Effen

In the old days Jordan and Kellison were the old and new testament. If you know those, you will do fine. When I took it, I liked Parmenter's book more as a supplement to the other two. Sometimes Parmenter's explanations were a little easier to understand. Other than the text books, the best way to study is by using old exams. They are all available on the Joint Board web site. You can also buy solutions to the exams through various vendors, or you may be able to buy used ones from previous students. Also, try to form a study group with other in your area. Maybe someone who past more recently can comment on the other text books.

Interesting, I can't seem to find exactly what I was looking for, but here a two that might help. old post old post 1 - I don't really like the PBGC's response, but at least they are saying you must use rounded ages - according to the poster. If you search "annuity starting date" you will find a lot of threads that dance around the issue. To me, I just don't see how you can argue that basing the lump sum on some date/age in the past doesn't violate 411(d)(6), when you are clearly paying someone less than the value of their accrued benefit.

Ultimately this is a plan design question, although at this point, most plans have not been amended to account for it. Our position has been that if restrictions are in place the participant can either elect an immediate annuity, or defer their decision. If they elect the immediate annuity, then that cannot be changed at a later date. In other words, if < 60% they can have the annuity or defer. If they elect the annuity, it cannot be changed to a lump sum at a later date when the AFTAP increases. If AFTAP > 60%, but less than 80%, they can have an a) annuity, b) 1/2 annuity and 1/2 lump sum, c) 1/2 lump sum and defer election on other 1/2. If they take a or b, then they cannot convert that annuity at a later date to a lump sum. The only way they can have a lump sum at a later date is by deferring their election. I acknowledge that others feel differently, however whatever you do it must be in the plan document. If the plan sponsor wants to let the participant have a 2nd bite at the apple, and your plan provided for that option, I think it would be ok. I just haven't been recommending it, primarily due to adverse selection and administrative complexities. I think 2010 might produce some irritated participants due to rising 417(e) rates. Let’s say a participant wanted 1/2 lump sum and deferred the election on the other half. Now let’s say that the lump sum value of 1/2 of the AB is $10,000 in 2009. If the AFTAP increases so that the restrictions are lifted in 2010, and the 2nd half of the annuity is valued, it might only have a value of $9,500. That won't seem "fair" to a lot of participants. Nothing we can do about it, other than being ready with an explanation.

Apparently he has to die.

They do seem unreasonably high to me as well, so I think your "scam" radar is working fine. Obviously there are lots of creative solutions to allow higher than expected contributions, so I'm not going to say it is obviously illegal, but I would want to know more.

I wouldn't read it that way - how could you have 1000 hours of service on a given day? I think it just means that if they are a participant at any point during the year, and have not terminated, then they get the contribution. Since he was a participant on the first day of the year, he met the requirement as long as he didn't terminate during the year. It would not be uncommon for a "standard brokerage plan" document to be generous with contributions. Just remind him how much he saved on his document by using a prototype when you bill him your time to interpret it, and add to that the extra he has to contribute to the plan because of it. Penny wise, pound foolish

Based on what you quoted, I would probably say they would be entitled to the contribution because he has obviously met the eligibility requirements (since he is a participant) and he has not terminated. I see three options: 1) give him the allocation based on the above interpretation 2) let the sponsor make an interpretation based on the document - after all, it is his plan, not yours. Since it is a one life plan your chances of getting sued for following his interpretations seems fairly remote. (If there were other participants I might think differently.) 3) contact the document provider and ask them for an interpretation of their document

In a prototype you would typically see several definitions for "Year of Service" - one for eligibility purposes, one for vesting purposes and one for accrual purposes. You want the one for accrual purposes. If yours doesn't clearly define years of service for accrual purposes, you might need to look in the body of the plan. That is the much larger document that came with the adoption agreement. If you don't have that, you need to contact the person who wrote the plan and ask them. Also, make sure you look through the entire adoption agreement. Sometimes they don't put things where you think they should be.

In the section of the plan that defines the contribution it should also define who receives the allocation. This is where you need to look to determine if a contribution is necessary. It may say something like, "all participants who complete X hours of service and are employed on the last day of the plan year will receive an allocation of y% of compensation". Or it may just say any participant who completes a "Year of Service" will receive the allocation, in which case you need to check the document for the definatio nof "Year of Service". Either way, the answer is in your document.

Interesting idea. As long as it is non-discriminatory I don't see why it would be a problem. Couldn't you also use a traditional compensation definition, but create a benefit formula that only recognizes compensation in excess of 100K for the owner group. I'm assuming you are doing this as a way to only have an accrual if the sole prop. has a "good" year. I think doing it through the benefit formula would be a little cleaner. I don't like to mess with the definition of compensation.

Lots of old threads on this old discussion, frankly I don’t know where this idea comes from. Nothing new in PPA because you were never permitted to use the value as of the last valuation date. You always had to determine the lump sum as of the date of payout. Anything less would be a violation of 411(d)(6) since the participant would be receiving less than the value of his accrued benefit. Can you provide any evidence that you ever were permitted to pay a lump sum valued as of a date different than the annuity starting date?

I'm still trying to figure out where the balls of their ass is? If it involves a male donkey, I'm not sure I understand the analogy - but I agree it would be a bad place if you could somehow get there?

Do I disagree that there isn't any guidance that they aren't covered? Wow, triple negative! I agree there is no guidance indicatating that cash balance plan's are not covered by 436. As AndyH said, why do you think there would/should be? There is nothing in Code indicating that they should be treated any differently than any other db plan.

Also, if you paid a bunch of HCEs when the plan was only 80% funded, you most likely violated the 110% rule and if you didn't mention that fact to the client, then yes, you might find yourself in some hot water. But, assuming that wasn't an issue, I agree with Andy. We, as actuaries, don't really have the ability to get very creative anymore. The significant methods and assumptions all need to be approved by the PA. It isn't like the old days when we had much more flexibility with our assumptions. Yield curves and asset smoothing are all reasonable methods. The interest rates are based on published market rates. The PA elects which rate they want to use. If they are the clients elections, and the actuary has nothing to do with their development, what are they going to sue the actuary for?

I agree with David - 1/1/2008

It IS required for cash balance, and other "applicable defined benefit plans".

New vesting schedule applies to the entire accrued benefit of anyone who worked more than 1 hour after 1/1/2008. You can't have different vesting schedules for different pieces of benefit.

Gee, why do I feel like I just got yelled at by June and Ward Cleaver. Gary knew, or should have known after almost 800 posts, that discussing fees on this board is a no no. If he was a new poster, I'm sure the reaction of the group would have been different. Personally I think Carrots was the best of the bunch.

We typically prefer money.

dmb, I'm not clear. Are you saying you have a client that provides post retirement death benefits and they need a FAS 106 valuation or Are you saying you are working with a qualified db plan that has post retirement death benefits as a benefit? If it is the first, your FAS 106 report will look a lot like a FAS 158 report. Post retirement death benefits are fairly common as part of a post retirement medical plan or as a stand alone. I would just value the benefit and pretty much ignore the contracts. In other words, if the death benefit is $10,000 I think the plan's liability is just based on the $10,000. If they are insuring this risk it is just a vehicle used to fund the benefit, but it doesn't really impact the plan's liability. I have seen some people use a group term rates to set the liability, but this probably wouldn't be appropriate for a post retirement group since the group term rate is probably a composite and would include actives as well. In other words, the group term rate wouldn't properly reflect the post retirement group.

WOW! I'm going to read that one, it is a lot shorter than the one I printed

FWIW, if any of your clients jumped on the yield curve after the IRS released the 9/25 newsletter, don't forget that you can use the alternative method for PBGC premiums as well. This can dramatically reduce their premiums. However, you need to do this before the due date of the comprehensive filing date, or you have missed your chance. If your client has already paid their premium, as long as they amend their filing before 10/15, they can still take advantage of the alternative method.

I spoke to a few others, including some actuaries with the "big boys" and everyone seems to think we need to do them. We have been doing them for our clients. Also, if you are doing the full 5500 for your client, be careful of the Schedule R. LOTS of new attachments that aren't obvious unless you read the instructions. They are asking for an incredible amount of information.

OK, but since my AFTAP is greater than 60%, as long as the amount of the retro payments was less than 50% of the present value of the benefits, I can still pay it, right?

Does anyone know if retroactive disability payments would be subject to benefit restrictions? I have a plan where the AFTAP is 65%. The plan pays an immediate disability benefit commencing when social security deems a person disabled. Sometimes social security takes years to make this determination. For example, the participant might receive a letter in 2009 stating they were disabled in 2007. In this situation the plan would retro pay disability benefits back to 2007. (disability is pure subsidy - not a retirement benefit) I know the regs say "any payment", but I was wondering if for some reason ancillary disability payments might be exempt.