Effen

IRC Section 432(a)(1)(A) states that a plan sponsor cannot accept any bargaining agreement that provides for the reduction in the level of contributions or the suspension of contributions for any participants in the Endangered Plan. Since this is the case, is an employer ever able to voluntary withdraw from a plan once it has been certified Endangered? Assuming the employers bargaining unit wants to withdraw, would the fact the plan is Endangered preclude that option? Is there a way to withdraw short of union decertification?

Are you saying this is true for at-risk as well? I agree the numbers could be the same for the not-at-risk funding target (that is significantly lower than the current actual value of the benefit in the present interest rate environment), but I didn't think that was true for the at-risk liability. Are you saying the at-risk liability for a traditional db plan the guarantees a lump sum that is more valuable than the 417(e) rates would be the current lump sum value? (ignoring all 415 issues)

Yes, I understand the difference in determining the liability for cash balance plans vs. traditional db plan. I was just pointing out the lunacy of PPA once again. Two plans one cash balance, one traditional. Under both plans the participants are entitled to $10,000 payment if they terminate one because it is the current cash balance value and the other because it is the lump sum value of his deferred annuity. Yet simply because one is a cash balance plan the other is not, the at-risk (and not-at-risk funding targets) are significantly different. Just one more thing that makes no sense. Ok, I think we are all on the same page. FAPinJax's post stated the "calculation is the same for a regular DB plan with respect to the at-risk piece". I just wanted to clarify that the result would be significantly different because of the issue you mentioned. And yes, the benefit needs to be vested, but it isn't as simple as just taking the current vested benefit. If the person is currently non-vested, they still have an at-risk liability.

Are you suggesting that the PVAB based on current 417(e) rates can be used as the 404 at risk liability to determine the maximum deductible contribution in a traditional db plan that pays lump sums based soley on 417(e) rates? That was really my point. That for a cash balance plan you can use the current lump sum value of the benefit for the 404 calculation, but I don't beleive the same is true for a traditional db plan. Do you agree?

What really doesn't make sense to me is that apparently you can only use that logic on cash balance plans. It seems to me that you should be able to use that logic on ANY db plan that pays immediate lump sums upon termination. Apparently the IRS views the lump sums paid out of a cash balance plan to be different from lump sums paid out of a traditional plan.

I believe the theory is that if the benefit isn't vested, it can't be paid. Since for the determination of the at-risk liability you look at the value of the benefit payable at its earliest eligibility, the participant isn't really eligible for a benefit until they are vested.

That vesting needs to be considered when determining the at-risk liability.

Carol Z confirmed that with me a while back. However, keep in mind that the person will be vested in no more than 2 years, therefore there is only a 2 year discount on the value, so the difference between the cash balance accounts and the real at-risk liability is relatively small. I'll let you decide if it is small enough to ignore.

Because Congress thought that would make pension funding too easy and they wanted to protect the jobs of all the actuaries. I think some claimed during the recent campaign that they saved 4,000 jobs just by making pension funding more complex.... The cash balance account is projected to expected retirement using the accumulation assumption, then discounted back to attained age using the segment rates or yield curve. Currently the segment rates are generally higher than the accumulation assumptions, so the funding targets are less (sometimes significantly) than the actual cash balance account. However, most people are using the sum of the cash balance accounts as the "at risk" funding target and therefore would preserve the deductibility of a contribution sufficient to bring the plan to 100% funded based on the cash balance accounts.

I think I misread your original post. I didn't realize that this reciprocal agreement was being signed after the participant earned a benefit. I thought you were saying there was a reciprocal in place, but you just didn't know about it. I would agree that you have a different problem if there was no agreement in place at the time the participant earned the benefit.

Even though you changed RA to 62, it should have only applied to post amendment accruals, otherwise you have a 411(d)(6) violation. Benefits accrued prior to the amendment are still payable at 55. If the plan now delays the right to receive that benefit until age 62 or seperation from service, I think you should actuarially increase the benefit payable at age 55 until the distribution or anticiapted distribution date, not to exceed the 415 limit for that age.

Really? Reciprocals have been around a long long time and every multi I ever worked on used them. It wouldn't surprise me if they don't understand how to pound them into their square holes, but this horse left the barn long ago. I would tend to look at BRich's "problem" more like he never actually earned the benefit because he was never really a participant in the plan. You only thought he was a participant, but in fact due to the reciprocity he never really was. There is no 411(d)(6) violation because there was no benefit accrual. Data is always in issue in db plans. People are given statements for years only to find out later that they were never really vested. I would call it a data issue, not a 411(d)(6) issue.

Proprietary or not, the plan sponsor certianly has a right to know the full table used in their valuation. If the prior actuary won't give it to you, ask the sponsor to request a copy of it.

A couple of thoughts: Do you see this on your pay stub as a deduction, or did someone just tell you that the plan costs 7 cents per hour? If it is an actual employee contribution, it must be 100% vested. Even if you are not vested in the employer provided benefit, your employee contributions would be returned, plus interest. (I assume this is not a union shop?) Yes, they are required to furnish all participants with a statement every three years. If they are taking money out of your pay, then you are a participant, even if you are not vested. My experience is that not all employers are "on board" with this requirement yet. I suggest that you formally request a copy of your statement.

We happened to read Section 6.6 of the McKay Hochman prototype db document and realized it contained what we thought was distressing language. Distressing primarily because we never knew it was there. So, the appears to imply that even if the plan coded the death benefit to be the minimum REA QJSA (J&50 - spouse only), that upon the attainment of Early Retirement age, ANY participant can elect a different death benefit. Therefore, a single employee can elect a lump sum (assuming that is an available option) death benefit. If that is true, it becomes impossible to use McKay Hochman prototype for a sponsor that only wants the minimum death benefit. Do McKay Hochman users provide election forms for participants attaining early retirement age? Could the estate sue the plan if they don't make this clear to the participants? "If dad would have known he could have elected a death benefit, he certainly would have elected a lump sum" Anyone else familiar with this provision?

With IRS submission we generally say 9-12 months, if PBGC only probably talking < 6 months. That timing is from the date they tell us they want to terminate.

http://www.whitehouse.gov/blog/2010/09/27/...-learn-whats-it

yes, it is possible, but the plan needs to contain the proper language. Typically the problem is properly defining the suspendable employement. There are fairly strick DOL rules for this involving the type of work and location which sometimes Trustees would rather ignore. I'm not positive, but I don't think it can be applied retroactively. I think that was the issue in the Heinz case? http://www.mwe.com/index.cfm/fuseaction/pu...0e5d340c97c.cfm

I have re-read the statutes and humbly withdraw my appeal.

If it is unclear you need to look at past precedents and ask the sponsor for an interpretation. Don't take the responsibility for interpreting a plan provision that isn't clear. Unless you are the plan sponsor, this shouldn't be your call. For me, it says to reduce for fractional years, that means interpolate in my book, but obviously, it isn't my decision.

Q1: http://benefitslink.com/boards/index.php?s...od+change\ I'm calling a change in the month of determination an assumption change and I'm calling a change from segment rates to yield curve a method change.

Lance, Could you supply a reference to this bill that was passed? I see several bills that passed in the Senate, but haven't seen anything about a bill passing both houses or anything awaiting the President's signiture. (Other than on one of your other sites.)

Smash - good to have you aboard. I agree with everything you said, except that the Trustees do not control the assumptions used for the withdrawal determination. Like FASB assumptions, I think the withdrawal assumptions are completely in the hands of the Trustees. They can ask for direction from the actuary, but ultimately they can set them where ever they want. If they actuary doesn’t agree, he/she can caveat the calculations. I look at them the same way I look at FASB assumptions. That is, the actuary is just doing the calculations based on directives from the Trustees or Plan Sponsor.

To me that is still one of the open questions. The notice says "all participants" must receive the AFN, but it never defines as of what date. Forgetting about a plan termination for a second, what about an ongoing plan? All participants at the BOY or EOY? What about participants who terminated non-vested during the year, or even in the subsequent year, but before the notice is distributed? What about participants who die without a beneficiary? I think the safe answer is to give it to all participants as of the first day of the plan year, but I'm not going to argue with a client who wants to have a different interpretation.

You could always come to Pittsburgh - we are on the brink of having the worst road record IN BASEBALL HISTORY! Like my daddy always said, if you are going down, go down in with style. Regarding the "catholic" bear, I assumed you were using the word for it's actual meaning, to which I ask, is the bear catholic what? Is the bear catholic in agreement that he is smarter? Does the bear catholic care if Yogi was a catholic?