Effen

I agree that it does not apply to db plans, but if the client wants to interpret it differently, that is their choice. Make sure you put your position to them in writing and maybe cc their ERISA counsel. That way, if/when they get caught, it won't come back on you.

I assume you are talking about a multiemployer plan. I agree with AndyH. Generally anyone who has a benefit (vested or non-vested) would be a participant. This would include beneficiaries and alternate payees.

Just another example where the few dollars they saved using a prototype will be more than offset by the cost to provide a benefit they didn't have to or to pay someone else to fix it. Anyway, just because it is a prototype, doesn't mean you still can't amend it to do what you want. However, it probably means you might need to hire an ERISA attorney to make sure you amend it properly, and it will lose its prototype status. Then again, I would follow Blinkys advice first, and read the document very carefully to make sure the option isn't there somewhere. Maybe even call the prototype provider, explain what you would like to accomplish, and ask them how the plan can be amended to accomplish it.

The corporation (or family trust) can amend the plan to cease the actuarial rollup and all future benefit accruals and provided that they give James (and all other impacted participants) the proper 204h notice, it is frozen. No need to get James' spousal consent - he's just another participant in the plan.

Yes, but you need to comply with the equally onerous regulations involving participant choice. If you give choice, the required notices and explainations involve are a bit extreme. Much simplier to just convert and not give choice. There were some proposed regs released around February 2004.

By "bluff" I meant that the IRS has no authority to issue such an opinion. I agree that it is intended to be a guide for the agents, but the problem is the agents often treat it like it is law because they know you can't afford to challenge them in court. We currently have a plan with a 2% minimum cash balance accrual where they raised the question. We have used this design for years without any questions, but they raised in the last go-round. I will let you know how successful we are arguing that 2% is "benefiting", which since TH is 3% in a DC, shouldn't be too difficult, right???

Keep in mind that the .5% minimum is neither a statutory or regulatory minimum. There is nothing in the law or regs requiring that you provide it. It is simply an IRS bluff that you won't take them to court because it will cost you more to fight them than it is worth. In other words, I wouldn't fix a non-existent problem. If you pass a(26) by counting the guy with .41% as benefiting, then I would leave it at that. If the IRS raises the issue, fix it then. (This assumes that the .5% minimum isn't written into your document.)

Good point Andy. Most documents I have seen don't allow for a vested deferred to defer past NRD. Often times the attorney's take the position that a retro annuity must be paid, but just as often they allow for the rollup. I don't try to tell the client which interpretation is correct; I'm just an old country actuary. I don't know noth'n bout all that legal stuff... I just do the ciphering.

The two main questions are: 1) What does the document say 2) If the document permits, did you properly notify the participant with a Suspension of Benefit Notice. If you didn't properly notify the participant, my opinion is that you must provide the actuarial rollup regardless of the language in the document.

What kind of information are you looking for? The plan document should define the benefit. It could be some sort of "bump" due to layoff or early termination. Sometimes HR/Treasury people use jargon to describe a benefit that isn't really accurate. Get a copy of the document or SPD. The only sub-pay plans I am familiar with are used by multi-employers and they are funded with employer money. I doubt they could be funded with "pension distributions", assuming you mean money that has been paid to a participant. What would be the point of that?

c) Wasn't aware of any PPA related changes.

Not that I am aware of.

I'm not a lawyer, but in my experience any benefit that the plan sponsor thinks they can offer or not offer at their discretion is a discrimination law suit waiting to happen. From what you provided, it looks like the document provides for the escrow agreement and probably should offer it. I would not read the "may" as a "may or may not", but rather "would be permitted to" That said, ask the participant if they are willing to pay the extra admin and legal fees to draft the agreement.

I believe all we know for sure is the TNC should reflect the cost of the death benefit. This is most likley not equal to the premium. If you search, you should find some relatively recent threads about this.

Could you be more specific? Are you talking about plans where benefit restrictions are in effect? If so, I don't think you have any choice - you must offer them. The question seems to be whether or not you can have a form of payment that allows the participant to begin an annuity payment of 50% of the benefit that can be converted to a lump sum at a later date if restrictions are lifted. Ultimately it is a document issue. We are recommending to our clients that they amend their documents so that if they commence an annuity, they can NOT convert it to a lump sum at a later date. This is mostly for administrative ease. My understanding is that no additional guidance is expected any time soon.

Has anyone thought about how to complete line 23 of the Schedule SB if you are funding for a lump sum? Line 23 allows you to choose "Prescribed-combined", "Prescribed-seperate", or "subsitute" and "substitue mortality tables must be applied in accordance with the terms of the IRS ruling letter." The instructions for line 23 state that "Mortality tables described in Code Section 430(h)(3), ERISA section 303(h)(3), and section 1.430(h)(3) ... must be used to determine the funding target..." However, 430(h)(4) or 1.430(d)-1(f)(4)(iii)(B) state that if you are funding for a single sum, "the current applicable mortality table under 417(e)(3) ...is substituted for the mortality table under section 430(h)(3)" So, if I am funding for a lump sum, and using the 417(e) mortality it doesn't seem that I have any possible options since the 417(e) mortality is not one of the prescribed tables under 430(h) or 1.430(h)(3). Any ideas?

I don't think there is anything in 416 that gives cash balance plans a different minimum. Therefore, if you have a top heavy cash balance plan it needs to provide at least a 2%/YOP (max 20%) monthly annuity at NRD. You may want to use something like your option 1 to determine their credit in a given year that might get you close, but when they actually terminate and are paid you will need to check against the real minimum and make sure they at least get that amount. This may be more than their cash balance account depending on the interest rate. This is why many db/dc combo provide the TH min in the DC plan.

I looked at a similar situation and concluded that the only option for a benefit waiver was a plan termination. If they are just terminating their employment, and the plan is continuing, I don't think they can waive it. However, if it is underfunded you can't pay them a lump sum anyway. What we looked at was an arrangement where the doctor who was leaving agreed to pay the company some dollar amount. If they are owners and are selling their shares back, you may be able to adjust the share price to account for "their share" of the shortfall.

I think the better (more expensive) valuation systems will handle the yield curve fairly easily, however the “small plan” systems probably will not. We use both Proval and ASC. With Proval it is just a click of a box, with ASC it is not possible. Personally, I wouldn't recommend it for small plans (tax shelter) unless you have a fairly sophisticated client. It’s a pay me now or pay me later thing. I think the contribution has to be more than just inconvenient before you suggest the yield curve.

If you are using the yield curve each year has its own rate. Instead of 3 rates, you have 99. I think most people are using the .5, 1.5, 2.5, ... but I can't speak for everyone. If you use the yield curve it is part of your funding method and therefore can only be changed every 5 years with automatic approval. (RP 2000-42) However, you actually get a free change for 2008 and another free change for 2009. Therefore, you can use the full yield curve for 2009 even though you didn't use if for 2008, but if you do, you are probably stuck with it for 5 years. Because the yield curve doesn't have the averaging of the segment rates, it is much more volatile and could end up costing the sponsor more in 2010-2012. However, if the client is in survival mode, it might be worthwhile to take a look. The sponsor will need to elect to use it, so MAKE SURE they understand it. They have until you submit the SB to make the election. Therefore, for calendar year plans you can run the numbers both ways and they can chew on it until 9/15/2010 before they need to actually decide. You might also want to look at redoing 2008 based on the yield curve. That way if they decide before 9/15/09, they will know the impact on 2008 and 2009 and should have a pretty good idea what 2010 might look like. That way they are really only flying blind on 2 of the 5 years.

At the Enrolled Actuaries Meetings it was made clear that "Congress thinks they fixed it" when they passed WRERA and are not likely to do anything more. Anyway, don't hold your breath.

Our clients have had pretty good luck with the Berwyn Group. I thought their pricing was very reasonable. https://www.berwyngroup.com/db/Home.asp Plus their logo looks like your avitar which I'm sure is highly significant...

That is the way I read it. Kind of interesting that if you might need to file a Form 10 before you really know what your required quarterly is for an EOY val. Lets say the market takes off so much that the 2009 required is $0. If that is true, you didn't really have any quarterlies due and therefore the Form 10s you filed weren't necessary.

1) Yes 2) Yes follow-up 1) Yes, but on the COPA board it was speculated that the PBGC might waive the requirement, but nothing yet 2) No one really knows. At this point, just do something reasonable.

We are doing same as Andy. Excel spreadsheet, merged into a word document. Easily 2+ hours each by the time you gather the information (including funding and investment policy infro from client), input the data, merge it, check the output, write email/letter, and confirm with client that they have it.