Effen

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.

Are you thinking that the PS CAN'T elect to change the funding target after the 10th month if it changes the range? That seems a little harsh, but I understand your position. I seem to recall hearing Holland say that the numbers on the SB had to match the AFTAP. I was just assuming that you could re-cert the AFTAP when you finalized the val, but your position could also be logical. I was thinking they could change it, but they might have to live the AFTAP. Keep in mind the due date for the PS to select the assumptions for the funding target is the due date of the 5500. That is 12.5 months after the AFTAP was due. Also, I did speak to the PBGC about the impact if the PS changes from segment rates to the yield curve after the premium due date. Their response was that they discussed it internally and decided that they would issue a refund or credit. I know this doesn't mean much, but it does mean that some at the PBGC think the funding target can be changed after the premium due date.

I guess the basic question is "what is the impact of a change in the funding target after the 9th month of the plan year?" I guess you could say changes after 10/1 won't impact the AFTAP, but they would impact the required contributions and/or PBGC premiums. The PBGC told me you can request a refund if the PS elects to use the yield curve for fuding and PBGC purposes after your premium filing due date. However, before you do remember you are stuck with the yield curve for 5 years for PBGC purposes. Just another bit of PPA timing stupidity.

If the change is "material" I think I have a problem, however as I read (2) it seems to say that a change is material if it results in the plan being more of less restricted than it was being operated. In my case the plan was operating in accordance with a presumed AFTAP of 72% and were properly restricting benefits to 50% of the lump sum and properly notified the participants. However, they didn't want to impose the complete restriction until absolutely necessary, so they asked me not to certify the final until 9/30. So, I certified on 9/30 a final 2009 AFTAP of 55%. However, the PS took no action based on this AFTAP (except to sign an election to use the yield curve). So on 10/2 I re-certify the AFTAP at 73%, therefore no change in the previous restriction. (Except for the 2 days.) Since the plan never "operated" in accordance with an more or less restrictive AFTAP, I'm thinking it isn't a material change and therefore it should be ok? P.S. I agree that if I would have not certified on 9/30 the plan would be deemed to be 60% and the client is SOL until at least 1/1 (or maybe 4/10).

4/1/2009 Plan sponser elects to use non-tranistional segment rates for 1/1/2009 val. I see AFTAP will be 55%, but wait until 9/30 to certify since prior year was 82%. Benefit restrictions came in 4/1/2009, participants notified of 50% LS restriction. 9/14/09 IRS says you can use yield curve for 2009 and switch back to segment rates for 2010 9/30/09 I cert AFTAP at 55% based on non-transitional segment rates. 10/2/09 PS elects yield curve for 2009 valuation. AFTAP based on yield curve is 75%. 10/2/09 I re-certify AFTAP at 75%. Since no notices were ever sent notifing participants of complete restriction, is this a material change? I'm thinking my 10/2 cert is the AFTAP and it's not material. I think if it would have happened after the 100% lump sum restriction notice was sent, then I might have a material change and I would have been stuck with the 55%, although the proposed regs seem a little contradictory. What if the PS made this election on 9/14/2010? I think How do you handle changes in the funding target after 10/1 of the current year?

Just to further clarify what David is saying, the funding rules currently in place allow a plan sponsor to contribute and deduct (if otherwise permitted) an amount that would in essance result in the plan being 150% funded. Also, as a point of confusion, contributing the minimum required contribution is generally not sufficient to ensure the plan is 100% funded. Contributing the minimum ($0) does not mean the plan is 100% funded and contributing the maximum ($150) would probably result in the plan being overfunded by approximatley 50% (ie:150% funded). Overfunding might make sense if the client wants to prefund for the future, but wouldn't make sense if the plan is nearing its end or benefits were frozen. The large range provides employers with flexibility to fund when times are good, and not be overly burdensom when times are bad (I know, lots of screaming in the back ground, but we are talking theory....) This should be a consulting opportunity for your actuary and if he/she needs to explain how the numbers work for your plan. You need to understand the implications of the contribution and only your actuary can help you. If he/she can't/won't, find one that will.

prior post Here is a prior thread. FWIW, I am not telling my clients to re-notify, unless they have new participants coming in. I think that would meet "good faith" for now.

Sure, it happens all the time. A company may be making quarterly deposits towards 2009 before they have completed their 2008 final payment. As long as they designate which year the deposit is for, there is not problem. PPA had some ordering rules that you might want to look at, but I don't think they change what I said.