Effen

I didn't think they were asking about a cash balance plan? But even so, the actuarial rollup is not the same thing. AB65(N65/N66) is not the same as just giving another accrual and interest credit. However, post PPA since cash balance accounts are no longer connected to 417(e), I think your theory might be ok.

What does the plan say and what has the Plan Administrator done? In order to freeze the accrual, you must give the participants a 204(h) notice. No notice, no freeze. Many people assume that if the plan provides the greater of the actuarial increase or the age/service accrual, then all is well. However, recent IRS statements imply that if the plan doesn't specifically state that the late retirement benefit is the greater of the two, then the participants should recieve both (just like post 70.5). Some attorneys take the position that if the plan is silent then the payments must be retroactively paid since the PA had no authority to suspend them in the first place. Several opions, but as a general rule, if you didn't give the participant a notice, you will need to either make up the payments, or provide some sort of adjusted benefit recognizing the missed payments. Lots of old threads if you do a search. Also, look in 1.411(b)-(2)(b)

I hope I'm not breaking any rules, but I thought this was important for members of this board to be aware of an interesting developement coming off the COPPA board. If you are an actuary and a COPPA member, you should read this long message stream. Basically, it comes down to Jim Holland (and many begrudgingly agreeing) that an amendment to increase in benefits that is adopted in the 2 1/2 months after the PYE CANNOT be recognized for funding in the prior year. Maybe someone knows an efficient way to allow everyone on this board to see the entire discussion post, but in my opinion, it was just too long to cut/paste into a message. I just posted a link to the message and Jim's summary comments since he did a nice job with the sites. http://finance.groups.yahoo.com/group/Coll...s/message/32388 From: CollegeofPensionActuaries@yahoogroups.com [mailto:CollegeofPensionActuaries@yahoogroups.com] On Behalf Of Jim Holland Sent: Thursday, February 10, 2011 8:17 AM To: CollegeofPensionActuaries@yahoogroups.com Subject: RE: [CollegeofPensionActuaries] RE: Unfreezing the frozen I will make what I expect to be my last comment on this topic. Prior to the issuance of the final regs, everything that Norm and Jeff have said could be a reasonable view of 412(d)(2). The final regs have an explicit provisions that 1. State that require that plan provisions adopted no later than the valuation date and that take effect by the end of the plan year be taken into account. 1.430(d)-1(d)(1). 2. Plan provisions that take effect in a later plan year are not taken into account even if adopted by the valuation date for the current plan year. 1.430(d)-1(d)(1). 3. An amendment for which a 412(d)(2) election is made is considered adopted on the first day to the plan year but when the amendment takes effect is unaffected by an election under section 412(d)(2). 1.430(d)-1(d)(1)(ii) and 1.430(d)(1)(iii) last sentence 4. If a 412(d)(2) election is made and the amendment takes effect by the last day of the plan year, the amendment is required to be taken into account. 1.430(d)-1(d)(1)(ii) last sentence 5. For purposes of paragraph (d)(1) (1.412(d)-1(d)(1), plan provisions taken into account, general rule), the determinatin of whether an amendment increasing benefits takes effect and when it takes effect is determined in accordance with the rules of section 436© and 1.436-1©(5). 1.430(d)-1(d)(1)(iii) 6. The regs under 1.436-1©(5) provide that an amendment that increases benefits takes effect under a plan on the first date on which any individual who is or could be a participant would obtain a legal right to the increased benefit. 1.436-1©(5) 7. The preamble discussion (sentence cited earlier) states that an amendment to provide increased benefits retroactively with respect to a prior year, but no participants benefits are increased until the amendment is adopted, the amendment takes effect at the time of adoption and must satisfy the requirements of section 436© for the plan year the amendment is adopted. 10-15-2010 Federal Register, page 53024, first column All of the above statements should not be arguable because they come straight from the regulations, and anyone can look them up. The interpretation and effect can be argued about. The key words are the ones "take effect" because the regulation (IMHO) has now linked the taking into account for 430 funding (and by implication 404) and 436. In doing so, it appears to change what all (including myself) had viewed as the interpretation of 412(d)(2). Now for a cautionary note. As I understand it, the Supreme Court decision earlier this year on the medical residents and FICA regulation addressed the deference given to tax regulations and gave them what is called Chevron deferance. That appears to mean that as long as they are a reasonable view of the law they will be upheld. (Let the attornies tell you the exact interpretation.) Even if you do not like a regulation, the question you have to face is what it actually says and means, and what risks you want to run for your clients or yourself in taking a view.

If you want to really cry, try rooting for the Pirates...they are being forced give Ohlendorf a $1.4m raise because he won ONE game last year!... then again, it doesn't have anything to do with 401(a)(26) ....

"#1 - a conversion of a carve out 412i/401k plan into a carve out traditional DB Plan/401k plan; any issues on this type of conversion?" Like what? Can a 412i be converted into a traditional db - sure. Can it have carve out provisions - sure, assuming it is passing all of the applicable non-discrimination tests (410(b), 401(a)(4), 401(a)(26), etc...) "#2 - a carve out 412i plan/401k plan - I do not see many of these in the industry so what would be your opinion of this type of arrangement?" Since you asked for my "opinion" I would say that around 90% of 412i plans are "sold" by insurance agents and not "purchased" by plan sponsors. They are very expensive and often illegal (see VEBAPLAN's propaganda), however the agents/ins companies make lots of commissions dollars so they will continue to be sold. Once the client sees the light, they are often converted into traditional db plans. Very common design to use employer money contributed into a 401(k) profit sharing plan to allow a db plan to pass the applicable non-discrimination rules, especially in the small plan market.

As far as I know, you do the calculation the same way, you just have 1 or 2 years in your numerator and therefore a smaller share of that year's change. If you have only been in for a few years, you might under the de minimis limits. Also, some plan's allow a "free look" that you might want to check out.

Item 8e on the Schedule MB asks for the “difference between the minimum required contributions” with and without the amortization extension. I have a client, who took an amortization extension, however the “minimum required contribution” was zero before and after the amortization extension was recognized (due to large credit balance) and therefore the difference is also zero. There are no instructions for this line item so we can’t really tell what the IRS intended, but since they asked for the difference in the “minimum required contribution” and not the difference in the charges to the funding standard account, I think the answer would be zero. However, zero seems to be generating an error from EFAST when you try to submit the forms. Has anyone else encountered this problem?

When you say "forms of distribution section, the subsidized benefit of J&S 100% at NRA was offered", what do you mean? Does that mean that the monthly benefit paid under the J&100S was equal to the life annuity, or does it mean they don't charge the participants for the pre-retirement death benefit, or does it mean the J&100S is reduced, but by less than the true actuarial equivalence. When I hear an actuary say "subsidized J&S", I usually think that means the plan does not charge for the pre-retirement death benefit. Virtually all small plan's have a "subsidized J&S". This would not impact my assumption related to the anticipated form of distribution at retirement. However, if a participant who selects the J&S benefit at NRD receives the same amount they would have received as a life annuity, I might value the J&S, unless the plan offers a lump sum, which would generally be the option of choice. The actuary is supposed to base their assumptions on what they really think will happen. They generally look to past experience to justify the assumption. This kind of thing is usually "reasonable" vs. "unreasonable", not "right" vs. "wrong".

I have a client that values their workers compensation liability as FAS 112. I just realized that the amount of the biweekly workers comp payment includes a payment to the employees attorney. Apparently the payments are to be paid as long as the workers comp benefit (ie-lifetime). Is the piece of the payment paid to the attorney a FAS 112 liability or should it be broken out somewhere else?

It is pretty straight forward. See Q/A E-1 of Notice 2011-3 Q E-1: How is an election made to use an alternative amortization schedule for a plan year? A E-1: An election made on or after January 1, 2011, must be made by the plan sponsor, by providing written notification of such election to both the plan's enrolled actuary and the plan administrator. Such election must be signed and dated by the plan sponsor and must include all of the following information: (1) The name of the plan; (2) The plan number; (3) The name of the plan sponsor; (4) The plan sponsor's mailing address; (5) The plan sponsor's employer identification number; (6) Which of the two alternative amortization schedules is being elected; (7) The plan year for which the election is being made; (8) Whether an alternative amortization schedule has been elected for another year, and, if so, a statement that the same alternative amortization schedule is being elected; and (9) A statement that the plan sponsor will notify the PBGC and plan participants and beneficiaries pursuant to § 430©(2)(D)(vi) of the Code and ERISA section 303©(2)(D)(vi).

Because I was almost caught off guard, I thought someone else out there might appreciate a reminder that if any of your clients elected funding relief for plan years ending in 2009 or 2010 you need to have their formal elections in hand, and the PBGC notified on or before 1/31/2011. This includes 2010 EOY vals that you may not even have data for - gotta love the IRS.

I think you probably need to go back and make sure the prior distributions were correct. How far? I would say the only right answer is "to the beginning". That said this is obviously something the attorney needs to provide guidance. You shouldn't be giving any recommendations related to something you know is wrong.

Oh, that is significantly different. Unfortunately I know very little about multiple-employer plans. Hopefully someone else will pick up the thread.

I'm sorry, but I still don't really understand what you would like them to audit? In a multiemployer fund, there isn't really anything to audit other than confirming that they are properly crediting your contributions. A multiemployer fund is not like a bunch of single employer funds. Everything is comingled into one pot - you can't really seperate one employer from the others. Maybe a better question is what are they concerned with? Why do they think they want an audit performed? Are you sure you aren't in a multiple employer plan?

What do you mean an audit of their participation? Are you looking to confirm the amounts you are sending are being properly credited by the fund, or are you looking for something different, like an estimate of your withdrawal liability? The fund would have an outside auditor who should be auditing selected employers periodically. You may be able to ask them to move your company to the top of their list. If you don't trust them, you should be able to ask you auditors to confirm the information with the fund. If you are looking for an estimate of your withdrawal liability, you can ask the fund for an estimate, or hire an actuary to estimate it for you.

Why would you use the 2009 form? I'm certain the 2010 forms will be ready long before the 7/31 due date.

Any recommendations?

Someone called me today and wanted to set up a self-directed IRA so they could loan a relative money from the IRA. Without getting into that issue, where does a person go to set up a self-directed IRA. I never heard of a "self-directed IRA" until a few minutes ago. I was told they need an attorney to draft a document. Is that correct? What makes a self-directed IRA different than a normal IRA? Would any bank be able to offer them, or are they something different?

My understanding is that it is first come, first served. You look at each transaction independently. Your starting point for the 2nd payout, should be the ending point after the first.

Some of our clients have had success using this firm. I think they will also give you a one free search, and sometimes one is all you need. http://www.berwyngroup.com/

The IRS has been very clear that an election to forgo benefits cannot be recognized for funding purposes. This stand is based on the fact that 411(d)(6) states that you can never reduce accrued benefits, therefore why would they allow you to recognize an illegal reduction for funding purposes? The only exception is after the plan's termination when you are allocating assets. In fact, if the assets are short, you really don't need a waiver if you are going to allocate the remaining assets using the priority categories. Waivers are used if/when the owner agrees to accept less and pays everyone else what they are entitled to. Also, sometimes the PBGC requires waivers, but they are used so an underfunded plan can terminate under a standard termination. Either way, they do not impact the funding requirements. The EA in your example 2 was definitely wrong.

Double post -see Retirement Plans General for the open topic.

The plan ends at the termination date (6/30). I vote for prorated amort payment, but there is little/no guidance post PPA. It is never reasonable to reduce accrued benefits, in fact it is generally illegal. Benefits can never be reduced to avoid funding deficiencies. They can only be reduced at the instant of distribution if the assets are not sufficient. They can never be reduced to impact any funding related numbers.

Also, apparently Citigroup changed their methodology. The new methodology seems to be producing discount rates that are slightly lower than the old methodology. I'm seeing the method changes could result in decreases of 5 - 10 bps. I other words, using the old methodology I might end up with a rate of 5.45% and 5.40% on the new method. I tend to use the Citigroup curve and I'm seeing discount rates close to 5.50% for plans that don't pay lump sums. For plans where the expected payout is a lump sum, I'm getting something around 5.0% or less.

I would make sure that it is not discriminatory, otherwise I don't really see a problem. However, why would you want to do that? If the plan has excess assets, just follow the current plan language and allocate them in a non-discriminatory manner (assuming the plan calls for this). You will need to check the final distribution against the 415 limit at each participants age anyway. So, if you are amending the early retirement age as a way to push more of the excess to an HCE, its most likely going to be a discriminatory amendment and therefore not allowed.