Effen

Also, don't forget about most valuable accrual rates which most (but not all) would argue should be based on the immediate lump sum and the immediate annuity option.

What exactly is a "cross tested cash balance" plan? Since a cash balance plan is a defined benefit plan, if you are "cross testing" it, are you testing based on contributions?

I am working on a new plan for 2008 and maybe I'm late for the parade, but I just realized that it seems to be impossible to fund the maximum lump sum benefit if I have a db/dc combo. Assuming my db contribution will exceed 25% of payroll and its not covered by PBGC, if the ER makes a contribution into the a PS plan, the db deduction is restricted to the lesser of the min required contribution or the amount needed to bring the plan to 100% funded (not 150%). Since maximum lump sums are probably based on 5.5%, and each of the current segment rates for funding are greater than 5.5%, my funding requirements will always be lower than the amount needed to accumulate a 5.5% lump sum. If I didn't have the PS contribution, I could overfund the db up to 150% and that would probably produce an adequate cushion. However, if I fund the PS plan, I loose that ability and therefore force my db plan to be underfunded at all times. I won't ask if it makes sense, because I know it doesn't, but do you agree that it how it works? Basically, PPA either forces employers to underfund their db plans, or forces them not to make profit sharing contributions. And why is that good for the participants? I think this problem will become less of a problem over time as 417(e) rates converge with funding rates, but in the mean time this seems like a real problem.

I have work with a fund that has 15 different money managers. For most of them, reporting the market value at any point in time isn't an issue, but for some (real estate, hedge funds, etc) the financial consultant is telling us that getting the market value as of a date other than a calendar quarter is not possible. So if my valuation date is May 1st, I would be using March 31st values as a proxy for April 30th for some of the investments. Is this a problem or is it something that happens all the time? The issue came up when I asked for preliminary asset information to get an idea of the funded status before May 1st. I guess this could be in issue in single-employer plans as well.

rcline - you can download FAS 158 from free from the FASB web site http://72.3.243.42/pdf/fsp_fas158-1.pdf There are also some summaries as well www.fasb.org I believe the accrued/prepaid has simply been relabled "Net amount recognized in retained earnings". I believe most of the math is still the same, it should just be a few label changes. I also agree the accountants are clueless. It is more of a change for them because things that were footnotes last year are now balance sheet items. I can calculate the numbers, but I don't know how they are suppose to put them on the books.

Do the parital plan termination rules apply to multiemployer plans? We work with a multiemployer plan that is loosing actives members at a fairly good pace, mostly due to withdrawing employers. These withdrawing employers are triggering withdrawal payments, but the question came up about a potential partial plan termination. Assume the decline would meet any reasonble criteria for a partial termination if the Plan was a single employer. I did find this that seemed to imply that they were not deemed 100% vested because they were unfunded at the time of the withdrawal. Is that they way most look at this or do we need to dig deeper? Sammy Joe Freeman v. The Central States, Southeast and Southwest Areas Pension Fund, United States Court of Appeals, Fourth Circuit, Nos. 93-2559 and 94-1150, August 10, 1994. [Relevant Law Sections: Code Sec. 411(d)(3)] Participants' accrued multiemployer pension benefits were not vested when an employer withdrew from the plan because the benefits were not fully funded at the time of the withdrawal. The plan's assets were $1.74 billion short of the current value of vested benefits, and, if terminated, the plan would not have enough funds to pay vested benefits. Thus the participants were not entitled to benefits.

Not that I know of. I have always thought you had to follow the document, even if you don't agree with it. I have seen where documents are corrected to match past practice, but that generally only works if you are giving more and even then the attorneys get a bit concerned. Ask their ERISA counsel for a letter instructing you to ignore the plan document. If you get it, I think you are ok. If not, the issue will get resolved.

Not that this addresses Andy's (the actuary) point, but all of the other cost methods are still in use in the multiemployer world. Only single employer plans are forced to use the new PPA method. I think this also helps AndyH (the non-actuary?) justify his position that 00-40 is still active. There are still lots of plans using other funding methods.

I think I would question the reasonableness of your funding method. I would probably treat the accrual as normal cost, even though you could argue it is liability. Couldn't you have a similar issue in 2008 as well? If AL you amort over 7 yrs? Either way, I would argue the only "reasonable" method would be to treat it as normal cost - although if it is a situation where you were trying to save someone from a deficiency, I might be temped to treat it as AL, but it wouldn't be my first choice.

SoCal - "Extremely common in small plans." ??? Maybe in SoCal, but I'be been doing large and small plans for 25 years and have never seen it in any size plan. We just must be behind the times over here in the East. What are the advantages of doing this? What are the disadvantages?

We have generally found the EBARS to be correct, if you code everything correctly. They had some problems doing "MVAR", but they have corrected it. There are just so many variables and so many things that need to be coded correctly, that if you don't know what the answer should be, you probably won't get it. When we first got it we spent a lot of time going through the coding. It still doesn't do everything exactly as we would like, but I think we are generally happy that the results are correct. It can be a little quirky, but no worse than any other system. Like I said, it will let you produce results that are clearly wrong, so you need to know what is right. If you do know what is right, we think it works fine. We use to do everything on spread sheets, but found the calculations were just getting too complex to do everything correctly. Plus, we wanted something a little more user friendly, but ultimately decided that the DB/DC stuff couldn't be passed down very far anyway - just too many variables.

We use ASC and it works fine as well. I know people who use Datair and it seems to work also. Maybe one reason people don't respond to this type of question is that no software works any better than the person using it. If you know what you are doing, they probably all can be minuplated to do what they need to do. If you don't really know what you are doing and you are hoping the software will do it for you, then you are in for a whole lot of misery (or maybe blistful ignorance). We have found that DB/DC combined plan valuations and testing isn't generally the type of thing that can be "passed down". Lots of chances for big errors and the software will not only let you hang yourself, it will also give you the rope and the stool.

The December rate was 4.53 http://www.irs.gov/retirement/article/0,,id=96450,00.html

I voted for information purposes although you need to add all the obvious caveats - that we know you just can't pick a rate and the actual rate should depend on the demographics of the plan and the yield curve applicable to the anticipated payments stream bla, bla, bla...

I'm curious what others are doing about partial ages under the new lump sum methodology. Are most taking the "easy" way and interpolating between ages or are "right" way using the 1440 line approach mentioned by timesup in a prior post

Maybe, but even if they fix it before 1/1/09 what are we to do in the mean time? I have clients who would like to make distributions and I need to pick an accumulation rate. Since most of ours use the 30-yr Treasury rate, it seems the only reasonable way is continue to use the 30-year treasury for 2008, then change to 3rd segment (maybe?) in 2009. It may depend on what the relative value disclosures look like.

Assuming the current accumulation rate is based on the 30-yr treasury rate, since the 3rd Segment rate stuff is in "(d)(4)" and the 30-yr treasury (old standard) is in "(d)(5)", doesn't this mean that the Plan needed to be amended by November 30, 2007 in order to use the 3rd Segment rate starting 1/1/2008? Seems to me since they didn't release this until 12/28, it would be difficult to use the 3rd segment rate as of 1/1/08. I guess you could change it mid year, but that seems like a pain. I suppose we need to keep using the 30-year treasury rate for 2008. Am I missing something?

FWIW, I had a situation last year where the client wanted to put real property into an escrow account to cover a distribution to an HCE. I had several discussion with head of the VCP/CAP program in my district who ran it past the national office and came back with a big "NO GO". They were very clear that real property is not acceptable. They said only cash money would be acceptable for the escrow solution.

Seems to me that since the fund knew a DRO was in the works, it should not have commenced payments to the participant. I'm not sure of the sites, but I believe it should have escrowed the payments for a reasonable time until the DRO issues were resolved. Also, did the plan get spousal consent to start the payments to the participant or did they hang their hat on the "he is single" hook? What ever you do, make sure the fund's counsel is on board.

I think Andy may be on to something. If this person terminates, I think they would be a Highly Compensated Former Employee, however, while they are active, they are a NHCE. Interesting... I would explain Andy's point to their ERISA attorney and ask him/her to make the ruling. I wouldn't want to be on record saying it was ok to pay it, but I would explain it to the client and their attorney and let them make the decision.

I agree with Rcline. If you searched your records the next step would be to have the employer check the payroll records and see if he ever worked there. If you have no record and the employer has no record, this person would need to prove they did work for your client and that they are entitled to a benefit. As far as seing an old SSA, I don't know of any easy way. Did you try the accountant? Often times they keep copies of old 5500s.

Andy, you might not be aware but commutation factors are back on the EA exams! The ban has been lifted! That said, I haven't thought about lump sum factors yet, but I will soon.

You mean other than asking the person who prepared or filed them for a copy? Why are you looking for them? Maybe there is another way to solve your "problem".

I have asked several attorneys this question and they all tell me "no". No one seemed too concerned about the need to add QOSA J&75 option, even if the option wasn't in the plan. Any attorneys want to chime in?

I think I would say "a", assuming the 120,000 415 limit properly reflects the fact he has < 10 years of service and participation. I think the 415 limit is a final check. Calc the benefit payable under the plan, then check it against the 415 limit. There is no vesting schedule applied to a 415 limit.