Effen

Probably not the best venue to discuss this type of thing, but.... Are actuarial valuations required? - yes/no. You are required to have an actuary sign the Schedule SB/MB every year. In order to do that, the actuary must prepare a valuation. Now, is he/she required to provide you with a valuation report? That depends on the clients needs. We have clients who need our battleship and others that just want an email stating how much they need to put in. My opinion is that technically the SB/MB is the valuation report and that is all that is required, but it is most likely not sufficient for most clients. You also have actuarial standards that drive actuarial communications, so some actuaries take the position that if they issue any reports, it must satisify certain requirements and therefore a simple letter or email would not be sufficient. As far as billing rates I would say $150 - $350 depending on experience is certainly reasonable. You can get it cheaper, but you get what you pay for... pay me now or pay me later. The actuaries with the nation firms can have billing rates over $500. Since you said "your actuary" I assume you are subbing out your db clients to someone who simply signs the valuations. Based on my experience, this is almost always "you get what you pay for". I suggest that just like when buying term life insurance and banking the savings, if you go cheap on "your actuary", make sure you put your savings into your E&O coverage.

I think WRERA causes us to redo a lot of 2008 valuations. Whoever signs the 2008 SB would be responsible. If actuary A refuses to redo and signs the SB, then I think actuary B has a problem. I suppose worse case would be that actuary B would need to redo 2008 and footnote the 2009 SB showing why the COB/PB are different than previously reported. Just like with credit balances, Holland always said if you certify the credit balance on the Schedule B, you are accepting all prior work as valid. If you know it was not correct, you have an obligation to fix it. Who pays for this is a different question. Granted, if actuary A is retireing he doesn't have much incentive to do the right thing, but certifying something you know is incorrect seems like bad answer for a lot of reasons. It is a shame that there will be added costs due to WRERA, but that is the cost of relief. Tell the client to thank his Congressmen at the next election.

Lots of issues. Take a look at 1.414(l) Are type of plans are these? multi-employ? bargained? single employer?

First, I'm not a lawyer, but how can he abrogate a contract? Isn't that a bargaining issue? It sounds like you are saying he wants the fund to treat him like he never abrogated the contract and accept his contributions for the last 4 years, but I don't see how that exempts him from withdrawal, unless he is going to continue to be a contributing employer, in which case he never withdrew. The payment of the 4 years of contributions is completely separate from the withdrawal liability. I still don't see what the fund is getting out of this as satisfaction of the withdrawal liability. Let’s say I have a club and you wanted to join. You agree to pay me $X each year and $Y of you leave the membership. At some point you decide you don't want to be in the club, so you just stop paying me. I annually remind you that you owe me $X and that if you don't pay, you will owe my $Y as well. Finally, four years later you say you will pay me the $X for the four years as satisfaction of the $Y. I say, no, you owe me BOTH $X and $Y. I may be willing to forgive the $X (assuming you never used the club during the time), but the $Y must be paid. Then again, Trustees can do whatever they want, but I agree with the goalie, it would probably be a breach of fiduciary duty to accept it, unless the 4 years of contributions was more than his withdrawal liability. Obviously, this is a fight for the lawyers.

Are you saying they would continue to pay into the plan during the course of their current agreement and then stop? Why would the workers want money withheld from their wages and sent to the fund without getting any benefit for it? Why would the plan let the employer walk away at the end of the contract? I think you might be able to do anything the trustees accept, but why would they accept this?

You’re missing the fact that I don't remember everything I "know" and sometimes I post before I think. I agree, the 2008 should not recognize the 436 freeze, unless that plan is actually amended to freeze the benefit indefinitely. I am still perplexed about the 2009, is the 1/1/2009 FT based on the actual accrued benefit or what the benefit would have been if the plan wasn't frozen?

I don't know if this was the original intent, but if no AFTAP was certified (including the 2007 proxy) wouldn't the plan be frozen as of 4/1/2008? Either way, my question related to the 2008 valuation. In the old days we always had the opportunity to recognize a mid-yr change for valuation purposes, or not. So now, post PPA what if today (1/26/2009) we take over a calendar year plan where no AFTAPs were ever done? What should we value for the 2008 valuation? Should we: a) just do the 1/1/2008 valuation not recognizing any freeze because on 1/1/2008 no certification was necessary and therefore we prepare the 2008 valuation as if all knowledge is instantaneous and it is 1/1/2008. b) Recognize that it is now 1/26/2009 and no AFTAP was certified and therefore the plan was frozen on 4/1/2008 even though no one was notified and no action was taken. It seems like under the old procedures both answers may have been valid. Even on the original question, if we assume the plan certified the 2007 before 4/1/2008 and that cert was > 70% and therefore the plan really wasn't frozen until 10/1/2008 when no final AFTAP was done, should the 2008 valuation be revised to reflect the freeze assuming it would impact the benefit earned during 2008? What if we were good little actuaries and prepared the val on 3/1/2009 and based on the AFTAP we knew the plan would be frozen on 10/1/2009. Should the 2009 valuation always recognize the 10/1 freeze? This will probably be very common in 2009.

Be careful. If it is truly a "choice" between ER PS$ or DB accruals, you probably need to provide LOTS of information, including similarly situation employee examples or the election might not be valid. There were some Regs released around 5 years ago and maybe they only applied if the DB was a cash balance, but you should probably give them a look. Generally the IRS takes the position that there is no reason why anyone would waive out of a free benefit unless they were misled by their rotten stinking lying employer. Proceed with great caution.

You act like you are surprised by his statement? Did you think he, or anyone, will let the PBGC fail? Just like Social Security and Medicare - won't fail. What do you expect him, or any politician, to say... "Today we have decided to let the PBGC eventually fail". From their website - "The PBGC pays monthly retirement benefits, up to a guaranteed maximum, to more than 640,000 retirees in 3,860 pension plans that ended. Including those who have not yet retired and participants in multiemployer plans receiving financial assistance, PBGC is responsible for the current and future pensions of about 1,305,000 people." These people are all about getting re-elected. They aren't going to make 1.3 million voters unhappy. Prepare for higher premiums, higher taxes, older retirement ages, lower benefits and yes, maybe more onerous distress termination rules.

Although Andy's advice is probably the best, our AFTAP certification provided the basic calculation including the funding target, value of assets, adjustments to the assets (COB, PF) and the percentage. For first year plans everything was 0, including the AFTAP. We sent the certification along with a cover letter that explained the stupidity of the rule.

As far as I know there is still no answer. There is lots of discussion about this on this board if you do a search. Here is one you may want to read. http://benefitslink.com/boards/index.php?s...mp;hl=undefined From a practical matter is doesn't really matter since benefit restrictions don't apply for new plans. We did AFTAPs for new plans and showed them as 0%, not 100% and I believe we told PA's to pass out notices that tried to explain the situation.

NO, I think that is the point. The amounts deposited for 2008 that go towards the PB DON'T share in the actual 2008 investment return. Only the original COB & PB get the market rate. Amounts deposited for 2008 get brought forward (and back) at the effective rate only. At least that is what I think today

So, now this all makes perfect sense (not!) ... Only the PB that existed on the first day of the valuation date gets brought forward at the actual earnings rate. The PB that is created, or the amount of the increase, due to contributions made for the current year, get brought forward at the effective rate. That kind of makes more sense. I had several clients who made large contributions in December and created pre-funding balances. It didn't make sense that I would need to discount these to the first day of the year at the effective rate, then bring them forward at the actual rate (-30%). You are saying that the actual rate of return for 2008 doesn't really impact the "value" of amounts deposited for the 2008 plan year. So, for example: 1/1/2008 MRC = 0, Max Ded = $1 million. Effective rate 6%, actual return for 2008 -30%. Plan Sponsor deposits $25,000 on 7/1/2008 for 2008 and elects to increase the PB. At 1/1/2009 the PB = 25,739 (25000 * 1.06^.5) NOT 16,998 which would be the 25,000 discounted to 1/1/2008 at effective, then accumulated to 1/1/09 at actual rate (25,000 / 1.06^.5 * (1-.30)) BIG difference. Do I have that right?

They seem to be using the actual rated to bring the COB forward (2%), and the effective rate (6%) to bring the PB forward? What am I missing?

You could say that we choose not to buy that dog. We have plenty of our own dogs that bite just as much.

Generally, we don't do them. We tell them that their accountants can do them cheaper and more effeciently than we can. This seems to work without any further discussions about 98% of the time. (Then again, we don't consider ourself to be a "tpa" either.)

Not allowing new employees to participate in the multiemployer plan would not directly create a withdrawal liability. I could over time depending on turnover. Partial withdrawals are the result of a specific decrease in the number of contribution units over a specific time period. Mr. Ecklund is correct that some plans will not accept this type of contract, but some will. Also, if the plan is critical or endanagered, it would be prohibited from negotiating such an agreement.

Where are you located?

You have a problem and should contact the plan's attorney. How many participants are in the plan? If they aren't in the name of the plan, whose name are they in? Is it a qualified trust? What have the 5500s reported? Auditor reports? 1099s?

Any employees subject to collective bargaining can generally be excluded for "coverage" testing and "non-discrimination" testing. The other participants would need to be considered when performing coverage and non-discrimination testing on the various plans.

Whoever said cash balance plans were "simple to operate". Probably the same people who said Obama was bi-partison. They are sold as easy to understand (which they are compared to a traditional db) but they can be very difficult to operate. I don't think I have any stand alone cash balance plans that are top heavy. If they are going to be top heavy, we almost always have them paired with a 401(k)/profit sharing plan which is used to meet the various minimums (TH & gateway). And yes, the TH minimum could be higher than the cash balance account.

Andy et al - I now completely agree that the forced burn only applies if you are avoiding benefit restrictions. So a frozen plan that only pays de-minimis lump sums would NOT be forced to burn COB even if by doing so would make the AFTAP > 80%. That said, I don't think anyone knows what the de-minimis amount would be if you had a plan that was amended, due to the mandatory rollover rules, so that lump sums less than $1,000 can be forced and lump sums between $1,000 - $5,000 require a participant rollover election, but not a spousal consent. Some are saying it would be $1,000, others $5,000 and the IRS isn't saying anything, yet. I love the fact that we may need to wait for technical corrections to the technical corrections bill.

Interesting theory.... so, I am presented with the following: Frozen plan (post 2006) paying non-discretionary lump sums only (ie: benefit restrictions are meaningless) 80%+ funded in prior year 11/1/2008 valuation Funding Target 17,000 Assets 13,000 COB 0 The employer would like to make a large contribution for prior year (2007). If they put in $599, I'm still < 80% funded, but I create a large COB that I can use to reduce my 2008 MRC. If they put in $601, it would be forced to burn all but $1 of my COB and therefore they will need to make another large contribution for 2008. Seems silly but I think if they put in too much in 2007 it will force them to put in more in 08. However, based on your theory, I wouldn't need to burn COB since the restrictions don't apply (post pension relief)? Do you agree?

I'm not sure that would be true if the people that produce the statements admit they made everything up.

Andy, I agree. The "relief" part of the bill seems to have only applied to benefit freezing. The restriction on non deminimis lump sum would still seem to be based on the 10/1/08 or later AFTAP. So, in my case, if my plan paid non deminimis lump sums, they would still be restricted.