Effen

There is lots of good stuff written about replacement ratios if you do a few internet searches. I believe the SOA has a few studies available on their web site and you might want to check the web sites of some of the big boys (Buck, Wyatt, Towers, etc.) There are also lots or articles written in the financial trades. There was a session at last year's EA meeting that might be helpful if you can get the handouts or tape of the session. It wasn't the best, but it might help you in your thinking. Basically, the necessary replacement ratio changes based on the person’s income. Lower paid employees will require a higher replacement ratio than higher paid. Also, you need to consider the impact of inflation over time. A 100% replacement at 65 might only be worth 70% at 80.

You ask an actuary to do it. Can you be a little more specific?

himt4 - No one can give you a definitive answer, because no one knows until the IRS tells us. As a consultant, you need to explain to your client that any combination above 25% involves some risk.

I have the same situation, but the 1996 Grey Book appears to say "NO", unless you actually have a Full Funding Credit on the Schedule B, which is something flosfur didn't state. Is there something else that makes you guys say "Yes"? QUESTION #4 Funding - RPA: Full Funding Limit -- Elimination of FSA Bases Which full funding limit (and associated full funding credit) determines when the FSA amortization bases are eliminated? That is, are the FSA bases eliminated when funding reaches 100% of the actuarial accrued liability, or only when it reaches the greater of that number or the RPA'94 override of 90% of current liability? The instructions to the 1995 Schedule B seem to imply that the full funding credit based solely on the ERISA full funding limit of 100% of the actuarial accrued liability will not be calculated. RESPONSE In general, FSA bases are eliminated when the Schedule B actually shows a full funding credit on line 9(l)(4) (i.e., when funding reaches the greater of 100% of the actuarial accrued liability and the RPA '94 override of 90% of current liability).

We use CCH's WEB-based "Pension Plan Guide", which comes with access to several "answer books" on-line. I like the service, but I have always preferred CCH to RIA. I like to have the code/Regs accessible so that I can read things for myself. I tend to use the answer books and ERISA outline only as a guide. Without the Code/Regs, their answers can sometimes be a bit incomplete. CCH on-line is pricey, but it is nice to have access to the code from anywhere (office, home, etc). That way if you are doing work from home, you don’t need to have all those reference books around. Its all just a click away.

We have filed Form 500 prior to the termination date without any problems.

Carol, strange as it may sound, I believe the predecessor plan rules only apply if the plan terminated. Since the PS is still ongoing, I don't believe they apply, unless it terminates in the near future (5 years, I think).

Does the term cost = $0? Just because benefits are no longer accruing, doesn't mean the cost of the insurance is $0. You may still have a NC, even though the plan is frozen. Think of it as an expense. If you have an explicit expense assumption, it doesn't go away just because the benefits were frozen.

Maybe you are referring to the new requirements that the db election forms state the "consequences of failing to defer" your pension benefit. In other words, what bad things can happen if you take a lump sum now. Ive been wondering what others are doing about this myself.

I'm just saying the death benefit is exempt from the top 25 restriction. You still need to follow the terms of the plan to resolve the actual benefit distributions. Just because the primary died, doesn't mean the sponsor is dead. The termination of the underfunded plan may not have been proper. Did you file it with IRS? You need to follow the provisions of the plan and pay out benefits accordingly. That could mean everyone gets less, it could mean the plan needs to be funded. You need to be working with ERISA counsel. I'm having trouble finding a cite, but I am sure it is true. I will keep looking, but maybe someone else can jump in. I have worked with the IRS on several top 25 violations and each time they state if the person has died, there is no problem. It may have something to do with the fact that the restricted employee is dead and the beneficiary is not necessary a restricted employee. I had a cite once, I will keep digging.

Death benefits are exempt from the "top 25" restrictions. Are there other participants in the plan? If so, are their other HCEs?

??? I don't understand the question. The impact on the plan is the same (other than the cost) whether it pays the participant in the form of a lump sum or it pays the insurance company for the annuity contract. Before the plan termination the money was an asset of the plan, after the termination it is a asset of the participant. A few more details would be helpful. Why are you asking?

Lets say on 1/1/06 an active participant over age 65 received a lump sum based on an accrued benefit of $7,600/mo. life only. The lump sum was paid, based on the 417(e) rates in effect. The amount was $912,000. The participants 100% comp limit was $8,000/mo. and using 5.5% also produced a lump sum of $912,000. Therefore, even under the post PPA 06 method, the lump sum was permitted. It is now a year later and the participant has "accrued" an additional $300 under the terms of the plan. Question 1 - is it possible to pay this $300 as an annuity w/out violating the 415 limit or because the participant received a lump sum equal to 100% of comp, no additional accruals are permitted? Question 2 - If 3 years from now the participant increases their compensation limit to $18,000, how should I value the previous lump sum that was paid? Would I roll it up using plan factors, 417(e), 5.5%, none?

Thank you.

Does anyone have any relatively recent disability tables they could share? I’m looking for incidence, not disabled mortality. I have the old UAW tables and a table from 1985, but I was wondering if anyone has anything more current. We looked on the SOA site and didn't really find anthing. We are looking mostly at blue collar groups (1,000 lives) and as we update mortality to one of the RP2000 tables, using a 1955 disability table doesn't seem reasonable.

Is this a bargained plan? I have seen some union plans where the bargained contribution gets carried from the contract into the PS document. I'm not saying if it is correct, but I have seen it.

I wouldn't go that far. I'm not saying you shouldn't do it, but I wouldn't want to be to one to tell the client "they have nothing to worry about." I usually realy on the ERISA attorney for they type of statement. Anything beyond 5 years has some risk to it. If the client understands this and decides to do it, then it is his choice. I generally stay out of legal opinions.

Take a look at §1.401(a)(4)-5. Generally, you can't grant more than 5 years of past service without having to demonstrate it is non-discriminatory. Also, you can't accrue more than the 415 limit, so the most he could have at the end of year 1 is 10% of the 415 $ limit. The % pay limit is based on service, so it might be ok.

TREATISE, PENSION-ANSWER-BOOK, Q 5:35 What is an affiliated service group?

"You spin me right round baby, right round, like a record baby, round, round, round, round" Search the DB board for a lot of discussion about this circular topic. Personally, I don't think you "benefit" unless you actually receive an annual addition during the year. I recognize others don't share this opinion.

Shouldn't that be Prrrrr?

Why do you think you will loose a deduction?

Be careful of 411(d)(6). Assuming it is a CY plan, you can't just change benefit rates this late in the year unless they are all increases. I wouldn't change to EOY val as PPA virtually requires BOY vals starting in 2008. Why can't you do testing at EOY and valuation at BOY? You can still do them at the same time, except different years.

Lots of discussions about this on the defined benefit board that you might want to check out. At this point I believe we are awaiting Regs to determine exactly what this provision means.

1) yes, in fact you may see more of this with the pending PPA changes. It's an extreme solution, but sometimes you don't have a choice. 2) I don't know nutt'n 'bout no Davis Bacon.