Effen

Thanks Pax, do you have a link to that worksheet? I searched the SOA site and couldn't find anything.

If anyone has been doing projections beyond 2008, what are you using for estimated segment rates for Current Liability? At first, I was just using the RPA rate (5.78%) for all 3 segments, but I think that is a little low. An actuary at another firm recommended 5%, 5.6%, 6.1% for the 3 rates. Anyone have any idea? What would the segments be based on current market conditions?

Did it go through the Trust? If not, then it isn't a contribution.

You are correct sir

"Unregistered tROHPYwIFE" - is that sort of like a free agent?

SoCal, I'm not arguing your point, but we were involved in a situation where the IRS applied to tax to a "normal" employee in this same type of fact pattern. We were hired after the fact, but I know the IRS collected the tax because the employer paid it for her. This was 10+ years ago so maybe things have changed or maybe she just didn't argue the point since the employer was paying.

Then your plan may have a disqualifying defect... but then again, so do some of the most popular national prototypes on the same issue. If you didn't provide a Suspension of Benefits, then you must provide a roll-up (since you also said your plan didn't allow retro payments until now.) This is a 411(d)(6) issue. You can't just not pay the benefit. You may want to consider VCP if you want to be safe. Since you are amending now for the retro payments, why not make sure the amendment clearly defines how the retro payment will be determined. That way you will control what form it will be based on. Are you also planning on paying the significant excise tax on the missed MRD's the participant will incur when he files his 1040? This plan has some real issues.

You probably should look at what hospital A employees were told in 1994. There probably isn't anything legally wrong with what they did, although you do point out a potential HR problem. Chances are the merged hospital was well aware of the issue and still chose to do what they did. They way you perceived what happen in 1994 ("merger of equals") may have been the way it was presented to the employees, but behind closed doors it may have been B purchasing A and therefore B didn't want to pay for A's past service in B's plan. It sounds like you have properly identified a "problem". I'm not saying they did anything wrong, assuming everyone was given the proper notices. What they did was / is very common. It can be easily "fixed" with $$ if the hospital wants to fix it.

They are generally free and clear after the one-time payment. The one noted exception is if there is a mass withdrawal in the near future. I believe the Trustees can come back and reasses them a higher liability based on the mass withdrawal liabilities.

I would defer to your ERISA counsel for the final say, but.... if your plan doesn't contain language permitting retroactive payments, then I don't think you can do it. If it does have the language, I believe you still need the participant (and spouses) consent in order to pay the retro benefit. The IRS has been hot on this issue in the recent year or so. A cleaner way may be to do an actuarial roll-up. Also, watch out for MRD issues which bring major individual tax penalties. Specifically related to your question, yes, you must permit them to elect from the available forms of payment.

This may help (or not). It does discuss the differences between Settlor and Fiduciary functions and provides a few sites that may help. Also, the DOL released some guidance a few years ago related to fees. You might want to look around on their web site. http://benefitslink.com/boards/index.php?s...c=17493&hl=

Yes, one time payments are possible. If you ask, the Trustees should be able to give you a payoff number.

I don't know if they will/can connect the two. I had a client who submitted PS & DB plan documents to the IRS for approval (which they subsequently received), signed-up for the PBGC on-line stuff, then decided he didn't want the plans. Never filed 5500, never filed a PBGC, never paid my bill, never heard from either the IRS or PBGC ... although it has only been a year, so we still have hope. I would caution you about answering his question and taking him as a client. He has already demonstrated that he does not do well required filings. He also apparently doesn't seem overly concerned about fixing things since he asked for your opinion if he didn't. So let’s say you officially recommend that he does the delinquent filer thing, but then you also verbally tell him that you doubt the IRS will pick-up on it if he doesn't. Haven't you just told him that in your professional opinion you don't believe the IRS will catch him? I'm not sure that is a position you want to be in if the IRS does come calling. I suggest you tell him the delinquent filer program is the only alternative you are willing to discuss and that he should consult with his attorney regarding other possible options. Also, what makes you think he will treat his new plan any differently? Kinda like the woman who goes after the married man, then complains when he cheats on her

Why do you say it is not protected? Is this a DB or DC plan?

Assuming PPT means partial plan termination, I would say generally no. However there are instances where it could. Do a search of this board, I seem to remember a tread discussing this a few months ago.

Do a search on the multiemployer board and you should find a few threads. I would say it is common to use different assumptions for w/drawal liability, although it is by no means the norm. Segal uses a method that uses different rates depending on whether or not they are funded. They also use a rate that is tied to the PBGC rates. If you do a little poking around, you should be able to find a write-up.

Andy, I've been thinking about what you said and agree with some of it in principle. I believe actuaries had very little to do with the new law. The ASPPPA people were busy protecting as much of their 401(k)/small db plan turf as they could and the Academy people did their best and got a few changes made. Since we don't have a National Retirement Policy, Congress perceives a problem and they fix it. I agree PPA isn't the best, but you have to admit a system that permits a plan to run out of money because it has a credit balance is broken. I agree that PPA 06 will be the end for most traditional corporate db plans within the next 10 years, but I also believe that was always the intent, not unforeseen consequence. I am curious though, what was said at the EA meeting that sounded like the "key to the Rosetta Stone"?

I don't really understand the question. Separating into multiple employer plan? A multiple employer plan is one plan of unrelated employers. Then you say they ARE 4 separate plans of unrelated employers? What they are trying to seperate?

Yes, there should be some relationship between the investment policy and the actuarial assumption, but the assumption should be on the conservative side. If they have a good investment manager who performs well against the indices, that will produce actuarial gains and lower the cost. The actuary will generally not assume the manager will always do better than the index since in general, all things will eventually come back to the average. My comment had to do with the fact that the interest "assumption" for Post PPA funding will be tied to the yield curve produced by the specific plan's participants. The days of 5% pre/post for small plans are over starting in 2008. As far as determining the minimum required contribution, the ability for the actuary to set the interest assumption has been removed from our quiver starting in 2008.

I guess the question is what you mean by "funding policy". If it has anything to do with the investments, then I think you have the process backwards. The client and their financial advisor decide on what to invest in and the actuary should set their assumptions based on that. If the investments are going to be 100% CD's, the assumed interest rate will be lower than if it will 100% equities. In the small plan word when a plan is first started the actuary may tell the client they are using 5% for funding, because they have nothing else to go on. That doesn't mean the client should then set their investment strategy around making 5%. If they invest very conservatively and simply shoot for 5%, they will be keeping their costs high and benefits low. If developed a strategy that would produce 8% over time, their cost could be lower or their benefits higher. I once heard great 412(i) analogy... you go to a restaurant and the waiter brings out 2 identical looking steaks. One costs $20, the other $400. What is the difference between the two you ask.... the waiter replies, "a $380 deduction". In other words, at the end of the plan you get the same benefit, so why pay more if you don't need too. The more you can make on the asset side, the less cash you need to spend for the same benefit. One reason a 412(i) generates such high contributions is they use a very low interest assumption (2%). Due to 415 limits they can't pay out any more at the end, they just give you crappy investments and your deductions are higher because your investment performance is expected to be so bad. Most pension actuaries are not financial consultants and have very little to do with the actual investing. We generally work on the liability side of the funding, not the asset side. There is also a big difference between large plans and small plans. Small plans are usually funded using lower assumptions not only to be conservative, but also to generate higher contributions / deductions. Large plans tend to set assumptions a little more scientifically, looking closer at the actual investment strategy. Most companies don't want to contribute any more than they need to. In big plans, the pre & post retirement assumptions are almost always the same, but they can be different. An oversimplification for a small plan would be to say the pre-retirement assumption reflects the assumed long term rate of return on the assets and the post-retirement assumption reflects the interest rate used to pay-out the benefits. For example, a typical small plan will pay a lump sum. Since lump sum rates are relatively low, the actuary may assume a post-retirement rate of 5% on the assumption that a 5% lump sum will be paid at retirement. If the client is investing 70% in equity and 30% in bonds, the pre-retirement rate may be 7% reflecting an assumed long term bond return of 5% and assumed long term equity return of 8%. In practice however, most small plan actuaries would just use 5% pre and post to be conservative and to keep life simple. (This may change in 08 when PPA kicks in.) You are also correct that there are different assumptions for different purposes. FASB provides guidance on how they want assumptions selected for financial purposes. This process is not necessarily the same process used to set the funding assumptions. RPA current liability & PBGC are based on mandated assumptions, so the actuary has little to no discretion. If you are really interested, the American Academy of Actuaries has published guidance on the setting of actuarial assumptions for various purposes. It should be on their web site.

One of my pet peeves is investment consultants who look at the actuarial assumption as a "target". In a perfect world, the IPS should guide them on what sectors they should be investing in and how much risk the client wants to take. They should then be judged on how well they did against those indices during the time period. The actuarial assumption is simply a LONG TERM estimate, based on the IPS. If the actuary is assuming 7% and the fund earns 9% investing in entirely International Equity, the investment consultant should be fired, not applauded for out performing the assumption. ERISA requires all plans (DB & DC) to have IPS. I assume most smaller plans ignore that requirement, but then again, I'm not the investment consultant.

Interesting? I thought it was just the opposite. Maybe that is what Bird is saying as well. I wonder if there are any real statistics on this. I guess the bottom line is you need to ask.

I don't think the PBGC gave them any fines. We argued that the client filed the Reportable Event ASAP from the time they became aware of the problem. They did asses a lien on the company and they have been very interested ever since. They call each quarter to confirm if the quarterlies have been made. Sounds like my numbers were bigger than yours. They were deficient by a few million $.

We had a very similar situation. They corrected the deficiency and paid the 10%. We haven't heard a word from the IRS since (about 15 months has past now). What did come to bite us was the PBGC. If they have deficiencies, then they have Reportable Events. Also, keep in mind that the missed quarterlies are also Reportable. Make sure you file the Form 10 and 200 if appropriate. The PBGC can/will impose a lien if the missed contributions exceed $1m even though they may be current under funding standards.

I don't know of any models, but I am working with one now that the Trustees are a bit upset that they put the plan in place. They are having a problem with the "use it or loose it" aspect of the plan. Basically, in order to collect the benefit, you must be unemployed. If you are never un-employed, you are never eligible to receive the benefit. If you are actively working until your retirement, you loose your sub-pay benefit. Same goes with death. If you die while active, no benefit is paid since you were never unemployed. Anyone know a way around this problem?