Effen

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.

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.