Effen

I don't know if they can be "forced", but why would the employer choose to pay twice as much as they need too? If the Plan is deficient, they have to pay the required contribution, plus a potential 100% excise tax. It would seem a pretty poor business decision to choose to pay the excise tax. That said, I know some employers just don't have the cash available. Have they looked into the various options regarding waivers and amortization extensions? (IRC 412(e), 412(f)) Also, since the deficiency is imminent, did PFEA 04 give them any relief

I don't think you can "value the plan monthly". A cash balance plan is a defined benefit plan and therefore if the participant doesn't receive the present value of their annuity on the date of distribution you have improperly reduced their accrued benefit. I don't know what it means to value it monthly. The value of the accounts change daily. That said, I think if the amount of the distribution exceeds $5,000, the spousal consent rules apply. We generally give 2-3 months of lead time for election forms. In other words, if a request comes in in May, the election package we send assumes the lump sum will be paid in August. It also contains a big note that if it is not paid by August, it will need to be re-caclulated.

"I would be curious to know if the ABPT testing would then be the numbers to report on the 5500, schedule H relative to coverage. " 5500 Schedule T should have this detail.

It's also fairly common. The IRS has stated repeatedly that it doesn't like it, but it is still very common in small tax shelter plans.

Also, wouldn't the method change require IRS approval since you only used aggregate for 1 year?

I'm using an FIL method and my UAL is negative and I'm not in Full Funding. Sec. 4.01(2) of RP 2000-40 grants automatic approval if I want to re-establish my UAL. Q1: If I do this, it looks like the re-established base should be amortized over 10 years. Do you all agree? Q2: If the Plan was amended this year to increase benefits, any reason why I can't re-establish my UAL recognizing the amendment or should I create two bases. One, my re-established base and two, my recent amendment. I guess the two base approach would give me a lower min since the amendment is 30 years and the re-established base is 10 (I think).

If limit it to Enrolled Actuaries and want an "A" month, I would say April 1st, since we are all fools for staying in this dinosaur business. WDIK - tremendous post!

Does anyone have an opinion on a method that instead of forcing UAL=0 when UAL is <0, you force UAL + CB + ARA = 0. This seems to produce a little more realistic result and doesn't force the creation of such a large large loss base. Part of my problem was the the sponsor wanted to make a large contribution, which would have created a large credit balance which would result in a large offsetting loss base to bring UAL back to 0. Our system allows this and I'm told that at least one major national firm does it this way.

You’re right, it is all UC, not PUC. (working late - thank you Congress!) OK, I agree that the FFC is < 0, i.e. 0. What I find strange is that because each year I will add the value of the AFC's to my reconciliation account, I will need to add an offsetting loss base to keep the equation equal to 0. This produces some very strange looking results. Do you agree this is the correct way to handle it?

Consider the following: CB = $0 Reconciliation account = $126,000 (due to LY AFC) PUC NC = $0 412 charges = $12,000 412 credits = $0 AFC = $61,000 ERISA FFL = $0 (UC AL slightly > assets) 90% RPA FFL = $170,000 Min. Req = $73,000 (AFC + 412 charges) Max Ded = $300,000 (100% of RPA) Even though I don't get a FF credit, should I wipe my bases out next year due to the application of the ERISA FFL? If not, assuming all other assumptions are met, wouldn't I need to force a loss bases each year to keep the balancing equation = $0 (since my UAL will be negative?) I guess that once the plan was well funded the AFC would no longer apply and I would get my ffc and all would be wiped out, but the process would look pretty strange to the sponsor. Or just let the balancing equation go out of balance since my UAL is < $0.

I think this is an issue between the locals and not so much a Plan issue. It should all be spelled out in the recriprocal agreements. If you don't have recriprocal agreements, I don't think there is any requirement to recriprocate contributions. Without the agreement, the different locals would be treated like seperate employers. That said, I work with several locals who pro-rate the hours credited under the home local to account for contribution differences between recripricating locals. Based on your example, the person might get 2.7 hours credited for every hour he works as a traveler. If your benefit home benefit formula is based on a percentage of contributions, no adjustment would be necessary since it would automatically provide additional benefit for the additional contribution. If your home benefit is based on $*YOS, than you might want to consider extra service credits. Either way, I think you need a reciprocal agreement.

I'm not Blinky, but FWIW, I agree

I think I have read all of the threads from the last few years on the subject of restricted employees and found them very helpful. Thank you all. Does anyone have a problem with either of these two benefit options: 1) A monthly life annuity (or 10CC or J&100) until such time as the plan's funding ratio increased to over 110% at which time a lump sum would be paid. (forget about how to calculate it for now.) 2) premium refund annuity which guarantees the sum of the payments will at least equal the value of the lump sum. I have seen these discussed, but I didn't really see any resolution. Is anyone using anything like this? If so, how do you handle the death of the participant (or spouse) under Option 1?

The charge I was refering to was for the "what if" on the withdrawal liability calculation. They would most likely have to ask the actuary to do the calculation, who would probably charge the Fund, which they may pass on to the employer. Generally, I don't think the Funds charge participating employers to copy information that they have a right to see (annual valuations, Form 5500), but I think they could. I agree with you PAX, that if they went to the Fund office and just looked, they wouldn't be charged.

If you are a participating employer, all you need to do is ask the Fund. You have a right to all of this information. They should be able to tell you if a withdrawal liability exists, but they may charge you for the "what if" if you want a specific number.

Will the consultant be paid a fee or a commission? Be careful there as well. I will agree that employers think it will be simpler to deal with one company instead of three, but in reality, you will probably still talk to at least three different people in three different locations. They will just answer the same phone. Also, turnover and job movement is generally higher with the insurance companies so you will be constantly dealing with different. Also, as I pointed out, you really need to get a breakdown of ALL of the fees before you decide it is cheaper to go bundled. Generally, it is not. I also recognize that it is virtually impossible to change the mind of a person who has already decided that the bundled approach is best. Good luck on your quest.

Just a few thoughts about the "bundled" approach. Generally company "bundles" services in order to obtain more business. Prudential, NYL and Fidelity are primarily after the assets. In order to get those assets, they will offer other services. Because they are primarily asset driven you may not get the best legal and actuarial advice. I am not being critical of them, because they generally do very good work on most plans, but we take over a lot of actuarial consulting projects when the questions leave "the box". I actually have a client that has a bundled product with Principle, but use me for all of the actuarial consulting. (We’re local, more responsive and more efficient - not necessarily cheaper) Documents tend to be another problem. If you don't fit exactly into their prototype Fidelity will force you to jam your square peg into their round hole. You will need to hire your own attorney to amend their document. When they were CIGNA I found them to be a little more accommodating and didn’t force you to use their document, but I have never worked with Prudential. I tend to agree with PAX. If they are trying to "sell" you something, you should probably continue to look. A good consultant will listen to your goals and objectives and then design to plan to fit your needs. If you want to best possible service you should hire an ERISA attorney to handle the legal, and actuary to handle the liabilities and an investment consultant to handle the investing. When you go bundled you end up hiring an investment company to do your legal and actuarial consulting which may be cheaper, but could be costly in the long run. If you go bundled on price, make sure you see "all" of the expenses including the asset-based fees. It is also a good idea to have someone else look over the quote to make sure you understand it. I recently had a client that asked CIGNA to propose on their DB plan. CIGNA quoted $3K which was a fraction of their current actuaries cost. Once we looked at the asset-based fees, we realized CIGNA was actually charging close to 90K which was significantly more than the current actuary and financial consultant combined. "If it's too good to be true, it probably is"

You can contact the Railroad Board and they will send you their valuation which includes all of the q's. I don't know the link, but if you start with the Social Security site, you should be able to find it.

When we were younger, we dreamed up many "creative" ways to have junk mail sent to our friends. Obviously this was before SPAM and before we were old enough to get so much of our own junk mail. The "effen" was usually followed by a "richard" and then an address. I always liked the "effen" part, but have since dropped the "richard" See you in DC?

What do you "effen" think!

Sounds good. Since you are one of the few who use their real name, I guess we'll just look for you.

YEARS AGO (late 80's) I think there was a Regulation, Notice or RR that said that you must terminate all frozen db plans unless they didn't have sufficient assets to do so. I think it had something to do with 401(a)26 but I don't remember the specifics. Sorry I'm not more help, but this may point you in the right direction. My understanding is that frozen db plans that contain sufficient assets were suppose to be terminated. That said, I don't remember the authority or reasoning.

I was hoping we would have something final on the 1/1/04 RPA rate. Anyone know what’s happening in DC with this? I have several clients whose contribution is driven by the additional funding charges and they are very interested in this. I don't really want to release a report using 105% if it will ultimately be changed back to 120%.

I'm with you 100% and counsel is involved. When I asked the client why they never filed in the past, they produced a letter from 1993 that referenced the Notice. After I read the letter and the Notice, I started to wonder myself. The plan has well over 100 participants. It sounds like you agree that they still need to file and the amnesty program would probably be a good option.

Are you saying that 90-24 provided an exemption for only for GTL plans that weren't welfare plans? Is it possible that it isn't a welfare plan? The plan solely provides group term life benefits and the employer pays the entire premium. Also, lets assume that 90-24 provides an IRS exemption from filing. Do I still have to satisfy the DOL filing requirements? I assume I still have DOL requirements since the 5500 amnesty program is only a DOL program.