JAY21

John, are you sure on the 50% cushion not apply to those at 415 limit ? I don't remember seeing anything like that and am operating under an opposite view so if I'm wrong I'd prefer to know now vs. later. Why do you think that ?

What do we have to use for assets for PBGC premium ? if it's the actuarial valuation of assets as of the val ate for 2008 then an EOY val might be using the 12/31/08 assets and thus we wouldn't be able to do PBGC premiums until after 12/31/08 even though I agree the 2008 accrual isn't included.

Thanks !

Is the AFTAP notice requirement for under funded (less than 80%) also required for the following year's presumptive result (10% reduction) when/if that result is less than 80% and 2009 Val/AFTAP is still not done yet ? For example, say your 2008 AFTAP is 83% but the "presumptive requirement" for the following year as of 4/1/09 is that if the Val/AFTAP is not done yet it drops 10% to 73%. Is the notice required at that time (4/1/09) or does the notice ONLY apply to final current year AFTAPs below 80% and NOT the presumptive result as of 4/1/09 ? If it's required then I suppose it's the 30 days after 4/1/09 ?

I vote for (a) as well since this is less than his 415 high-3 limit which is (10/10ths)($230,000), and the lesser 415 limit applies.

I think the Mavericks might have the right idea, even though risky. Many of us with lots of EOY vals will not have time to both finish our outstanding 12/31/07 Vals (i.e., LLC and Sole Props whose net income hasn't been determined by CPA) and 5500s PLUS get ALL of our 2008 Vals done on a BOY basis by 10/1/08 for 2008 AFTAP. There are just too many LLCs/Sole Props who never get us the 2007 data early enough to finish up 2007 Valuations early enough so as to utilize this "relief" the IRS just issued. I keep coming back to PPA provided we can use EOY vals for small plans but most other PPA related procedures, proposed regs, notices, all seem very unfriendly to EOY valuations making EOY vals logistically challenging.

Anything new on this subject ? We're about 28 days from the 10/1/08 AFTAP for calendar year plans and I haven't heard anything more definite on this subject. Practically speaking, even if not fully supported, is anyone thinking of proceeding with using 2007 Schedule B info for 2008 AFTAP despite the lack of a technical corrections bill ? For many of us, getting 2008 Vals done on a BOY basis while were still trying to get 2007 EOY vals and 5500s done is not practical (if that's the IRS solution).

I think I see it better now. Since you are using the ERISA 303 Funding Target (or PBGC version of Funding Target) I believe this does not include the accrual for the premium year (though it has interest credited to end of year for EOY val) so accruals are only through BOY, even for an EOY val, so you wouldn't need the 2008 earned income for PBGC filing only the 1/1/08 Funding Target minus assets for UVBs, so no 2008 compensation needed. If anyone disagrees let me know.

If I'm reading the new 2008 PBGC premium rules and deadlines correctly you must value the unfunded vested benefits (for variable rate purposes) as of the Valuation Date that falls within the premium filing year (not prior plan year EOY Val). While the deadline appears generous being 16 months after the start of the 2008 premium year (e.g., 4/30/09 for 2008 filings) how many 2008 EOY valuations for Sole Props/LLCs will have their self-employment earnings to you before 4/30/09 (some, but many go on extension). So how does one file the 2008 PBGC premium based upon the 12/31/08 Valuation which uses the 2008 self-employment earnings that might not get done until say August 2009 (via tax return extension). Do we need to put these people on notice that they can't extend their tax returns since we need the Net Schedule C (or net k-1 income) before 4/30 to do PBGC filings ? Is there any relief that I am missing ? Under 2007 rules we could use the "snapshot" Val date as of 1 day before premium year (or 1st day of premium year) giving you 8.5 months to get data and get it done. Thoughts anyone ? Another provision forcing us into BOY vals ?

Bill, Bill,....a big 2 posts on benefitslink and you're already talking trash. Not a good way to wins friends and receive good responses in my view.

I don't know if the wife has ever performed any minimal services for her husband Sole Prop (even if not paid for those services) but if she has, and has never been a participant in a DC plan sponsored by the same employer (Sole prop), then maybe the plan could be amended to lower any hours of service requirement (e.g., from 1000 to say 10) to allow her past service credit and amend plan to provide a de minimus $83.33 per month per year of service benefit to utilize IRC 415(b)(4) allowance for a 10k annual benefit ($833.33 monthly) phased in over 10 years of service, past service counts towards this. IRS audit guidelines have stated that if no compensation has been paid the 10k annual annuity benefit would need be taken as a annuity benefit (not lump sum) so they then would purchase an annuity from an insurance company to provide this benefit if the plan will not continue past husbands death. Depending on her age and years of service that benefit purchase might use up a good chunk of the estimated 150k in excess funding.

I think this proposal does illustrate the challenge that even with a cash-balance plan it's still tricky to give all the target group (e.g., doctors, or owners) the same contribution given differing 415 limit present values. I've struggled with it myself where to design the uniform pay credit for a shareholder group IF they all want the same contribution. Do you pick a shareholder in the middle range of the ages to design the pay credit around with the expectation that the younger shareholders who initially get a theoretical pay credit greater than the PV of their 415 limit will "grow into" the pay credit via future COLAs on 415 limits, YOPs, and increasing PV as they age. I know that one selling point of CB plans is the uniform allocation availability for shareholders but someone isn't going to be too happy when they get a theoretical allocation of 100k then decide to leave the group and get 52k as a distribution. I like the combo plan approach best when the shareholders get their 46k in DC plan and maybe the group will be satisfied then with say an additional 50k in the cash-balance plan (i.e, something less than the youngest shareholders 415 limit).

Thanks ak2ary for the good input.

Why do I get the feeling that despite PPA 06 statute stating we can still have EOY vals for small employers, everything seems to say otherwise and trys to force us to use BOY vals for all plans. Yes, we can switch Val dates back and forth if this is the IRS approach that ultimately comes out, but it's bound to cause some confusion for clients as some software systems only show benefit accruals/PVABs as of the Val date and not at plan year end if that's not the Val date (e.g., 12/31/07 Val and 1/1/08 Val would have the same benefit though they may provided 1 year apart). Then we get to explain to participants why their benefit statement shows no change since they last received a statement a year ago. Yes, I realize the answer would be then to do a 1/1/09 Val to get the 12/31/08 accrual reflected but if we are wanting to switch back to EOY val for 2009 we might get to do a mock Val for participant statements (1/1/09) and 12/31/09 for real Val.......kind of a pain and not that great of a solution in my mind.

From an experience standpoint (vs. any reading of instructions) we tried to file a final 5500-EZ for a 2007 year some months back using "marked up" 2006 forms (cross-outed the 2006 and wrote in 2007) and it was rejected. We had done this previously a lot in past years and never had a problem but it seems like that isn't working now.

Is there anything out there pending that is going to give us some guidance for our 10/1/08 AFTAPs for EOY-valuation clients ? Any pending bills that will authorize the IRS to give us some guidance and/or relief ?

Andy, so is it your take that Rev. Proc. 2000-40 is still good for 2007 PYEs but obsolete for 2008 plan years (plan years beginning in 2008) ?

Check out these two links on the subject. http://www.fdic.gov/deposit/deposits/insur...6.html#employee http://www.fdic.gov/deposit/deposits/insur...html#retirement

Since the special 415 rule is no help in 2nd year (2009) then I guess the strategy of using past service credit for a new 2008 plan in order to create/fund full target liability cushion of 50% is a help in 1st year of plan (2008), but second year of plan since your past service liability at 1/1/09 is still just 1/10th of 415 YOP you have created a shortfall gain in year 2 for minimum funding (since you already funded 150% of target liability in 1st year) which partially offsets your normal cost for minimum funding in 2009, so your maximum 2009 is probably just roughly equal to normal cost since 150% of target liability (1/10th of dollar limit) has not changed since prior year and was already funded in 1st year Ignoring at-risk assumptions impact on max contribution for the moment, does this sound right ? Corrections ?

I believe we've discussed that a new plan effective say 1/1/08 can be treated for funding purposes as if 1/10th of the 415 limit was available (allowed) on the first day of the plan year (1/1/08). Is this a special rule just for the first plan year only ? or for the second year (2009) for funding purposes could you treat it as if you had 2/10ths of the dollar limit on 1/1/2009 ?

I think the first 3 months of 2008 was a grace period where lump sum distributions could still occur despite AFTAP %. Then 4/1/08 for calendar year it depended on the 2007 AFTAP (using 2006 as proxy for EOY plans). If a participant terminated say 2/15/08 but did NOT receive a lump sum by 4/1/08 are they now restricted from getting a lump sum (AFTAP is only 75%) until later AFTAP is higher ? I'm thinking yes they are stuck with 50% for now, but participant has attorney arguing that since they terminated before the 4/1/08 restricted date they should be able to get a lump sum. Thoughts ?

I thought I saw this question asked before but couldn't find it. Could a SEP that covers the staff employees in an Affiliated Service Group serve as an appropriate "plan" for purposes of receiving comparable benefits (contributions) when testing the other individual plans of the doctors under a combined permissive aggregation approach, or do the contributions have to be made to a qualified plan on the staff employees behalf ?

Some DB plans are also accident and health plans I believe. I think to even have an arguement for tax-free disability benefits the plan has to have certain language showing the intent to provide such benefits (tax-free disability benefits) and even then I think it can only apply to very extrememe disability situations which are clearly spelled out in the plan. That said, I agree the IRS has a very narrow tolerance on what might qualify as a tax-free disability benefit with the default being that they are taxable and the burden of proof would be on the disabled participant I would think. I think in general, when it's part of a DB plan (vs. disability insurance) you have an uphill battle to provide them tax-free disability benefits but it may not be impossible if the language is there and it's limited to very extreme disabilities. Seems like there was a big legal court case on this involving some Fire Fighters from Alaska or CA if memory serves.

Hmmm.....I was thinking the same as Blinky so it would be nice to figure out where we stand.

Yes, I'm hoping to have visitors in Pension Prison.