Effen

Usually it is the auditors call if they need the FAS 158 report or not. Generally, non-professional type employers usually need them, but its up to the auditor.

FWIW - I have concluded that my interpretation is correct through conversations with the IRS and other actuaries.

432(b)(1) ENDANGERED STATUS. --A multiemployer plan is in endangered status for a plan year if, ... 432(b)(1)(B) the plan has an accumulated funding deficiency for such plan year, or is projected to have such an accumulated funding deficiency for any of the 6 succeeding plan years, taking into account any extension of amortization periods under section 431(d). 432(b)(2) CRITICAL STATUS. --A multiemployer plan is in critical status for a plan year if,... 432(b)(2)(B)(i) the plan has an accumulated funding deficiency for the current plan year, not taking into account any extension of amortization periods under section 431(d), or Lets say I have a plan that is "green", but has a funding deficiency approaching in 9 years. I am therefore eligible for and take the automatic 5-yr extension under Section 431(d). This extension solves my credit balance problem and I am free and clear, BUT, since I can't recognize the extension to determine if my plan is in Critical Status, I would fall into critical status 6 years from now when IGNORING the 5-yr extension I have a credit balance problem in the next 3 years. Is that the way you all understand it?

How can you have a "Hi 3 grandfathered around $300K" when the current max comp limit is only $230K? I guess I'm still a bit confused by your question. The 415 $ limit is determined based on the current year and the individual's current age. What happened in the past doesn't impact that. Once you know their current limit, you may decide to offset it for prior distributions, or not.

I haven't though through everything, but just remember that under PPA, the 415 limit is only actuarially increased for retirement after age up to the comp limit. In other words, the comp limit is the ultimate limit regardless of age. It is still an increase, but its not the big increase it once was. I guess you might be able to argue that he "accrued" it prior to the clarification in the Regs, but that is for lawyers to fight about. There is some debate/discussion about how you adjust the 415 limit to recognize prior distributions if at all. You might want to search the board. Personally, assuming all your ducks are in a row on the document, I don't have any real problem with what you are suggesting, assuming the big guy is still working and earning service credits. You might want to look into the possiblity of discrimination against past participants - were there other participants at the time he started to receive his benefits?

no - they are complete "free-bees"

Its not only restricted, its frozen. Did they notify the participants? Ignoring all the implications of the non-certification, I believe you can prepare the certification now and unfreeze it retroactively to the first day of the plan year. I don't remember whether you need to amend your plan to unfreeze it, or if it unfreezes automatically with the certification.

I don't think it is a problem. I have a plan that does it, the IRS has reviewed it and issued a determ letter. No different than any other career average unit credit formula - partial years are ok with them.

"you ain't cheat'n if it legal!" - Barry Bonds (actually I lied about the Barry Bonds part)

AEA, I think you are missing Calavera's point about the actuarial increase. Assuming no changes, the NRA is earlier of 65 or satisification of Rule of 85. So, if a person is hired at age 25 and works every year until age 55, their NRA would be 55. If that person continues to work until age 65, are you actuarially increasing his benefit from age 55 to determine his benefit at age 65? Now to your question, the rule of 85 is fairly common in "real" retirement plans, I hope the IRS won't give you any trouble. If they do, they will have boat loads of unions on their case. You can only change NRA prospectively. Any benefit already accrued must still have the rule of 85 attached to it. You could change if for future accruals, but then you need to be careful with benefit calcs. You may be able to get around some of this if your plan allows you to give suspension notices instead of rollups, but then you need to make sure you issue the notices as soon as the participant has met the rule of 85.

Sorry, I moved you back. I don't work on any multiple employer plans, but I always thought the document defined those types of issues.

Grumpy - I moved your topic to a more appropriate board - I only hope the other dwarfs will find it. I assumed you were asking a multiemployer question, but now I'm starting to wonder if it was a PBGC notification question? Basically whenever an employer ceases to have an obligation to contribute a withdrawal has occurred. This typically happens when they negotiate out of a multiemployer plan. But there are several other types. A mass withdrawal is when all the employers withdraw at the same time. A partial withdrawal occurs when a contributing employer has a decline in the number of base units. The amount of decline needed to trigger a partial withdrawal differs by industry. Partial tend to occur if the contributing employer closes a location or if their workloads decline. Ultimately it is up to the plan to inform the employer that they are being assessed a withdrawal payment. There can be some facts & circumstances involved, but it’s usually fairly black and white. Do you have a more specific question?

Anyone else want to chime in on this? I'm curious what others are thinking.

It depends on what “PVAB” means. Since you referenced funding, I assume you mean "Funding Target", if so, then I definitely disagree with you. The funding target would be based on the accrued benefit (monthly annuity at expected decrement age) times a factor based on the segment rates. If your interest crediting rate is lower than the segment rates, your funding target will probably be lower than the sum of the account balances.

Interesting timing ... I was just looking at these same issues myself. I think we are on the same page, but I'm not sure about the paragraph. You also need to project for testing purposes if your plan needs to be general tested, so your conversion factors may be important. Seems correct. I'm not so sure you don't have a 411(d)(6) issue, although I'm not sure. I'm thinking your actually have 3 interest (and mortality) rates that are important: a) interest crediting rate - market related rate used to accumulate your cash balance account from one year to the next, b) cash balance conversion rate - rate (interest & mortality) used to convert the cash balance account to an annuity either immediate or deferred, c) actuarial equivalent - rate (interest & mortality) used to convert the annuity into other forms of payment, other than lump sum. I think I agree that the interest crediting rate can be change without a 411(d)(6) violation (assuming you follow procedures in the Regs), but I'm not sure about the conversion rate. For example, if pre-ppa my plan used the 30-yr treasury for all three (crediting, conversion, equivalent) would it be a 411(d)(6) issue if I changed the conversion rate to a flat 5%? Or if my current plan says to use the 417(e) rates for conversion, can I change that to a flat 5%? Granted my lump sum doesn't change, but my monthly annuity will probably be lower using 5% than it would have been using current 417(e) rates, so if I change the basis of my conversion rate and the annuity decreases, would that require a 204(h) Notice? I guess I am envisioning using 30-yr treasury rates for the crediting rate, 417(e) for conversions (or maybe a flat %), and a flat % for actuarial equivalents. Any comments from the gallery?

I believe 2008 is a "good faith" year so there may be an opportunity to have the ER re-designate $5K of the 1st payment to be used to partially satisify the 2nd quarterly. That assumes he "designated" the $50K as his first quarterly. If they just deposited it, without any particular designation, I would just have them do it now. I don't know if or how you can change a designation in 2009, but I'm hoping that by the time 2009 comes around, we will know.

Just a point of clarification, is this a multiple-employer plan?

I agree

Aslo, the "qualified replacement plan" doesn't avoid the excise tax, it just reduces it.

Why would it be different than what you were doing before? Your plan doc should tell you how to convert the CB into an annuity for testing. Just because you might not be using the 417(e) rate for the interest credit, doesn't really change the math. Seems to me you would just accumulate the CB to NRD at the current accumulation rate, then convert it to a benefit using the AE. (As always, watch out for "most valuable accruals") Are you saying you are going to use a flat 5% for the accumulation rate? If so, I don't think that gives you whipsaw relief since it isn't a market related rate.

Mike, why do you say 52? In a traditional db there wouldn't be any issue funding the benefit at NRA (62). I agree that if the participant was entitled to a distribution prior to NRA you would need to consider the 415 max at the age of distribution and the plan would most likely be overfunded, but I think funding for the benefit at age 62 is acceptable. Under your approach the required contributions would rapidly escalate as the participant got older. Then again, maybe this is a case where the minimum is artificially low and the actuary has an obligation to calculate a more reasonable level funded contribution, assuming it is less than the maximum deductible.

There is nothing prohibiting EAN, assuming it produces "reasonable" results. Either way, it all goes away with PPA so I wouldn't be too concerned.

These are questions that need to be answered by your ERISA counsel and would be based on the provisions of your plan document. That said, unless there is a distributable event I don't think you could pay out the employees of the employer who is no longer making contributions. They are still employed, they are still subject to collective bargaining, the plan hasn't been terminated...I don't really see any reason for them to be paid. Why do you think the plan's qualification is in jepordy? Just because an employer w/drew doesn't generally have any impact on the plan's qualified status.

Am I allowed to quote myself? Anyway, in case there are others who weren't understanding this, I spoke to the IRS and they confirmed that this was the correct interpretation. The Deloitte article was looking at the pre-funding balance, not the min. required contribution. In my example, the $108,000 would be the minimum required contribution, but they would need to put in more than $125,000 before they added to the prefunding balance. (I'm not sure what happens between 108,000 and 125,000, I assume it just gets ignored for carryover or pre-funding purposes.) So in the 2nd Deloitte example, although the sponsor elected to put in $150,000, the min. required contribution was only $50,000, but they needed to put in more than $150,000 before the pre-funding balance was increased. So I guess another difference between example 1 & 2 is that in example 1, the sponsor goes into 2009 with their $100,000 carryover balance, but in example 2 they have $0 carryover even though the same amount was ultimately deposited. Is that right? Therefore, since quarterlies are required for any plan with a funding shortfall, and since funding shortfalls are determined after the assets have been reduced by the carryover, if I have an frozen overfunded plan (funding target > MV assets) with a funding shortfall (because of a large carryover balance), the quarterlies will eventually eat up the carryover balance even if the plan never becomes underfunded. I guess that makes sense? OOps - If you are frozen and overfunded, your MRC would be $0, so you wouldn't have any quarterlies due after all.

- maybe this is part of the confusion - the article states "the minumum required contribution (not taking into account any credit balance) is $150,000", so if the MRC by definition ignores the credit balance, what do we call the actual minumum required contribution? Either way, their illustration seems to go against Example 5 that states the MRC is $108,000 ($125,000-$17,000 CB)? Maybe my confusion is between the interplay of the creation of the prefunding balance (which I think Ex. 4 is discussing) and the actual min. required contribution (Example 5). Looking at examples 4 & 5 from the Regs are you suggesting that the minimum is actually $108,000, but it would take a contribution of more than $125,000 (MRC?) to create a prefunding balance? What would the 6/30 payment need to be to satisify minimum? $103,334 or $120,829? Let's assume we have a plan with a TNC+ SA = $110K, a CB of $150K and quarterlies of $25K. Taking Deloitte's logic, if the employer elected to use the CB to offset the quarterlies they would owe a contribution of $60K because they used up $100K of their CB on the quarterlies (all adjusted for interest). That doesn't make sense, their minimum s/b $0 no matter what since their CB > TNC + SA?