Effen

I would prefer NOT to have a TNC. My question is, do you think my assumption would be "unreasonable"? Carrots makes a good point in that assuming they retire at the end of the year would create a TNC where I might not want one if they actually did retire early in the year (before they accrued the benefit). They would be forced to overfund their plan for a benefit that may never accrue.

Pre-PPA I don't think it was ever a "problem" to assume individuals working beyond NRD retired on the valuation date and therefore had no normal cost. This is fairly common in "real" retirement plans. If I used this method to do a small plan's BOY valuation where the primary person is beyond NRD I don't think I would have a TNC for that person. Then, if they worked the year and earned the benefit, their accrual would be part of Yr2's Funding Target and therefore amortized (assuming a funding shortfall) and not immediately funded like TNC. This seems to follow the old theory that pushed you to immediate gain methods if you had no active participants accruing benefits. Typically I would have done these types of plans using EOY valuations, but w/ PPA it seems like shifting to BOY would actually be beneficial. I could use the 150% to fund the accrual if needed, or shift it into future if the client doesn't have the cash. Does that seem right? Comments? Would anyone argue it is "unreasonable" to use a BOY valuation?

The plan still needs to satisify the top heavy requirements so I would say "yes". You need to be able to demonstrate that the cash balance account is > top heavy requirements.

How many past service years are you granting? If you would have implemented the amendment that many years ago, without any past service, would any NHCEs have benefited? If so, you might have an problem. It is a facts/circumstances test so there isn't any real way of knowing for sure.

I'm not so sure that it would be. At the least I would have the plan attorney explain the possibility to the client and let them make the decision. 1.401(a)(4)-5 contains the following safe harbor: I think you need to look at the timing of the amendment. In other words, if they amended the plan 1 years ago to do this without granting past service, would any NHCEs have benefited? I would tread lightly and let the attorney take the risk for making the call.

If you didn't credit past service and the AB at the BOY was $0, without technical corrections, your min=max.

I went through the process a few years ago and didn't find a whole lot of guidance. They are basically trading one liability that they have some control over (plan termination), for another that they don't (withdrawal). In our case the multi was well funded and took the assets & liabilities at face so in essance the ER transfered the PT shortfall to the multi. Then a few years later their w/drawal liability began to grow, but it is still less than what it was. The multi wouldn't give them a seat at the table so they are now feeling pretty helpless as the liability grows. It can work, just make sure everyone understands the differences in the benefit formulas and that the employer understands how w/drawal liability works so they don't get surprised on the back end if they end up withdrawing.

SOA - yield curve Click on Pension Discount Curve and Liability Index and it will "pop-up" an Excel table. (Make sure your pop-up blocker is disabled.)

I think the J&75 can be what ever you define it to be as long as it is the most valuable form of payment (I guess equal or greater to the value to the J&50?) You will still need to demonstrate the relative value of the option using some reasonable table in order to comply with the relative value regulations. If it isn't equal in value to the J&50, it probably isn't a valid QOSA.

Did it give any references?

If Corbel says it is ok, why don't you ask them for proof. I recently went though a fairly detailed arguement with another large document provider and finally got them to agree that their late retirement provisions were illegal. I think you know 10X what most IRS document reviewers know. I think the "big boys" just get rubber stamped or they are able to talk the agents into accepting something that isn't really kosher. I would be interested if you ultimately conclude you can have a last day rule in a cash balance plan.

My understanding was that a cash balance plan cannot have a last day rule. I think this would violate the ratable accrual rules since in essence the benefit isn't accrued until the last minute of the last day of the year...I'm pretty sure this is problem. Benefits need to accrue ratably over the year. All or nothing is ok, as long as it doesn't require more than 1000 hours. I think the "last day rule" could cause you to fail this requirement. Form CCH:

none other than my own. We are issuing the "old" notice for the 2007 plan year (issued during 2008).

You guys/gals look at the yield curve lately? short term 6.5%+, mid term 8%+, longterm 7.25%. With the market tanking and the 430 segment rates lagging behind (5.09, 6.16, 6.58) it would make using the full unaveraged yield curve very tempting. Could save lots of $$ in contributions... but you would be stuck with it for a period. Then again, you could get burnt on the other end as well. Am I thinking correctly?

I think this discussion is just going around in circles. JBones - could you give a specific example on which we can comment. In general, a cash balance plan is a defined benefit plan and the plan document must contain language regarding how the cash balance account is converted into an annuity. This annuity is the basis for your non-discrimination testing. You don't "normalize" the cash balance account into an annuity like you would in a DC plan. "but this matches the results that I have gotten from several discrimination software systems." Do I really need to say it? Software generally does what you tell it, most software systems give you plenty of rope to hang yourself.

You are correct that the restriction lives on, however I don't think we have any guidance. I'm thinking that 110% of the funding target is the only logical choice. Any other ideas out there?

I'm sorry, I was laughing so hard when I first read it, I though you were just providing some comic relief after a difficult AFTAP season. Yes, I agree - the previous actuarial person was WAY off.

FWIW, most people I have talked to say that the current year is "such plan year" and therefore in order not to be endangered for 2008, this plan can not have a projected deficiency before 7/30/2015.

You have a right to see and understand the calculation. You should ask for a copy of the calculation and the plan document and have it reviewed by a local actuary. Your attorney should be able to recommend one. That said, $1,390 per month for life to someone who is 65 would have a lump sum value of around $200K. If you truly were to receive 100% of the accrued benefit, your lump sum should also be around $200K, but your monthly annuity would probably be in the $1,000 range. (This is because you are 14 years younger than your ex-spouse and therefore you will most likely live longer and therefore your monthly payment will be less, but the lump sum value will be about the same). $501 per month for life to someone age 51 would have a lump sum value of around $90,000. Typically QDRO's split the benefit that was earned during the marriage 50/50. It looks to me like you are probably receiving about 50% of his benefit. You should double check the QDRO to make sure you are to receive 100% of his benefit. If so, you should contact the Plan Administrator and your attorney. Also, were you married during the entire time he worked for CBS? It is possible he earned a portion of this benefit when you were not married? If he did, you are most likely not entitled to any benefit he earned before or after you were married. The QDRO holds the answer to what your benefit should be, but you may need to get a few more people involved to determine if they offered you the correct amount.

If my valuation date is 8/1/2008. The Plan has a credit balance as of 7/30/08. What is considered "such plan year"? 8/1/2008-7/30/09 so that the succeeding 6 would be through 7/30/2015 or do they mean as of 7/30/08 so the succeeding 6 would be through 7/30/2014? If my plan is projected to have a credit balance on 8/1/2014, but will have a deficiency by 7/30/2015, am I endangered?

I don't think I agree with that. The burn happens because without it it would have been < 60%, but ultimately I am certifying the AFTAP to be 60%. Granted, the COB is lower than I said it was the first time, but the percentage (the "P" in AFTAP) is still 60%.

Their email stated that they intended to deposit $50K for the 2007 plan year prior to 9/15/2008. My AFTAP cert did not mention the contribution receivable (I know it should have, but it didn't) Partly my question comes down to, what exactly am I certifying when I certify the AFTAP?

Let’s say I a client with a funding shortfall, and a large credit balance. Their required contribution for 2007 was $0, but they told me (in writing) that they would be depositing $50,000 for 2007. So, I prepared the 2008 valuation and certified the AFTAP based on the client's written direction that they would deposit $50,000 for 2007. Well surprisingly they did not actually make the deposit. However, because the plan was underfunded, they were forced to burn a large portion of their CB to reach the 60% AFTAP and the fact that they didn't make the $50,000 contribution only increased the amount of the forced burn. From a practical stand point the fact that they didn't deposit the $50K for the prior year had no impact on their required 2008 contribution either since I wasn't able to use the COB to offset the requirement. (Try to explain that one to the client. So the plan is more underfunded that you thought, but that doesn't mean I have to put more in?) Since only the numbers used to determine the AFTAP changed (and not the actual percentage), do I need to re-certify the 60% or can I just say "I certified the 60%, it is still 60%, and how I got there is not relevant".

First, I'm not sure this is the correct board for this question, but it will probably get a better response here. - negotiated with the union or the insurance company?I guess I am a little confused. Is the cap on the amount of the cost that the employer will subsidize or did your carrier agree to only raise the annual premiums by a certain percentage? Is the plan self funded or insured? How do you determine the "rate" that is applied to the retirees?

Full letter Here is a link to the full letter.