Effen

I think I'm coming down on Andy's side on this. I don't see anything in Field Assistance Bulletin No. 2009-01 that implies I should subtract the CB out of the 2006 OR 2007 assets. When I show the 2008 numbers in chart format the PFB & COB are clearly stated. In addition, there is an explanation that the AFTAP is not a true reflection of the funded status because the FPB & COB are taken out of the assets for the calculation. The numbers are all there for a participant to do the math and see the plan's real funded %. However, in Appendix C for 2006 & 2007 you are simply stating the assets and liabilities and the funded %. You aren't providing any information about the CB. Therefore, if you deduct the CB from the assets it seems that you would be misleading the participant into thinking the assets are less than they really are and the plan's funded percentage is less than it really is. Where are people getting the idea that you need to subtract the CB from the 2006 and/or 2007 assets for this Notice?

You are getting conflicting information because no one really knows because there is no guidance from Treasury. Ultimately, it will be a document issue. Here is a recent discussion what to pay Don't hold your breath...The bulk of the proposed 430 and 436 Regs were released around 8/31/07. I don't have a free link for you, but someone else might.

At this point I would say the consensus is "no". There is apparently nothing in the Code or proposed Regs that implies the maximum should be adjusted for interest to a point other than the valuation date. Therefore, a beginning of year valuation would have a beginning of year maximum with no adjustment for later payments. At the session I was at where the question was asked, the IRS gave a "no comment".

Andy, I'm not sure I understand your question?

Nope, nope Not really, although most I talked to seemed to think it is ok to use an "at-risk" that is equal to the sum of the hypothetical accounts - but there was nothing official. PBGC is still saying they want to notification of any missed quarterlies including small plans.

If you have specific questions I might be able to tell you what I heard. The gray book was very good and answered a lot of AFTAP/Notice type issues, definitely worth getting a copy.

Yes I know it sounds easy, but it is fairly complex. To will try to simplify. Let’s assume a plan year beginning 1/1/2009. If the actuary can't (or doesn't want to) certify the actual 2009 funded status (AFTAP) prior to 4/1/2009, they will use the 2008 AFTAP, minus 10%. They must certify the actual 2009 AFTAP prior to 10/1/2009 or the plan is deemed to be less than 60% funded. So, let’s say 2008 AFTAP was 95% and therefore no restrictions were in place for 2008. You come to 4/1/09 and think your 2009 AFTAP will be around 55%. If the actuary does not certify the 2009 prior to 4/1, it is deemed to be the 2008, minus 10% or 85% and no restrictions will be in effect until 10/1/09 or whenever the actual 2009 is certified. Once the actuary certifies the 2009 AFTAP, benefit restrictions will be in effect starting on that date. Now let’s say the 2008 AFTAP was 85%. No cert is done on 4/1/09 so the 2009 is deemed to be 75% and benefit restrictions apply on 4/1/09. Then, on 10/1/09 the actuary certifies the actual 2009 AFTAP at 55% and all lump sums are stopped and the plan is frozen. There are LOTS of complications with prefunding balances and carry over balances that make this very complex, but there isn't enough time/space to cover the details. Basically, the 2009 AFTAP drives the 2009 benefit restrictions, but there are times when the prior year's AFTAP is used.

Interesting that you would say that Andy. I was at an "inconvenient truth" session with Tonya Manning (AON) and Don Segal. There was a fairly long discussion regarding bifurcation and the problems created. Don's opinion was the participant elected the lump sum, but the law wouldn't pay it. Therefore the question is how to pay it later? Tonya and many in the audience looked at it my way that it was two separate elections. I think Don wanted to apply a restricted benefit approach similar to a top 25 distribution. If there is one election then how do I determine the value of the lump sum if it is paid later? If it is new election, is it a new annuity starting date? If so, how does the J&S waiver effect things. Does the spouse need to waive again? What if there was a divorce, does new spouse have to waive? What about a death? I think everyone agreed that there should be no 2nd bite at the apple, but there was a lot of confusion about valuing the 2nd lump when it becomes payable. I agree it is a document issue, but it isn't an easy question - there are lots of things that should be specified in the document.

You might be thinking of the funded status for multiemployer plans (Endangered, Seriously Endangered, and Critical). Those had to be filed with DOL and they are public on the DOL web site. AFTAPs did not have to be filed with IRS, although as myatt stated, they will eventually become public once the Sch. SB are released into public domain.

What if we changed Xerxes facts slightly 1/1/2008 Results FT = 10,000,000 AVA = 9,000,000 FSCB = 1,000,000 Funded Ratio = 90%, so NOT exempt from restrictions in 2008. AFTAP = 80% If I do not certify a 2009 AFTAP by 4/1/2009 am I deemed to waive my $1,000,000 FSCB so that my 2008 AFTAP becomes 90% so that 90% - 10% = 80% and restrictions don't apply on 4/1/2009? Or, do I need to get the sponsor to elect to waive it so restrictions don't apply I guess the question is does the deemed waiver reach back into the past year if the current year hasn't been certified?

"Yarp"

I think the difference between (1) & (2) would be a document issue. The document would need to define what options are available to the participant and would need to define how each is determined. I think I would recommend that only option (2) would be available, with the added option of an immediate annuity w/ no lump sum conversion. Basically defer the option on the annuity piece or take the annuity, but if you take the annuity, you won't be able to convert it to a lump sum later. Again, I'm not saying this is the only way, it just seems to make the most sense to me and would be the easiest to work with in the future.

I know some of these have been asked before, but I'm looking for consensus. 1) Lets say my 2008 AFTAP is 75% and my 2009 AFTAP is 65%. I gave the appropriate notice in 2008. Do I need to give another notice in 2009 even though nothing changed? The statute says the notice is required "after the plan has become subject to a restriction". I was subject to the restriction in 2008, nothing new in 2009, so it seems that no additional notice is required. Agree? 2) Lets say my 2008 AFTAP was 85% and the 2009 AFTAP is 75%. My plan only pays lump sums less than $5,000 and therefore the restrictions have no practical impact. Do I still need to give a notice? I think the conservative answer would be yes, but does everyone still agree?

Personally I think it will be a document issue. The attorney's we work with are basically telling us to pick something, document it, and then when appropriate they will amend the plans to fit what we have decided. My thinking is that this participant is still entitled to $1000/ month at 65 and an unreduced at 62. (I assume he would also be entitled to some immediate annuity since you offered him a lump sum.) Either way, once restrictions are lifted why wouldn't you just determine the lump sum value of the $1,000 based on your normal procedures? If the plan's lump sum provisions include the value of the subsidy then (b) {using a62}, if not, probably (a). I don't like © or (d) because they could potentially violate 417(e). I guess I wouldn't look at it like he received 50% of his lump sum. I would look at it like he received the value of 50% of his annuity as a lump sum and therefore he is still entitled to 50% as an annuity. The lump sum value of that would be determined if and when it becomes payable in that form.

This was posted on the COPA board today. Not sure it will help, but rumors are always fun to discuss....

One reason would be the need to use of multi decrement fully iterative systems to determine plan liabilities. Typically firms that do only small plans use software designed for small plans (ASC, DATAIR, etc.) Firms that do work for larger plans use software designed for larger plans (Proval, Lynchval, etc.). These larger plan systems are generally fully iterative. In other words the liability for any expected decrement can be isolated in any future year. Therefore, when the client asks you to determine the value of a change in the early retirement or disability factor you can determine the true cost of the change. In addition, you can change the retirement scale to account for the increased or decreased utilization. Also, keep in mind that you are required to have assumptions that are independly reasonable. In other words, if the plan has a disabiilty benefit you are suppose to have a reasonable disability assumption. It is difficult to know your assumptions are reasonable if you can't isolate them. I know the small plan software providers will argue their systems will do it, but they generally use approximation techniques and do not do it directly. Another more basic reason is what SoCal pointed out. If you only deal with small plans you won't know what you don't know regarding larger plans. You will be getting a different type of question from various levels inside the company. The president of the company, the CFO, the auditor and the lawyer could all ask you the same question, but each would have a different reason for asking and you would need to know how to talk to all of them. No, the math and funding concepts aren't really any different, but the application and information required can be dramtically different.

I agree, different animal, different problems. Just becuase you are a good rabbit hunter doesn't make you a good deer hunter. You should take a look at the actuarial standards of practice and make sure you are qualified to do the work under the standard. Any you probably should increase your E&O coverage.

yes, I have seen them.

I agree with rcline. In my opinion the Schedule B IS the valuation. It is clearly required that you prepare the Schedule B, even if it is not filed. It is also clear that the filer must retain the completed Schedule B so I think you need to send it to them. If they choose not to accept it, that isn't your problem, but I think you are obligated to provide it. I think charging for the Schedule B seperately implies it is a la carte. Kind of like ordering a meal and then having them charge you extra if you want to actually eat it. It just seems a little misleading. From the EZ instructions: From the Sch. B instructions (2007):

There is lots of discussions you might want to look at. Do a search for "settlor". Also, there is a lot on the DOL web site about paying fees - do a search for settlor expenses. My understanding is that fees for necessary administrative services can be paid by the fund, however fees that are not necessary for the annual admin can not. For example, if the employer would like a study prepared to increase/decrease benefits, those fees should not be paid by the plan because they aren't "necessary". It seems to me the expenses related to a correction should probably not be paid by the trust, but there may be reasons why it would be permitted.

I agree that the COB will most likely decline during 2008 due to market value losses. However, I now believe this entire downward spiral in the market is the result of Congress continued drive to get rid of credit balances. In fact, I'm surprised AtA didn't pick up on this. Just like the Feds going after Al Capone, they realized they couldn't take credit balances away directly, so they looked for another way to destroy them. So, in PPA they got the COB tied to real market returns, then all they needed to do was cause a financial crisis so great that no investment would be safe and COB's would get reduced. Obviously the plan was hatched during the early 90s because they had to have time to give lots of cash to the financial sector to provide prop up their dubious lending practices. Then, just before everything collapsed, they passed PPA and the trap was set. They instruct the accountants that everything should be marked to market, then point out the bad dept just hanging around in the financial sector and boom, markets start to fall and COBs are reduced, and those that remain can’t be used because the AFTAP will be less than 80%. By 2010, all COBs will be gone… mmooohaa haa haaa {maniacal laughter}. It was a brilliant plan.

http://benefitslink.com/boards/index.php?showtopic=41508 Double Post - please delete one.

I'm sorry but what is PPA 302©? Do you mean the new funding rules? If so, I don't think there was any delay in the IRC Section 430 rules relating to funding for single employer collective bargained plans. Only the benefit restriction rules of IRC Section 436 have a delayed effective date based on the expiration of the current bargaining agreement.

yes Although you may not be required to actually file the schedule SB if the assets are less than $250K, you are still required to have one prepared.

I agree with David, the easiest thing would be to have the plan amended. Simply referencing 417(e) just doesn't really work in a post PPA world. When amending you need to be careful of 411(d)(6) cutbacks. We had to change several of our plans that referenced 417(e). We chose to use the 417(e) applicable mortality and the lowest of the three segment rates. That should result in higher optional forms of payment and avoid potential 411(d)(6) issues.