JAY21

However, if a technical corrections bill were to be passed on a timely basis (yeah, right) then I suppose the IRS would be empowered to issue relief (presumably similar to the aforementioned notice) and we would have this all resolved BEFORE 10/1/08, right ? Ok, I'm not holding my breath for this but "theoretically" it could happen like that, right ?

Is the IRS Notice 2008-21 EOY valuation relief (12/06 data) currently ONLY for the 2007 AFTAP ? Did I hear it would take a technical correction bill to allow something similar for the 2008 AFTAP ?

IRS Notice 2008-21 gave us some relief for EOY vals for AFTAP purposes (i.e,. use 12/31/06 data) but I believe it's restricted to plans that will have an EOY val for 12/31/06, 12/31/07 & 12/31/08. So that appears to leave gaps for the following plans: 1. Plans new for 2007 2. Plan EOY vals for 2006 & 2007 but due to size requirements (over 100) now will be BOY vals in 2008. Questions, are these clients SOL ? If the new 2007 plans are LLCs/Sole Props/Partnerships their income won't be determined for some time, would we have to do BOY vals on them ? (hate to do that with non-incorporated entities, so of which may be new entities with little income history). On Q. #2, I do have one plan that grew from 40 participants slowly to just over 100 participants in recent years but is still an EOY valuation. Since they will be forced to do BOY vals in 2008 under PPA, I guess I wouldn't be able to use the EOY val AFTAP relief under above notice, right ? All thougts and opinions welcomed. Thanks.

Does the preliminary version of the 2008 Form 5500 ask the question whether the AFTAP has been certified and appropriate notices provided to participants ? I have a draft copy of the 2008 Schedule B and it asks only for the AFTAP % but any notice question would presumably be in the 5500 or other Schedules which I've not seen. Anyone know ?

Have we established whether there are any penalties for either failure to certify - OR - failure to issue AFTAP notice (even for a 1 man plan). That's my only question as I'm still not sure on that issue, other than that, in this fact specific situation I don't see where it would matter if not certified.

Have a handful of 412i plans that now are "converting" to traditional DB plans but keeping some of the insurance policies (policies become part of the assets; envelope funding used). In my way of thinking the benefit formula is unchanged so that there should not be any 411(d)(6) issues with the accrued benefit since it would be as defined under the plan document which hasn't changed. Howver, my opposing thought is when it was a 412i the accrued benefit was equal to the contract value. Does this contract value have to be preserved at a minimum for each participant in the 412i plan ? Kind of a de minimus benefit until new accruals (if any) surpass it ? Thoughts ? Thanks.

I'm quite sure nothing as been issued. Last week in a webinar by Norm Levinrad and Joan Gucciardi they provided a sample AFTAP certification format one might use and a sample transmittal letter to the client. Their example was an AFTAP above 90% so no benefits restriction notice sample was applicable or provided.

As I talk to the various actuaries/programmers about when/if they'll have a 417(e) J&S annuity factor program for those plans where the true normal form of benefit is a subsidized 100% J&S benefit, it's apparent that this is a cumbersome programming effort not likely to be completed immediately. What would you think of the following approach for a calendar year plan where there is a 2008 termination and client is pushing hard for a lump sum distribution to be paid immediately (plan allows for it too). 1. Since current plan document in 417(e) section of actuarial equivalence still references 30-year GATT rates for 417(e), pay out on pre-PPA 06 417e rates per plan document (Our plans don't just reference 417(e) in general; there is extra language that ties it to old 30-year treasury bond rates). 2. If ultimately later in 2008 it can be shown that old 417(e) rates used to pay out someone in early 2008 produce slightly higher PVABs than new mortality table & segment rates do, which I think will generally be the case, then I think we've both followed the terms of the plan and met minimum thresholds on lump sums (417(e)). Yes, we may have paid a small amount more than we would otherwise have to but if client is ok with that..... 3. If ultimately later in 2008 the new mortality table (post PPA 06) more than compensates for the higher segments rates so that new 417(e) PVAB is GREATER than old 417(e) PVAB, then we'd have to do an additional true up distribution and also amend the plan to reflect the new rates (the amendment will be needed anyway at some point so that's nothing extra really). What do you think ? I'm going to try to delay lump sum distributions on subsidized J&S plans until some annuity tables for J&S can be developed, but if push-comes-to-shove have I violated anything going the route above given the plans haven't been amended yet for new 417(e) language and aren't auto-amending plans in the 417e area of the plan doc.

Just remember the recent IRS Notice that provided temporary relief for EOY vals for AFTAP purposes (can use 12/31/06 valuation for 2007 AFTAP) appears to lock you into continuing the use of EOY valuations for the 2008 year if you choose to use the optional relief (have to use an EOY val for 12/31/06, 12/31/07, & 12/31/08). That has nothing to do with Rev. Proc. 2000-40, which I agree we should be able to still use still relevant parts, but it does make you at least consider what you are going to do with your 2008 valuation date IF you're contemplating using the temporary EOY val relief for 2007 AFTAP purposes.

Any opinions on whether using a DC like multiple group structure still passes age discrimination until the 'similarly situated' safe-harbor rule ? I believe the proposed regs added the 'under the same formula' to the test for similarly situated, which I took to make it easier to pass (similarly situated under the same formula) but I'd be interested in others comments.

I don't see this delay as being much of a big deal. The law (tax code changes under ppa 06) is not delayed. The treasury dept. doesn't have the authority to dealy the effective date of the tax code change (still 2008) so it's just the extra guidance that proposed regs provide that is delayed, though optionally still applied to 2008, and even in 2009 it's just 'proposed' until they are finalized. I don't see much here to be concerned about since if you like the proposed regs you can optionally still use them for 2008, and if you don't, just follow the code sections with your best reasonable interpretation.

Thanks Ak2ary. Now back to some of the practical decisions that Penman mentioned. So, if we calc the 2007 AFTAP before April 1, 2008, using EOY vals under this notice approach (use 12/31/06 val/assets), then it's a good % until April 1, 2008 and after that it drops 10% until the earlier of (a) 2008 AFTAP is done, or (b) 10/1/2008 at which time if no 2008 AFTAP it's deemed to be less than 60%. Is that right ? I'm still not clear if there is any penalty if no 2007 AFTAP certification is done by April 1, 2008. If we can live with benefit restrictions, amendment restrictions, UPCE restrictions, etc.. for 2008 do we care ? We care if there is a penalty or if the client cares of course for other reasons, but like Penman I'm still trying to figure if there is motivation to do it (2007 AFTAP) if client doesn't need it for lump sums, UPCEs, amendments. Any thoughts ?

thanks Mike, that will be much appreciated. Thanks for your input as well Ak2ary.

Andy, I don't think we get the same result on the 2nd scenario (age 55; benefits payable at 65) but I think that is my error. I was initially thinking the PV for the 55 year old was the lump sum for the 65 year old but just discounted 10 years from 65 to age 55 using 2nd segment rate. However, my 65 year old has the 1st segment rate for the first 5 years of expected payments, whereas, under your advice it appears the 1st segment rate is never used for a 55 year old terminated participant getting an immediate lump sum since initial payments are more than 5 years away. That said, I'm sure that your approach is correct for the 55 year old, I just need to correct my visualization of this and maybe use a timeline from the current age at lump sum on out to when payments would be expected to begin (if paid as an annuity), and for how long they would be payable under each segment rate.

Time to do some lump sum term calcs for 2008 calendar year plans. Theoretical example/question that hopefully will serve for the methodology: If I have a retiree at age 65 (plan's NRA also is 65) with a lump sum option, is the annuity factor at 65 a summation of the following annuities: (a) 5 year temporary life annuity at 1st segment rate, plus (b) 5 year deferred temporary life annuity payable for 15 years at 2nd segment rate, plus © a 20 year deferred life annuity at 3rd segment rate ? If the above is correct, if I changed the terminated participant's age to 55 would it just be the same above annuity summation but discounted 10 years at the 2nd segment rate (let's assume no pre-mortality table and no forfeitures on death). I'd appreciate any confirmations or corrections.

Penman, thanks for the notice reminder. I didn't hear anything about any model notice and I'm pretty sure one does not exist at this point. What, if any, are the penalties for failing to provide the notice if a notice isn't done ? Anyone ?

I can't remember if it was the LA pre-conference session, or regular session, but Jim Holland mentioned one "might" consider using the 12/31/06 valuation numbers for a 2007 AFTAP given a lack of current guidance for EOY vals. That was informal of course, but I kind of got the impression that may the direction the future IRS guidance would take. For 2008 AFTAP and future years, he repeated that it will take a technical correction bill to provide relief. He said the IRS has more leeway in pre-2008 years, than 2008 and thereafter, so I get the impression we won't be out of the woods yet even after the IRS relief/guidance, which to me sounded like it might only apply to the 2007 AFTAP. Despite the IRS officials speaking in several sessions I didn't feel they gave us much info. Most of their remarks seemed to fall into the typical categories: (1) "we realize there is an issue", (2) "that's on our list to address this year", (3) "guidance will be out relatively soon we but can't define soon", or (4) "That's an issue for Congress to take up". The above comment on the 12/31/06 valuation was about the only "unofficial" suggestion I heard. On about everything else they seemed to play it very close to the vest. Overall I was disappointed with the conference content, even though the facilities and logistics were great. Even Larry D's presentation with Jim Holland on indexed benefits in a DB plan seemed to me to be a painfully narrow topic that I don't think many people were interested in given the number of people leaving the session regularly.

Effen, would you expound on areas of ASC to be extra careful with on DB/DC combos ? Is it primarily coding issues ? Have you disagreed with the actual EBARs that ASC calcs under both NAR and MVAR ? We're considering ASC for combo purposes (permissively aggregated plans) but have been primarily been just using own Excel spreadsheets for this purpose so far.

Penman, for what little it is worth I'm basically thinking along the same lines as you are. Switching to a BOY val mostly when practically necessary, not en masse. I'm also hoping the LA conference might bring some new info and hope for EOY vals, and if so, those of us going will share what we glean.

Is there any written guidance for this approach that SVP and others here have stated is the correct approach on the 417(e) PVAB ? I'm not doubting it just wondering where we got it from (verbal ??? vs. written guidance), or is it just a "of course that's how you do it stupid" and obvious to everyone but me. It seems a fairly laborious approach as has been mentioned in other threads.

Thanks for the sites. I agree, I don't see anything of particular interest in the brief corrections included in the bill re: PPA 06 (H.R. 4839; version passed by both House and Senate). Are we expecting another technical corrections bill that might cover PPA 06 or was this it ? I thought a thread discussed the IRS said their hands were tied on any EOY Val AFTAP relief until a technical correction bill went through, hoped this was it, apparently not.

So I see on benefitslink Congress passed a technical correction bill that among other things covers PPA 06 corrections. Assuming this bill gets signed (no reason to think it won't that I know of) does this then give the IRS the authority/clearance to issue some rules and relief for EOY vals for AFTAP purposes ?

Wasn't the IRS having a glitch a while back, and maybe even currently, on sending out late 5500 filing notices on 2004 5500s that were timely filed ? I think I have a client that just got one as it appears to have the normal "we didn't get your 5500 for 2004 leetter" but then there's an extra response page where you fill it out "if you did file it" using approximate dates and type of 5500 filed (EZ vs. full). Is anyone getting these ? Maybe just filling out Section I that they did file takes care of it ?? Anyone seen this ?

Agreed.

Glad I asked. I guess that makes sense. Did I translate the approach correctly on the attachment ? PVAB.pdf