,044.90/month for 312 months. Obviously this all needs to be in the document, which means you need to offer it to everyone else who retires.

Wait a minute, lets start over. Are you trying to: 1) determine the amount of a life annuity with 26 years certain 2) determine the amount of a 26 year annuity (no life). If it is just the 26 year certain, why are you factoring in a mortality table? 3) Are you doing the relative value calculation and need the 417(e) stuff for comparison purposes? Anyway, using 1994 Group Annuity Reserving Table adjusted to a unisex basis projected to 2002 as published in Rev. Ruling 01-62 at 5% I get 177.77 for life with 26 years certain to a 71 year old. (177.139 for just 312 monthly payments) Using the 2011 417(e) mortality with segment rates of 2.47, 5.07, 6.10, I get 175.08 for life with 26 years certain. (174.578 for just 312 monthly payments) But I'm still a bit confused about what you are trying to determine and why.

I'm pretty sure there a rule that says the period certain cannot exceed the life expectancy. I don't believe the plan would be permitted to pay a 26-year certain and life annuity to a 71 year old.

Nothing personal, but please tell me you are not "responsible" for this calculation. Surely you have someone at your company with some working knowledge of this plan who can help you. If not, I suggest you start looking for a more responsible employer. What forms of payment are available to beneficiaries? Can they have a lump sum, or must they take an annuity? If the participant died prior to satisifying the early retirement requirements, then generally, the beneficiary must also wait until the participants NRD to commence payment, but you need to check the document to be sure. When you say "should I value the benefit" do you mean you are calculating a lump sum? Benefits are always determined as of the payment date.

If there are no other employees, who could you possible discriminate against? IDK if the insurance policy causes you to do a 5500, but I doubt it. As long as assets are less than $250K, you only need to do a 5500 in the final year of the plan. Also, the $250K includes all plans of the employer, so if they have other qualified plans, you need to consider those assets as well.

Does the plan sponsor have other employees? If so, are the others excluded, or just not eligible? Does the value of the insurance policy, plus the assets in the trust exceed $250K?

I would say "yes", but you need to check your document to see how to determine the late retirement benefit. Did you give the participant a 204(h) notice (suspension of benefits)?. If not, you need to check the actuarially increased ben at NRD to NRD+1. Also, depending on what the document says (or not), you would need to give the greater of the two, or maybe even both the accrual and the actuarial increase.