Effen

Don't go bringing professional standards into this PPA lunacy. Maybe you can bring it up next week at the EA meetings.

I think they get another free change for 2010.

The "cost" is difficult to quantify. It depends on what rates you use to determine the lump sum and current market conditions. If you simply use 417(e) rates to determine the amount of the lump sum, it could produce liabilities higher or lower than the funding target (assuming you are using segment rates). Since the segment rates have a 24 month average built into them and the 417(e) rates do not, the segment rates will be higher or lower than the 417(e) rates at any given point. When segment rates are higher (like they are now) lump sums are higher than the funding targets. If the segment rates are lower than the 417(e) rates, lump sums wil be lower than the funding targets. PPA changed the playing field. Assuming you are using only 417(e) rates for lump sums, the only change in the funding target would be the mortality. However, the "shut down" liabilities may move +-20% (SWAG) depending on the rates at any particular point in time. If you use something other than 417(e), the impact will be based on the rates you choose. Lower rates, higher change. Now, go hire and actuary

Seems to me that if he signed the plan document, then he has a plan. Just because you ask the IRS not to look at it, doesn't mean you no longer have a plan. If everyone ends up whole, then if might be "no harm no foul", but I would look closely at anyone who might be impacted by his attempt to delay the effective date. For example, did anyone terminate during 2009? How about the vesting provisions? Personally, I would want a lot of cover from an ERISA attorney before I did much of anything on the plan.

It just seems strange that if the plan's actuarial equivalent section had said the lump sum was based on the greater of 5.5% or the 417(e) assumptions, I would have a funding target of $1.75 million, but because my document only references the 5.5% stuff in the 415 section, I get a funding target of $1.6 million. Same benefit to the participant either way, but significantly different funding targets.

Consider the following: 1) Sole plan participant has accrued a benefit equal to the 415 limit 2) Plan offers lump sums solely based on the 417(e) rates 3) Participant is at retirement age and has elected to retire during the year. The Funding Target Segment Rates produce a liability of $1.6 million. The lump sum based on 417(e) Rates is $1.9 million The max 415 lump sum (5.5%) is $1.75 million What is my Funding Target? I know 417(e) is not relevant, but what about the 415 limit? The 430 Regs say I "must take in account" an alternative lump sum basis to the extent the value is different from the present value determine using the segment rates, but it also states that if the basis of my lump sum strictly 417(e), than I should ignore the current 417(e) rates and just use the segment rates (other than differences caused during the transition period). So in my case I "know" the plan will be paying the 5.5% lump sum during the year, so should I consider that an "alternate basis" so that my funding target is $1.75 million and not $1.6 million?

I voted deferred lump sum because you said you were assuming the lump sum would be paid. I think you could change that assumption to something that better fit your situation. I don't think you are required to assume a lump sum payment anytime one is available. "1.430(d)-1(f)(4)(ii)(A) The probability that future benefit payments under the plan will be made in the form of any optional form of benefit provided under the plan (including single-sum distributions), determined on the basis of the plan's experience and other related assumptions"

so my option would be that a SOB notice isn't necessary since the document gives the greater of the two anyway. However I would argue the document language is a little lacking since in the first year after NRD it should be the accrued benefit as of NRD that is rolled up. That language seemed to imply it was the accrued benefit at the end of the prior year. Also, I have heard IRS rumblings that the plan still should give an SOB notice or it would be forced to give both the rollup and the age/service accrual. I can't remember the exact context, but I remember being a bit surprised when I heard/read it.

As FAPinJax points out, if you didn't give them a suspension notice, it doesn't really matter what the document says. If you didn't give them a notice, they need to get an actuarial increase.

DB or DC? I assume DC, but just wanted to make sure. Since the participant got your number from somewhere, who/what gave you the authority to talk to him and who agreed to pay for the cost of that service?

FWIW, I like Malwarebytes as well. Seems to work on most issues we have encountered.

Sorry, no real experience.

Did Dick state on his election package that he was not married, or did the PA just assume he wasn't married when the package was prepared? In other words, did dick lie on his election package by stating he wasn't married, or did the package never ask the question? Seems to me that if he lied on his package then both the plan and his wife could bring suit for forgery and recover the past payments. They should move to collect the entire lump sum if he was improperly paid the lump sum, or the amount of the monthly payments in excess of the J&100. They could probably reduce future payment to recover as well. It doesn't sound like the plan is in any "trouble", assuming they really had no knowledge of his marriage - did she ever come to the Christmas party? Obviously, you need to talk to an ERISA attorney.

Not disagreeing with ATA, but I think a 412(d)(2) election is required. Under the previous law this election only applied to amendments made after the end of the plan year, however PPA made it required for any amendment made after the valuation date. One question would be is checking the box on the Sch. R sufficient to satisify the requirement even though the instructions state it is required for amendments adopted after the end of the plan year? Do you think you would need a PPA type election like those used to add/burn/use PFB/COBs?

Depends on a couple of different things (assuming it is a small plan that only requires 15 days notice). 1) Did they earn any benefit from 1/1/ to 4/12? If so, than I think they would have a TNC. 2) Did they adopt a 412(d)(2) election? If so, they are electing to have the amendment treated like was in effect on the first day of the year and therefore no TNC. I don't think "prorating" would be proper. It is either based on the actual accrual earned, or if no accrual and a 412(d)(2) election then it would be zero. Also, don't forget that the TNC also needs to reflect anticipated administrative expenses, so just because there isn't any accrual, doesn't necessary mean the TNC is zero.

Just to throw something else out there… not everyone agrees with the Gray Book response on this issue and would argue that at the very least the Gray Book answer for "a" should be adjusted to say "assuming the plan provides". A plan cannot pay a form of benefit unless it is in the document. Just because the Gray Book provides a solution, the plan still must provide for the option before it can be paid. If the plan doesn't have any special language providing this alternative benefit form to a restricted HCE, then the HCE’s only choice is to either defer their election, or forgo the lump sum and elect one of the monthly annuity options. So, getting to Merlin's questions, it would seem that someone could probably draft plan language that would address your issues before they occur. I think there would be many possible ways to handle this.

It sounds like you are saying he retired and elected a life annuity because he couldn't get the lump sum. If so, there is nothing to pay the beneficiaries. Why do you say the plan still owes the lump sum?

I agree it MAY work using Windows 7 - XP Mode, however my understanding is that requires a system reboot in order to get the machine into XP Mode. Then, once in XP mode, the Windows 7 applications won't work. Therefore, in order to prepare a 5500 you would need to reboot, then reboot again when you are done to put your machine back into Windows 7 mode. Not a very practical answer for an office where people don't work on 5500s exclusively all day long.

Just an FYI that Relius does NOT work with Windows 7 machines. The sales people tell you they have work arounds, but the techs confirm they don't really work. We signed up with Relius before we knew this, and are now scrambling to find an new vendor.

If they rejected the lump sum and took the annuity 18 months ago, what makes you think they would want a lump sum now? You can't force them to take it. Just go buy the annuity - its what the participant elected.

One of those listed has late retirement provisions in their document that are so ambigious they are unworkable or illegal. I have spoken to them several times about it and they have admitted the provisions don’t really comply with the law - after I pointed out the applicable provisions of the law. When I ask them how we are supposed to interpret the language so we can do a ben calc they told me they would check with their actuary friends and get back to me. Seems to me if they wrote the document they should understand what it means, not asking their actuary friends to interpret what they wrote for them. Anyway, just one example. I'm not big on canned documents because often the subtle stuff no one reads ends up costing the clients 10X what they saved. Plus my experience is that you generally get very little help from the providers on anything even remotely technical. But hey, that’s just me. Maybe those guys are your friends so they will actually call you back.

Law practicing document provider - I generally call that an oxymoron.

I think the main reason for the surcharge is to give employers an incentive to re-open the contract. That said, the 5% surcharge is often significantly less than the rehab plan will call for. I think you need to contact your representitive trustees if you want to move quicker on the rehab plan. They are really the ones in control of the situation.

If you are taking them over, and it isn't your signiture on the SB, I don't think you have any obligation to make sure the prior actuary got all the proper elections. Just my opinion from a reasonableness point of view. Holland used to say that once you signed a Sch B you owned the credit balance, I guess the same logic could be true here, but 10 years from now I don't think you would be worried about all their past elections. Do your best to document as much as possible. If they didn't elect to create a PFB, don't use one. If the prior actuary told you they used their COB, assume he has the election - if it isn't your signiture, I don't think you need to see it.

Example 1: If there was no election prepared, how could the client have "used a portion" of the COB to offset the MRC? They couldn't have used it, if they didn't elect to use it. How did you know that was what they wanted to do? If they told you verbally, I would ask them to document their decision at this point. However, the actuary should not have signed the SB without a written election. Example 2: Just because they made excess contributions doesn't mean they created a PFB. If they don't elect to add the excess to the PFB, then you have no PFB. Example 3: I don't think I understand your question. You keep saying "balance election", but you need to be more specific. There are many elections that impact the COB or PFB. When you say "minimum contribution", do you mean the required contribution assuming they were going to use the COB to offset? (TNC + Shortfall amort - COB?) If so, and you don't have an election to use the COB, you probably need to re-file the SB showing a deficiency (or whatever they call it now). However, it may be a better idea to ask them to confirm the decision they previously made in writing at this time. The old days of one simple straight forward “minimum” are gone. The “minimum” changes based on the employer elections. I don't see much forgiveness on these elections. If anything it is the one thing I can see the IRS coming back and examining. Maybe not the content of the elections, but simply do they exist. I think it was pretty clear that they were necessary and to just say you didn't do them for 2008 would leave you fairly exposed. I think “good faith” means you at least gave some effort to comply.