Effen

If the Plan does not allow retro-active payments than you can't pay them. If they can pay them, you need to be careful about spousal consent, ect... The IRS has some fairly new Regs on this issue, but it’s fair to say, they don't like to see them. If the plan didn't give the participant a suspension notice, your only real option is to actuarially increase the benefit to reflect the value of the missed payments. Otherwise, I believe you have effectively reduced his accrued benefit which is a 411(d)(6) violation. You should run this past the plan's attorney since they will need to defend the decision if the participant appeals.

Just a thought, but since he was active when he died, could you argue that he should qualify for the active death benefit? I don't know if waiving post retirement spousal coverage is the same as waiving the Pre-retirement Survivor Annuity when he comes back to work.

You can't aggregate for 401(a)(26). The plan would need to cover at least 40% of the employees (ie:2). How about using different benefits. One Dr. gets a big db benefit, the other Dr. gets something very small since he didn't realy want to be in the db to begin with. Just give him enough to say he is benefiting, .5%/YOS or something.

FWIW, I agree with Blink. I think it is definitely is a problem. Why not figure out how much you need to fund for the NHCEs to pass the non-discrim test and fund it now as well.

I think you first need to explain this to the client, then go back to the prior actuary and ask him to fix it. If you sign the Schedule B and know it is wrong (which you do) his mistakes become yours. Maybe you could calculate the required contribution assuming the bases were corrected, tell the client to make the larger contribution then you have another month to fight with the prior actuary. That way the client should be protected from the deficiency if they make a lower contribution that is corrected after the due date. Communication with your client is critical! Also, changing the method now will do no good. The prior schedule Bs are wrong and need to be corrected.

Here are a couple prior discussions that should be helpful benefitslink benefitslink 2

Following is the quote from the FASB: Technically you are right, they are talking ABO, not PBO, but how reasonable would be be to have an ABO > PBO? As far as I know, there has been no movement on this issue since around May 2005. Does anyone else know anything? FASB

COOL! I think I knew you when... - we can take this off-line now so that we don't waste Ereads or Harwoods time anymore.

I deleted my posts because, I'm typing faster than I'm thinking. I'm working on one now with a "frozen" piece so I will slow down and think it through. Sorry for the confusion. Getting back to the original question: No, assuming you have a salary scale assumption, it should not generate losses, if salary assumption is exactly realized, g/l s/b 0. I agree SC s/b 0 ABO<PBO, difference being due to salary assumption. Sorry again for any confusion.

Laurel from CHG? is that in CLE? Were you also at NA in RR many yrs ago?

Actually, strangely enough, the plan trying to use the higher rate pays lump sums. The plan using 5.25% does not. Personally I was recommending 5.25% to both, we will see what the auditors accept. Local auditors tend to give a little more leeway than the national guys. FWIW, for Plans that pay lump sums and cash balance plans, FASB is considering a position where the minimum PBO is equal to the plan termination liability. This would probably require a discount rate around 4.5%.

I have done some at 5.25% and some at 5.5%, but the auditors haven't reviewed them yet. FWIW, the Moody's Rate was 4.96% on June 30, 2005. Moody's

First, unless I misunderstood the question, I'm not sure your numbers work. How many YOS after the freeze? 1000 * 15,000/10,000 = 1500 is "frozen" piece 1% * 15,000 * X = 1000 is the future piece? (X= 6.6666?) Anyway, I think I understand your question and I don't think I agree with your answer. Gains and losses are changes in the PBO resulting from experience different from that assumed. So, assuming you have an assumption for salary increases, I don't think that meeting that assumption can generate a loss. Although it may not seem reasonable, I think under a strict reading FASB would require you to project the total benefit, then prorate based on total years to get the NPPC and PBO. The ABO could be done the same way, without the salary assumption. (Read FASB 87 paragraph 29, 40,41,42 & footnote 8) It would seem reasonable to me to base the ABO on the actual Accrued Benefit and the PBO on the "project/prorate" method. However, that would seem to contradict the "rule" that the difference between ABO and PBO is salary scale. You also might want to call FASB as ask their opinion. I would be interested in their response. P.S. we miss MGB on this stuff.

You might want to search for "settlor" or "fiduciary". These may help you out. I couldn't locate the exact memo, but I think these will point you in the right direction. benefitslink benefits link

FWIW Dito on #2 Doesn't seem reasonable to say the NRA or NRD was prior to DOP.

There is no problem making a final deposit assuming it is permitted under the funding method. You may be able to increase the allowable contribution by adjusting your assumptions. Lower your interest rate, increase your mortality. Are your sure your participant wants to put the money in?

Also, be careful of comp definition. TH = 3% total comp, gateway can be based on comp while a participant so it is possible the TH > gateway.

SSEWBA

I think you are over thinking. If they are benefiting under either plan, then you consider their pay in the 25% limit. Just add up the pay, multiply by 25%, compare it to the db MINIMUM required contribution, take the greater of the two and that is the maximum deductible contribution.

I believe the FASB is still reviewing this. They are also looking at plans the pay lump sums through the same lens. That is, the ABO should never be less than the current value of the lump sums (ie: termination liability). http://www.fasb.org/project/amendment_st87&35.shtml

Although I understand your arguement, I don't think it is correct. The Regs. permit you to accrue 1/10th of 415 limit at time 0, so in reality, you have a liability on the first day of the first year and $0 normal cost for year one. I think a liability clearly exists on the first day of the year and therefore the Plan's funded ratio is 0% and therefore quarterlies would be due in year 2. I think the IRS response to ASPA question is wrong. Since I generally don't design plans to credit past service, I was wondering how others who do handle quarterlies in year 2.

If the future accrual rate will be lower, don't forget about the 204(h) notices.

Are you suggesting that the answer on 1(d)(2)(a) is always 0 in year one, even if the plan grants past service for benefit accruals?

A new plan grants 5 years of past service so it has $50,000 of liability and $0 assets at the beginning of year 1. IRS instructions state that in year 1 the answer to Q/A 4 of Schedule B is 100% and quarterly contributions are not required. The answer to Q/A 4 of the year 2 Sch. B appears to be 0% and therefore quarterlies would be required for year 2. However, I found the following that appears to contradict this. Maybe this Q/A didn’t anticipate the possibility that past service would be credited, but I don’t think the answer is correct. The Schedule B instructions clearly state that you enter 100% on line 4 in the first year or if the RPA liability was $0 at the beginning of the prior year, neither is true in my example. Does anyone think the employer would not need to make quarterlies in year 2, if the plan has a liability on the year 1 Schedule B?

This seems like a legal issue. If your client is considering following the other actuaries advice, strongly suggest that his ERISA counsel review it and provide a recommendation. If his counsel gives you a letter stating that it is ok, and removes you from any potential responsibility, I think you're clear to value the plan accordingly. You can always choose to resign if you’re not comfortable. If the attorney won't agree to write the letter, and the actuary is still pushing the "solution", maybe the ABCD would like to know about his legal interpretations. "Bad" actuaries hurt us all.