Effen

Yes, you prepare the form on the PBGC web site. It looks very similar to the current paper form you work with now. Once the form is prepared, you "release" it to the next person who does their thing and "releases" it to the next person. As far as edits go, our forms are always perfect and never need editing For example, theoretically, I, the actuary, prepare and sign the form, then "release" it to the HR person for his/her review. They get an email from MYPAA saying, "Effen has released the form to you". They follow the link and review the form. Once they are good with it, they release it to the CFO for signature. The CFO gets an email, follows the link, "signs" the form, the releases back to the HR person or to someone else to coordinate the premium payment. I would recommend you do it first with a client you are very comfortable working with. Have them on the phone while you do it so you can find out what they are seeing on their screens and you can see what your screens say. That is what we did, and it's worked well so far. Good Luck!

ak2way, I'm sorry, but I'm a bit dense this late on Friday.... Because 23 + 2 = 25? So taking your first example a little futher, you would say that the max DB is 22% of pay (to meet min funding), the max DC is 8% and the entire 30% DB/DC contribution would satisify 404(a)(7)? So basically you are saying db + dc - 6% m/b < 25%, ie: they raised the limit to 31%.

Yes, we are the Filing Cordinator for all our plans. I would agree that if you expect the client to be able to do this as the filing cordinator, you are in for some problems.

Gary, I have found the system to work fairly well so far. We have actually filed a few and have most of our clients signed up. They really do very little, in fact, probably less then then did with the paper. All they need is an email account and access to the internet. It really isn't that bad once you have done it. The Filing Cordinator prepares all the forms, everyone else just clicks a box or two. We have one client who refuses to give us an email account (he is simply anti-establishment) and I haven't figured out what to do with him, but once I told the others it was required, they all went along.

FWIW, we received the following statement from our valuation system vendor. They originally released an update doing a BOY calculation, but have changed their position and now believe it should be EOY.

412(e) is a ONE TIME extension generally used to save a plan that will be deficient in the very near future (typically 1-5 yrs). It was a seldom used code section until recently when multi-employer funds got themselves in serious problems due to poor laws (forced to increase benefits to keep employer contributions deductible) followed by poor investment performance. Basically, many were forced to spend the excess assets they built up in the good market in order to keep the contributions deductible, then when the market fell, they were stuck with benefits that were higher than they could afford. The IRS has only approved two 412(e) extensions that I am aware of. Many have been filed, but they have either been rejected or are sitting in DC waiting for IRS action. The IRS didn't like 412(e) since it was written long ago when interest rates were much higher. This is why it was changed in PPA 06 to something that is more reasonable in today's environment that requires less IRS involvement. Many/most multis are heading for trouble. 2016 is a long way away and much can change. Your "entity" should be prepared for higher contributions and the union members should be prepared for lower benefits. PPA 06 had many multi-employer provisions that will require the Trustees to formally address this problem. As a contributing employer he should be able to get a copy of the funds actuarial report. Once he has the report, he can hire his own actuary to review it and explain it to him. Make sure he hires one familiar with multi-employer plans since they can be quite different from a corporate plan.

Sounds like you are talking about a 412(e) extension. Based on PPA 06, these appear to be dead unless they were filed prior to 6/30/05. PPA provides for an automatic extension of 5 years if certain conditions are met, but those rules aren't effective until 2008. I don't know why they would have filed for 412(e) if their problem was so far out. I agree, it doesn't really make sense. Basically, you are just extending the amortization periods for each of the amortization bases, but the old 412(e) got very complicated with various interest credits and hypothetical credit balances due to differences in interest rates. The new PPA 06 rules appear to be much simplier. Extending the amortization period lowers the required payments, just like the payments are lower on a 20 year loan than a 10 year loan for the same amount. Look at the amortization bases in the valuation report. You will see them listed, along with the number of years remaining. This stuff is very complex and is more than can be handled on this board. You need to talk to the actuary and have him/her explain it. That is what you pay them for. Although since the application was denied, and since your deficiency isn't until 2016, this sounds like it is a non-issue at this point. If you are not the actuary or the accountant, what is your role in this? If we knew what perspective you were coming from, it might help answer your question.

But why do they want to do this? What are they trying to accomplish?

Generally, most documents I work with state that if there is no beneficiary designation or if the beneficiaries pre-decease the participant, any death benefits are paid to the estate. Also, if the death benefit is an annuity (like the remainder of a period certain), it may cause problems for the estate; how could the estate close if it will be receiving annuity payments for the next x years? I'm not sure why you would want to designate the estate as the beneficiary. Are you asking about pre-retirement or post-retirement death benefits?

If EA2 ever starts having essay questions, this would be good one. Maybe if you linked to the PLR we could help you, you could write pages on what you asked. You probably should let the actuary talk to the accountant.

PPA 06 grants 5-yr amortization extensions for some multiemployers: However, this doesn't take effect until Plan Years beginning after 2007. Previously, 412(e) was an option, but PPA appears to remove this option retroactively to 6/30/05. Does anyone know of any options available to a plan that will have a deficiency prior to 2007, but didn't submit a 412(e) filing prior to 6/30/05?

I think this is something we will need to wait for IRS guidance. I had a similar thought and was wondering if you could change your funding method in 06 or 07 to a method that would phase into the 2-yr smoothing in 2008. Depending on how your gains/losses fall, changing from 5-yr smoothing in 07 to 2-yr smoothing in 08 could be a significant change. It would be nice to be able to be able to create a method that phases this in over the next few years. P.S. You can edit your posts by clicking the "edit" button, so there is no need to double post a question when you change it.

Really? These things may have a 415 problems? Who would a thunk it? I'm glad you waited until the commission was collected before you bothered to look into that possibility. Heck, they might not have thought it was such a good deal if they knew all the details. Hey Ned, what do you suggest? Sorry, I counldn't resist, actually sueczer, it's good that you looked at it before it became too much of a problem. It's nice to know that at least one person involved with 412(i)s recognizes the problem.

I would like to confirm my interpretation of the new 404(a)(7)©(iii). The way I read this is that if the DC contribution is 6% or less, than the 404(a)(7) limit (25% comp) doesn't apply, but if it is > 6%, the 404(a)(7) limit applies. When I read some of the summaries I got the impression that you could ignore DC contributions up to 6% of comp, thus increasing the combined limit from 25% to 31%, however I do not think this is correct. Basically the way I read it now is that if the DB contribution is 50% of comp, you would be allowed DC contributions up to 6%, but the penny over 6% triggers this limit and would make any amount over 6% non-deductible. So if your db contribution was 15%, you could only put 10% into the DC without hitting the limit. Agree? 404(a)(7)© PARAGRAPH NOT TO APPLY IN CERTAIN CASES. -- * * *404(a)(7)©(iii) LIMITATION. -- In the case of employer contributions to 1 or more defined contribution plans, this paragraph shall only apply to the extent that such contributions exceed 6 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries under such plans. For purposes of this clause, amounts carried over from preceding taxable years under subparagraph (B) shall be treated as employer contributions to 1 or more defined contributions to the extent attributable to employer contributions to such plans in such preceding taxable years.

tcroscut - you probably should move this question to the multiemployer board. You may get better responses. My understanding is that things are less negotiatable in a mass withdrawal since the liabilities are based on termination rates. If the plan is going down, negotiating a lower rate for one employer, just means another employer will need to pay more than their share. That wouldn't fly very well with the employer side of the table. Also, most of this is statatory, so the actuary has very little control over the assessed amount. That said, mistakes can happen, so it would be a good idea to request a copy of the calculation so they can get an independent review.

Generally the disability payments are pure subsidy and have no J&S requirements. There could be implications for the spouse if the death benefit payable to someone who is on disability is different (lower) than the death benefit if the person "retired" and elected a J&100. On my plan, they are the same, so it is basically a non-issue. Maybe the spousal consent on the "retirement" election should also mention that the spouse understands the election is be revoked if a disability benefit is obtained. There are lots of little issues that need to be considered before this is done. Lots of information the participants need to understand. What happens if the participant dies prior to the disibility award? What if they don't get the disibility award?

Although I agree with Janet, I work with a fund that permits this. If the person is eligible for Early Retirement and is applying for disability, why should they have to wait for 6-12 months without any income? The fund permits them to elect ER pending the disability claim, then, if and only if they are awarded a disability benefit, their previous election is revoked and the benefit changes to a disability benefit. I believe the fund lets them make a new election at NRA, but they may treat the original election as binding. All of this should be stated in the plan document and you need to work closely with the ERISA attorney. I don't think "additional administration and cost" is a valid reason not to do it. The difference between the disability benefit and the reduced early retirement benefit can be very significant and I don't think it is fair to the participant to make him wait. The Funds generally want the members to get the best benefit available from the plan, remember that is what the plan is for. If the person qualifies for a disability, the funds will retro the payments anyway, if they are not, they were eligible for ER anyway. The fund isn't really out any extra money; it’s just a matter of when the payments will be made.

So, based on that fact pattern, all the ER had to do was make a contribution equal to the restricted amounts and the problem goes away? (and submit a VCP filing) Seems a little strange, the HCE's end up with their money and the other participants are still at risk because the plan is still underfunded. Not a bad deal for the HCEs. I thought that is what this rule was supposed to stop. Thanks for the info.

Texas - if the client put the otherwise restricted amount back into the plan, do they still owe the HCEs a distribution? Was the original distrubtion disqualified as if the plan never paid it? I have heard this solution suggested before, but I never really understand how it would work in practice. I guess if the "payback" was deductible and it resulted in the plan being > 110% funded it would be treated like they complied with the rule, but if the fund is still < 110% funded and they "paid back" the restricted amounts, what have they accomplished? Aren't they still in violation of the rule? If they are acting like the distribution was never paid, don't they still owe it? How can simply making a contribution equal to the restricted amount make the issue go away?

Since the PBGC has published 85% of the Corp. bond rate, into 2006 for 4010 filings, you should be able to divide these rates by .85 and get a very good idea what the RPA rate will be. Jan 06 RPA rate s/b 5.72% PBGC 4010 rates

rcline - If the PA did the bc themselves, then you are right, this is strictly the PA's problem, but I was assuming the service provider was an actuary who calculated the lump sum, who knew the funded status of the plan (or should have known), who sent the forms to the PA, who paid the benefit. I don't think this is something PA's should be expected to know. The actuary is really the only person in a position to know if and when this applies, therefore I would lay it strictly at their (my) feet. Now, if the actuary isn't involved in the bc, then they may be exempt, but the liability would then be passed to the person who actually did the calcs. If you are doing the calcs, you have an obligation to your client to keep them out of trouble. If you tell the client they don't need to make a contribution and they end up with a deficiency because if it, is that their problem too? They might pay the fine on paper, but the cash will come out of the actuaries pocket.

I have been wrestling with this problem for a while and have spoken to the IRS numerous times and really haven't come up with any solutions. If the plan is now terminating and assets are sufficient to cover all liabilities, the IRS may view it as a "no harm, no foul issue". That said, it is a potentially disqualifying event if they get caught. Or if the person who was paid has died, it’s probably a "no harm no foul" issue as well. We looked into VCP filings, but the only solution the IRS will accept is a return of the money, or set up escrow account to cover any potential shortfall if the plan terminates. Therefore, if the plan is now terminating and assets are sufficient, your client may choose not to say anything and just hope it doesn't come up, however if the assets are short, your client could be in deep do do. I highly recommend you contact an attorney who should look into some form of law suit against the prior service provider who permitted the distribution in order to protect the plan from future potential IRS penalties.

Just because your w/drawal liability will be "off the charts" doesn't mean you will ultimately pay for it. Keep in mind that your actual w/drawal payment is based on the current negotiated contribution rate and is limited to a 20-yr period. Because of these restrictions, it is fairly common that ER's ultimately ends up paying far less than their actual w/drawal liability.

Any thoughts how they might retro-actively apply the 5.5% minimum LS rate for 415 purposes? In other words, what if a plan paid a 415 lump sum in February using 4.68%. Do you think the Regs will forgive this? I think it would be difficult for them to argue the Plan did anything wrong. The distribution was legal when paid.

Has anyone seen anything related to the RPA rates that will be applicable to 2006 now that PPA has passed?