Effen

Everett - Great link!

I think only DC plans are permitted to charge for this. If it is a DB plan, I don't think you can charge the participant.

I guess I'm just the strange one, but I really find the MyPaa system pretty easy to work with once you use it a little. Even my most difficult clients have been able to handle it. I guess I just don't see what all the teeth gnashing is about. I have big plans and small plans and they have all seemed to be able to get it done.

Lots of stuff from the IRS that says you can not change assumptions when you amend a Schedule B. If you search this board I'm sure you will find the necessary sites. That said, I have seen actuaries who amended Sch B's and changed assumptions and the IRS never said anything (yet), but it is a "no no".

I have a new client who was required to provide the 2006 PBGC Participant Notice, but whose previous service provider (insert large national firm here) neglected to tell them about the requirement. I spoke to the previous provider and they agreed that one should have been done. So, I have prepared the notice for the client and told them to issue it ASAP. My question relates to the 2007 PBGC filing. As you know there is a question asking about the previous year's participant notice requirement. There are only 3 possible answers to the question. 1) Was not required to be issued, 2) Was issued on time and in accordance with all other applicable requirements, or 3) An explanation is provided here. I plan on selecting Option 3 and providing an explanation, but I am wondering how the PBGC will react. I know there is a potential $1,100 per day fine, but I can't believe they would actually asses it. Has anyone ever selected Option 3? If so, how did the PBGC react?

I agree

Unless it was a drafting error, I would assume this was done in order to lower the required contribution. As the actuary, you are not required to use NRA as your assumed RA. If you have reasons for using something different, I think that is ok. So if he's willing to tell you that he isn't planning on retiring until 60 (possibly in writing), and he gives himself a suspension notice once he reaches age 59, I think you have accomplished the same thing without violating 411(d)(6). You can assume a RA of 60 for funding, even though he is really eligible at 59.

Since no one else has responded I will give this a shot, unless something was changed in PPA 06 (which is possible since I haven't fully digested the cash balance provisions), in a traditional db conversion 411(d)(6) requires you to protect the accrued benefit and all of its forms of payments, including 417(e) requirements. Therefore, you can't just convert it to a cash balance account and forget about it. This was the heart of the moratorium the IRS put on cash balance conversions and led to lots of problems. My suggestion would be to simply start the cash balance at $0. Value the plan as two pieces, one for the frozen traditional plan and one for the cash balance piece. Don’t try to combine the two or you are just begging for 411(d)(6) issues.

I guess that is my point... are we all in agreement that you can no longer use annual factors to determine the max 415 lump sum or do you think you can still use the annual factor if the normal form is an annual annuity?

These are all good questions that should be addressed to your Fund's legal counsel.

Andy, are you thinking that the new 415 Regs permit you to use an annual factor to determine the maximum lump sum if the normal form is an annual annuity or would you be comfortable using it if it was just one of the optional forms of payment? I guess I'm struggling with 1.415(b)-1(b) ..."no adjustment is made to the benefit to account for differences in the timing of payments during a year (for example, no adjustment is made on account of the annuity being payable in annual or monthly installments). B) Other benefit forms. WIth respect to a benefit payable in a form other than a straight life annuity, the annual benefit is determined as athe straight life annuity payable on the first day of each month that is actuarially equivalent to the benefit payable in such other form"

This may help http://benefitslink.com/boards/index.php?showtopic=36253 Be careful not to pay out any top 25 HCEs

I think it depends on what the freezing amendment said. If the benefit was restricted by the 415 limit and not the formula, the fact that the formula benefit was frozen doesn't necessarily mean the persons benefit doesn't go up when the 415 limit increases. The document needs to define the benefit. When you apply the benefit formula in the document after the accruals have been frozen, what do you get? I have seen some amemdments freeze the 415 benefit and some that didn't.

In general I agree with Andy, assuming you have been paid to prepare the actuarial valuation. If they never paid you for the valuation, I don't feel you are obligated to sign the Sch. B. If they paid for the valuation, the Sch. B is simply certifying to the government the work you already did. You need to check your procedures and see if paying annual fee includes the valuation & Schedule B. Many large national firms will charge the client extra to prepare the Sch. B if they are fired after they do the val. I have had some situations where the clients pays the "extra" freight, and others where they pay me to redo the val and sign the B. I suggest that you contact the ABCD. My experience with them has been very positive getting through this type of situation. What about the PBGC filing?

My vote is with Tom Geer. Disclose all revenue & offset your fee. TPA recordkeeping is full of shady situations, that is why Congress wants more transparency. I would want to know what your competitors are doing, but I wouldn't set my policies based on their bad practices.

I don't know about HIPPA, but FWIW, we have taken SSN's off everything that we send out.

I agree with Mike & PAX. $10K deminimus is an annual benefit. The lump sum equivelant of it is not part of the deminimus.

Again, why do you think funding the plan on a termination basis would be bad? The plan will ultimately terminate, so what could be wrong with it? Although AndyH is correct that during the late 80s the IRS was attacking funding assumptions of 5% and retirement ages of 55, but that was at a time when interest rates were near 10%. They also lost many of those cases. At that time the gov. was all about taking tax deductions away in order to raise revenue. It is not the world we live in today.

hugh? Funding db plans on termination assumptions is exactly what PPA is forcing ALL plans to do. Not sure why you would think that would be a problem.

Andy, you summary regarding the funding is correct. Regarding you question of the site, did you mean the 401(a)(26) site or the PPA site? The plan is exempt from 401(a)(26) because it satisifies 1.401(a)(26)-1(b)(3). It is covered by the PBGC, frozen & underfunded. The PPA site is from the PPA summary: Based on this, it seems that as long as the plan was frozen prior to September 1, 2005, it is exempt from this restriction and can continue to pay lump sums regardless of the funded status.

Maybe I'm showing my age, but I'm not sure what you mean by "terminal funding"? I may also not have been clear about the plan. The employer did make contributions during the early years of the plan. Assets (and credit balances) were accumulated. At some point contributions were no longer required. Once the assets fell below the liabilities, they used their credit balance to satisfy minimum funding standards. They have now reached a point where the credit balance is virtually gone. As participants retire or terminate, they are paid - mostly in the form of a lump sum. Last year they reached a point where, although due to the credit balance their minimum was still $0, they didn't have enough money to pay out the next person who retired. So now, they make a contribution to the plan whenever someone needs to be paid. I don't think any rules have been violated. There are only a few people left in the plan and they are all close to NRA. I anticipate the employer will keep the plan around until the last person retires and is paid. Then, I guess, they will terminate a plan with no assets and no liabilities.

Thanks Andy, the plan satisifies one of the exemptions of 1.401(a)(26)-1.

I have a small plan (<20 participants) with a funding ratio of less than 5%. Due to their size AFC's never applied and they had a large credit balance so they never had to make a contribution. Benefit accruals were frozen years ago (pre 1980). Don't ask me why they still have the plan 'cause I don't know - they just don't want to terminate it. The plan also pay's lump sums, so basically, they make a contribution whenever they need to pay someone. I was thinking PPA would put an end to that since lump sums would be restricted if funding ratio was less than 60%, BUT, it seems they are exempt from that rule since the plan was frozen on 9/1/2005 (ERISA 206(g)(5)©(ii). So, I think they can keep doing the "same old same old" and continue to pay lump sums. Their required contributions will go up post PPA, and they can't use their credit balance anymore (it is gone anyway), but they can continue to pay lump sums even though their funding ratio is basically 0%. Agree?

I believe that if you don't offer a J&75 you must change the QJSA to be the J&100. In other words, you don't need to change the options offered, but you need to change the QJSA from the J&50 to the J&100. Another option is to add a J&75 and make it the QJSA.

yes, you are begging for trouble. Multi's were a different animal prior to PPA 06 and will be a very different animal after PPA 06. yes, I'm sure there are lots of interested actuaries who have experience with these types of plans.