Effen

Close, but not exactly right. Do a search on this board as there are lots of prior discussions about this. It really depends on how your current QJSA is defined. If the QJSA is a J&50, then you probably need to add a J&75 QOSA (qualified optional survivor annuity). If you QJSA is defined as a J&100, then you can use the J&50 as the QOSA. There is a little more to it, but that is the general idea. And yes, anytime you offer a lump sum you need to also offer an immediate QJSA and now QOSA. Also, don't forget the relative value disclosures.

Of the COPA members who responded, about 75% were planning on using 12/31/07 results to do 1/1/08 AFTAP. The poll was obviously done before the recent newsletter from the IRS.

So if the bargaining agreement expires 3/31/2009 and the plan year is 1/1 - 12/31, would you say the 1/1/2009 valuation should be done using PPA methods? Would the 3 month AFTAP certification start on 4/1/09 so the cert would be due 7/1/09 or should the AFTAP be certified on 4/1/09?

Well Hello "jk", welcome to the party ... glad you could make it. If you do a quick search for EOY valuations you will find lots of dialogue. Problem is, it is just complaining because there aren't really any solutions. The Code says you can do EOY vals, but apparently isn't clear enough for the IRS to write Regulations without technical corrections, which at this point don't appear to be on our hard working congressmen's (and congresswomen's) agenda. They would rather concern themselves with election year politics, because let’s be serious, stopping all progress long enough for you to climb over and beat down the other guy is really more important than pension legislation anyway. Anyway, the IRS has permitted us to change to BOY for 2008, then MAYBE back to EOY for 2009. As you pointed out, this isn't really of any value to most people. Hence Blinky's poll. A similar poll was run on the COPA website w/ around 75% of the actuaries stating they plan to use the "good faith" approach and certify 1/1/08 AFTAPs based on 12/31/07 valuations. From a practical standpoint I see very little danger in this, other the Jimmy Holland saying he doesn't approve. Your 12/31/07 RPA CL will almost certainly be greater than your 1/1/2008 Funding Target, so using it to certify would be conservative? What argument could the IRS possibly use against it? With special thanks to AtA: The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action. You should obtain appropriate tax, legal, or other professional advice.

119 views and only 11 votes? Come on people!

What do you mean by "use 2007 rules"? Does that mean do a 12/31/07 FTAP and call it 1/1/2008?

I agree with David. Since you are the "RiskAdvisor" you should also know another way to avoid the risk is to stay out of the equity market. Cash balance accounts generally only guarantee around 5%. I saw a 1-yr money market last week guaranteeing almost 4%. I see a lot of people terminating their db plans because they are afraid of the investment risk. What they seem to not want to hear is that you can avoid a lot of the risk by investing in a very conservative portfolio. Uneducated financial advisors continue to push equities for pension investments and don’t seem to consider more conservative alternatives. Equities loose money, client screams and curses the plan. Pick conservative investments, just hit consistant singles.

Probably not. You said they "had" a defined benefit plan, then you said they "switched it to a cash balance plan". Did you terminate the first defined benefit plan and start a second defined benefit plan (cash balance plans are still defined benefit plans) or did you just amend the original defined benefit plan into a cash balance plan? If you amended the original defined benefit plan into a cash balance, I doubt they could pay out the prior accruals. What would be the distributing event? All you did was change the benefit formula.

That is correct, but they aren't due until 4/30/09, which should be possible, but not necessary easy to do.

prior post I don't think the 2008 PBGC premium includes the 2008 Accrual, so you should be able to determine the 2008 premium even though you haven't done the 2008 valuation. You will most likely need to run your (12/31/07 - ie 1/1/2008) numbers using PPA assumptions. Last thing I heard about technical corrections was - don't look for anything until after the elections, and even then maybe not until 2009. (Why do we pay these people?)

Are you implying that by using different assumptions you could actually get different answers? And that someone might skew the assumptions to produce an answer that benefited their agenda? Hmmmmm curious and curiouser... I'm just glad pension actuaries would never do such a thing..

OK, what am I missing? If NRA is currently 55 and the plan currently allows in-service distributions, how can you just change it to 62 and say the change applies to past accruals? Wouldn't that be a 411(d)(6) violation? Any benefit he/she accrued prior to the change in NRD would still have a NRA of 55, so again, why not just pay the in-service distribution at 55 (in 2009)? Is the concern that the IRS will challenge the 55 as unreasonable, especially considering that the person didn't actually retire? I guess they would be a little exposed on that one, but I don't see that waiting to take the money is going to lower the risk. Waiting will just create excess assets since the value of the benefit will decrease each year, while the assets (theoretically) increase.

Matt Damon recently joined the actuarial community when he said - "You do the actuary tables, there's a one out of three chance, if not more, that McCain doesn't survive his first term, and it'll be President Palin. It's like a really bad Disney movie, "The Hockey Mom.' Oh, I'm just a hockey mom from Alaska, and she's president. "She's facing down Vladimir Putin and using the folksy stuff she learned at the hockey rink. It's absurd." If McCain is 72, I calculated about a 10% chance of death during next 4 years, but Damon was really good in Good Will Hunting.

Are you aware the IRS is currently "looking closely" at floor offset arrangements? Several attorneys have told me that it has become very difficult to get approval letters and the IRS is even threatening disqualification to some with existing letters. Mostly just saber rattling, but why put your client through it? Tread carefully and make sure your client understands the risk and is willing to pay your freight.

If the plan provides in-service withdrwals, why not take it? But, you are correct that as long as this person continues to work and defer payment, the value of the benefit will decrease.

I agree, we went through a similar discussion with one of my clients and the attorney's concluded it should be everyone, or no-one. Anything less would cause them to be exposed for a breech of fiduciary duty.

I don't see any problem with that as long as you use the same assumptions for the 2009 valuation. Also, remember that the "valuation" isn't really official until you file the Schedule B. Therefore, although you may have released the 2008 valuation report, your assumptions aren't really locked in until you file the 2008 Schedule MB, which will most likely be after you do the 2009 certification.

sounds a little fishy to me as well. I don't think they plan should authorize the change without express written consent of the participant and their (the plan's) attorney.

My hospital clients have received similar requests. I guess I didn't think the request was too onerous; they just wanted a copy of the plan document and the most recent valuation. The bigger question is why are they asking?

I think my reference was meaningless to my question. From what I can tell, the "old" notice is still required for 2007 plan years, but I would be interested if anyone thinks differently.

Just curious, but why would you have a short plan year for the first plan year?

Are the old Pre-PPA Funding Notices (RPA CL / Assets) required for the 2007 plan year or, since PPA changed the requirements do we have a one year exeption as long as we report the 2007 funded percentage on the 2008 notice. Does this site apply?

Andy, There are some old threads dealing with offsets due to prior distribuitons, mostly related to 415 adjustments. That said, if a longer service person takes a lump sum, and if the plan offsets for prior distributions, the chance that the participant will ever see another $ from the plan is pretty small. They would need to accrue a pretty large benefit in order to offset the "value" of what they already received. I don't really see it as "whip saw", I just see it as a choice. They didn't have to take the distribution, the plan could have given them a suspension notice and their lump sum might have declined with their life expectency. The participant chooses $ today and therefore doesn't get $ tomorrow (in most cases).

Seems to me that if you are giving participants a choice then your disclosure requirements go through the ceiling. It might only apply to cash balance conversions, but there were some regs released 5 or 6 years ago that discussed the requirements if you are giving participants a choice between a db and dc. I believe you will need to demonstrate the impact of their decision under various scenarios in order for their elections to be valid. It may be easier to just draw a line and say these stay in the db and these are out.

We generally just put it into the SAR. It usually says something like ... here are the quarterly contribution requirements, this is when they were due, this is when we paid them... I guess I thought that is what "everyone" was doing. Not sure if this still works under PPA. Also, depending on the amount of the missed quarterly it could generate reportable events with the PBGC which has its own requirements.