JAY21

1. Talk to an Enrolled Actuary (pension actuary). 2. The only con to freezing or terminating the plan after 5 years that I can see is that you forgo additional years of future funding, but if you situation necessitates that, then freezing or terminating after 5 years should be fine so long as you are not over funded at that time. If over funded (all DB plans are either over funded or under funded) then you might need to keep the plan accruals going another year or so to absorb any over funding. 3. Back to your initial eligibility comment for employees, if 1 employee worked 1000 hours in the prior year (2012) and thus met the eligibility for 2013 but then failed to work 1000 hours for the current year (2013) they may still need to receive a benefit accrual as they probably are included in discrimination testing for 2013. This would be an issue to discuss with the actuary. The 1000 hour rules is not absolute in all situations so this would be something you'll want to look into.

For those of you conversant on contributory DB plans, when an lump sum option exists on the both the employee and employer portion of the accrued benefit, does the accrued benefit portion that is derived from the employee contributions have to be present valued on 417(e) rates too (obviously not less than the contributions with interest) for the lump sum distribution ? or can it be a lump sum where the employee derived portion of the accrued benefit is paid as a lump sum as a refund of the employees contributions (with interest) only and then only the employer portion of the accrued benefit is present valued on 417(e). For example: 1. ER paid accrued benefit present value on 417(e) plus EE dervied AB paid as refund w/interest of contributions = Total Lump Sum -OR- 2. Entire accrued benefit if paid as a lump sum is subject to 417(e) but never less than the employee contributions w/interest (120% of federal mid-term rate interest). Is example 1 above even an option ? I know there are situations where a refund of employee contributions can forfeit the entire benefit (subect to restoration rules) but I'm just talking about a standard termination of employment where a lump sum of the employer provided benefit is also available.

Possible takeover DB client that has apparently heard some comments that some other companies they have some affiliation with might cause the plan some problems and have requested that we determine if an ASG exists (my words) before taking it over. We'll do our best but doesn't the IRS still have an option to rule on an Affiliated Service Group ? is it available just via Form 5300 for the initial qualification of a DB plan (or any plan) ? or as a separate stand-alone ASG ruling (maybe just a private letter ruling). I thought I remember seeing or hearing that the IRS will no long rule on ASGs ? but may I heard wrong or maybe it's just as a separate private letter ruling they won't but will for an initial qualification ? Anyone remember ? Thanks.

Is it even an option at this point to still use the 30-year GATT Rates as the 417(e) rates in the plan document instead of the newer RPA segment rates ? Thanks.

I don't see why not.

Maybe, but what is the purpose of a Form 5310-A then ? Also when you transfer excess assets to a Qualified Replacement Plan via IRC 4980(d) this is not just the present value of the participants accrued benefit but includes excess assets as well. I'm not advocating the trust-to-trust approach, I consider it aggressive, but I don't agree that there as NO trust-to-trust transfers as aforementioned.

I believe they are effectively doing the equivalent of a quit-claim deed approach but it's a Trustee-to-Trustee assignment of assets and I believe this approach has "some" validity under general Trust Law. That said, it's probably a short-cut approach that still will need the actual mortgage re-titled (Title Company work) at some point (you don't want the mortgage to always show the DB plan name years after it's in the MP plan). Whether you can claim that the signature date on the Trust-to-Trust transfer can be the "distribution" date will probably be up to the plan sponsor. In my opinion this is a grey area, I've seen it done, don't recommend it, but there seems to be some general trust law that support such an approach though whether that works with a Qualified Plan Trust is hard to say.

Looks like unless it's a YOS from a predecessor employer (defined term) then you can't do it per IRC 1.415(f)-1©(2).

The rules on 415 compenstation only allow us to count compensation paid from employers part of the same Controlled Group or Affiliated Service Group for IRC High-3 Comp limit. Are there similar rules for which Years of Service (YOS) you can count for IRC 415(b) purposes to be applied to the Compensation Limit under IRC 415(b) ? For example, say a plan gives prior service credit for benefit accruals for employment worked in a total different company (maybe to attract top talent away from another company) could you use those prior unrelated employer YOS for the DB plan's current 415 limit ? even though they were not worked with the sponsoring employer or any related entity ?

This probably falls in the dumb question arena, but when a non-profit organization sponsors both a DB and DC plan I assume there would be no multiple plan deduction limits. In this case are we ok just making sure we adhere to the 415 limits under each plan but without regard to the normal deduction limits ? Thanks in advance.

I don't think a prototype SEP and a SEP on the IRS Model Form 5305 are necessarily the same thing. Most of your investment companies have prototype SEPs that do NOT use the IRS Model Form 5305. It's my understanding that sponsors of these prototype SEPs (but NOT Model SEPs) can then sponsor another qualified plans.

DB plan termination with a lot of participants, several which are terminated vested participants with benefits in the plan. In anticipating the IRS submission questions and IRS policies, what are you seeing these days from the District Offices reviewing plan term submissions on whom has to be fully vested upon plan term beyond just the active participants. Is the following consistent with what others are seeing: 1. Terminated Vested Participants whom have not been paid out from the plan AND whom have less than 5 one-year break-in-service years must be 100% vested. 2. How about terminated participants that were 0% vested upon termination of employment but have less than 5 one-year break-in-service years since their termination, must they be 100% vested ? Does the plan's language about "deemed forfeitures" of these 0% vested benefits influence the IRS on this and help avoid full vesting ? Opinions, Thoughts, Experiences are appreciated.

I think the entry dates were provided. As a practical matter with only 2 entry dates anyone who has not enter the plan as of 7/1 will not enter until the following year so I'd just use your 7/1 counts as representative of "every day of the year" demographics.

Looks like I didn't look hard enough. The instructions to the PBGC's Form EA-S has a blurb that the enrolled actuary may include as a plan assets the value of such committment if it is made to the plan in writing and signed by sponsoring employer(s). I see no requirement that the notice be given to participants, sounds like it's more for the actuary to have something to be able to certify the EA-S form.

I was reviewing some PBGC plan term instructions when I ran across Appendix D in their instructions. Appendix D is a model "Commitment to make a Plan Sufficient for Plan Benefits'. Does anyone know how, when and where this notice is to be used ? (see attached copy). I realize the plan cannot terminate in a standard termination unless assets are sufficient to cover all benefits but is this notice to be used when the plan "intends" to fund the plan further but has not yet done so but still wishes to start the standard termination process. Whom does it go to ? I can't find anything in the PBGC instructions as to how and when to use this notice. Thanks for any input. PBGC_Model_Commitment_to_Fund_Plan.pdf

I meant that the e-mail approach "IS" the abbreviated method I was hoping for. It doesn't get any easier than that.

Thank you. I was hoping there was an abbreviated reporting method.

I may have my first Val where for the 2011 plan year the employer may want to use the 2+7 extended amortization period pursuant to the IRS Notice 2011-3 guidance that explains IRC 430©(2)(D). It appears this amortization extension can still be used for 2011 (the last year available) if I'm reading it correctly. I see that this is a PBGC reportable event. Is this reported on the PBGC Form 10 or is there an abbreviated method that is used for this PBGC reporting purpose. Thanks for any input.

That is a good point. IRC 414(m)(5) explains those "captive management" situations where the 1 entity exists only to manage another entity. Whether the "consulting" they do equals "management" of those companies might be the key issue to look into further. Perhaps if the "Consulting" is something more narrow than management (e.g., technical consulting on a certain aspect of the operation but not management servies) then it might still be ok, but this is certainly an important issue to consider. If it's an Affiliated Service Group with the ongoing AB company due to the performance of captive management services you wouldn't want a DB plan if AB company has employees.

In my opinion as an actuary you are maximizing every opportunity currently available to you. I can think of no further options or different plan design that would increase what you are doing. Also it sounds like you are staying within the limits. This is just my opinion based upon your current day snapshot of info you provided so you'll need to make sure you have professional help to "mind the store" on all the contribution limits going forward, but I see no problems or unmissed opportunities from the info you have provided.

This should not be a problem and the IRS will accept this type of amendment upon their review.

If I can further extend the question to say is there now ANY required amendment that is due by 12/31/2011 ? I thought the DB required amendments for 2011 was comprised of 2 parts; (a) a WRERA amendment and (b) this 436 amendment. It's clear that Notice 2011-96 is extending the 436 amendment to 2012 but what about part (a) above; the WRERA amendment is that extended with this notice too or is that still required by 12/31/2011 ? Thanks.

I guess I must disagree with the posts that transferring the excess above the 415 limit is aggressive. Where do you find that ? I've used Revenue Ruling 2003-85 several times in these situations. There is nothing in the Revenue Ruling or in the Code itself (IRC 4980(d)) that limits the availability of this option. Even the IRS is bound by the tax code and its own Revenue Rulings and I don't think you read into it more issues than it espouses. I think this exact situation described works even under the spirit of the law since the excess that is transferred to a Qualified Replacement Plan (e.g., the 401k plan) and put into a suspsense account is then released and counts AGAINST the DC plan's 415© limitation under that plan so you are NOT able to receive both a maximum (49k) allocation of new contributions plus a maximum allocation (49k) from the suspense account since you have only 1 415 limit and the excess asset release counts against 415. It's almost akin to pre-funding the DC plan since due to the 415 limits a small plan employer will likely now contribute less (or none) until it has used up most or all of the excess in the suspense account thereby limiting its tax deductions to the DC plan for a few to several years until the excess asset suspense account is exhausted (limited to 7 years generally). You could argue that in the aggregate the government has lost less revenue due to fewer new DC plan contributions from this scenario than if the client had invested the DB plan in assets earning exactly 5.5% so the 415 limit was perfectly funded but no more. To me it's a win-win scenario as the client avoids excise taxes on over funding and the governement gives away less tax deductions due to new DC contributions until the excess assets (suspense account) is exhausted.

I have a potential client that did not file a 5500-EZ for 2009. He has not received any IRS correspondence yet on this missing filing. He is also late on his 2010 filing now too. Does anyone know if the IRS has gotten around to sending out late notices/penalties on 2009 Form 5500-EZ clients yet ? He's closing down the plan so I think he's trying to gauge if he might have slipped through unnoticed or whether to file late given the 5500-EZs don't have a deliqeunt filer program yet, at least I haven't heard of any for 5500-EZ filers. Thanks for any input/opinions.

I just read the ASPPA ASAP notice on the delayed effective date of fina/proposed cash-balance regs. I think I understand it but what about optional use of such regs before the new effective date, is that still allowed ? I believe previously that even though 2012 was the effective date we were allowed to optionally rely upon the proposed regs before then. Is that still an option ? Thanks for any opinions.