JAY21

I guess I'd hang my hat on the words "may" and "agreement" as something that lends support that is not required (escrow) but may be offered if it can be agreed upon with the Plan Sponsor. I'm not an attorney though.

Start with the plan document. If the plan document doesn't allow the escrow as an option I would think the plan sponsor has every right to turn them down. After all, a plan is not required to offer every option available under the law.

So the 417(e) table maybe can still be considered the "prescribed table", since that is what is called for under IRC 430 (by reference), so maybe we still just reference it as a prescribed table (actually a prescribed table within the prescribed table regs section.....).

In case you haven't seen it yet, benefitslink had the following PBGC relief posted today. Plans under 25 particiants (as of prior year) are relieved of filing a reportable event for failure to make quarterly payments (so long as not due to employer financial difficulty). Plans between 25-100 lives (prior yr count) only need file 1 notice (not 4 separate notices for each missed quarterly payment) but they must due it by the 1st due date, which I think for calendar year plans is May 15th ? See attached. Thanks for the efforts of COPA/ASPPA and others who helped petition for this relief. PBGC_Quarterly_Pmt_Notice_Relief.pdf

Sounds like a shared employee. A "reasonable" approach would be to cover her at whatever portion of her salary is for services to the sponsoring employer.

Good point David, it's just I would think a 2008 Schedule SB would be asking about the 2008 AFTAP, but if you use prior year data for AFTAP, while following the instructions, you end up with a 2009 AFTAP on a 2008 Schedule SB.

Does lines 14-15 of the 2008 Schedule SB want your "actual" 2008 AFTAP which was sent to the client (which may have used 2007 data if EOY val) ? or do we just strictly follow the line-by-line instructions and use the 2008 data for these lines which essentially is the 2009 AFTAP numbers (for EOY vals using prior year data).

Andrew, thanks for sharing this. It looks helpful.

I'm not sure I fully understand the CPAs position. I'm thinking he plans on deducting it in 2009 and doesn't need it in 2008. I generally leave the deduction timing up to the CPA.

Kind of a different situation.... Client has a 2008 DB funding range with approx. 50k-250k funding range due to past service and 50% cushion on max end. Client actually funded 150k during 2008 but CPA only wants to deduct about 100k for 2008. Since the extra 50k was entirely contributed within 2008, but 50k is not going to be deducted, is it subject to 10% penalty tax. CPA said they'll pay the 10% penalty tax if it applies. Seems odd to pay a penalty tax on a contribution within the deduction limits but "optionally" not deducted. Does the 10% penalty apply ? I'm thinking it would apply.

What are people doing on small plan EOY vals with quarterly penalties ? Discounting back from actual contribution date (EIR + 5%) to quarterly payment date (e.g., 4/15) then accumulating interest forward on discounted payment to the EOY val date at the EIR ? Something different ? I believe we don't have specific guidance on EOY vals yet but curious as to what "reasonable interpretation" approaches are being used out there.

I generally try to encourage clients to use NRAs at age 62 or later (safe-harbor), but for the occassional client that insists on using a lower NRA (usually to help increase the tax deduction where high-3 comp avg. is less than 415 dollar limit) is there any good statistical info that is either free or via a modest subscription service that provides some industry norms for retirement ages (any DOL workforce surveys or anything like that). Of course the small family businesss that breeds purebred dogs might have a hard time finding good statistics, but for common occupations there must be some data free or at a reasonable price. Any ideas ? thanks.

Carrot, personally I think you are allowing too much of a disconnect between distribution and funding. Yes, we all know the concepts and rules are a bit different but the "best" (i.e,. most accurate forcast) assumptions should be used to keep the values under funding and distributions as close as possible. Your interest crediting rate under the plan document is part of the Accrued Benefit itself. While you certainly don't know future rates under the chosen plan doc benchmark you do know the actual interest rate for the current plan year which is used to develop part of the current year's accrual (interest on theoretical contributions). To me it would be hard to justify segment rates in the 5.5-6.25% range if you current accrual was using say 4.0% at least to bring it from the prior year to end of current year for theoretical account. Maybe the best bet is to amend the plan doc benchmark to tie into a corporate bond benchmark and get an IRS letter (since it's not a safe-harbor benchmark under current regs) to have a better argument for using segment rates. Of course, then the plan sponsor has to make sure they go out and get that kind of rate to avoid shortfall contributions.

I'm pretty sure your participant count date fora new plan is 1/1/08 (would be 12/31/07 for an existing plan) and so you'd pay just the flat rate premium for the 1st year.

Well....your April 30th date is for plans with 100 lives or more. Those plans must use a beginning-of-year valuation date per PPA 06 rules. Thus, it probably isn't unreasonable to think the 1/1/08 valuation (using 2007 census data) should be done by 4/30/09. Small plans under 100 lives have until the earlier of (a) the actual filing of the 5500 or (b) the extended due date of the 5500.

I slugging my way through my first Annual Funding Notice for a PBGC plan under 100 lives. It replaces the SAR report. I'm using the PBGC model notice and following the instructions at the bottom of the model notice which refers me to sections under ERISA 303 for definitions of each component (e.g., plan liabilities). Reading those ERISA sections they do not refer or allow any use of prior year data for this FTAP purpose which is no surprise as even the IRS relief was not in the Code itself. Question: Is there any ERISA/DOL relief similar to IRS relief to to use prior year data for small EOY plan valuations ? If not, I end up with a different PBGC FTAP for the same year than my funding/distribution FTAP under the IRS rules/relief. 2 different FTAPS results for the same year ???

For 2008 I believe we can use any val date. We have a small plan that seems better suited for an EOY val than its current BOY val date. However, if we change it to a EOY valuation, is there any guidance on how to do the AFTAP for the first year of changing the valuation date ? Normally an EOY val AFTAP uses prior EOY valuation numbers (per technical corrections act; IRS guidance), but in this case, the prior year was a BOY valuation, can we still "look-back" to the prior year Schedule B for our AFTAP numbers given the prior year was a BOY valuation ?

That's an excellent letter. Thanks for sharing that.

Sounds like to me the DB plan has a "safe-harbor" benefit formula (i.e, same formula for each participant) and if so there is no discrimination testing on the DB plan even if there is for the 401k plan. The plans can optionally be aggregated for discrimination testing, but that would only be necessary when the DB plan was NOT a safe-harbor formula (e.g,. formula for highly paid is maybe 10% of pay but for lower paid employees only 0.5% of pay, but then employees get good profit sharing contributions to make up for the DB disparity and plans are tested together). I agree with the plans "likely" be aggregated for top-heavy testing (e.g., if a key employee is in both plans or plans aggregated for discrimination testing).

If ASPPA and COPA are unsucessful in their efforts to talk some sense into the PBGC, do we have 4 notices annually to the PBGC per plan (those PBGC plans required to make quarterly contributinos) where a plan doesn't make its contribution until AFTER all 4 quarterly due dates ?

I read the ASPPA ASAP but didn't understand the subsequent paragraph about the only remaining waiver available for 2009 and thereafter is where the minimum required contribution is made by 30 days after the "due date". What is the "due date" for this purpose ? (30 days after 12/31/09 ??).

If the 415 limit is going to be payable as a lump sum then it must be present valued on a single life basis (using statutory mortality table and interest rate comparisons to the plan's actuarial equivalence) even if the normal form is a subsidized 100% J&S (or 50% J&S). If this benefit (415 limit) is actually taken as an annuity benefit then it can be paid without reduction over the 2 joint lifetimes if the normal form is a subsized J&S and such a J&S is elected. In addition to the lump sum determination based on a single life annuity, the other classic example they usually give for a reduction is if someone elects a 10 certain & life benefit (first 10 years of payment guaranteed) usually in this example the normal form of payment valuation is only a single life annuity.

You have revised your valuation rates and they are now $X (old val rate plus $300).

Thanks SoCal. That's a great example.

Do we have any exact details on how the provision works that states that accruals for HCEs within the past 2 years can't be taken into account for the maximum funding cushion. For example, Plan is frozen 1/1/08 but is later unfrozen by 12/31/08 as client had better year than expected. This is a 1 person plan that has been in effect since 2006 and these are the first amendments to the plan (freeze and unfreeze) Since the 12/31/07 AB was not impacted by an amendment within the past 2 years do we still get the (1.5)(Funding Target;past svc) but then DON'T add the 2008 normal cost component (due to recent unfreeze within past 2 years) to arrive at the maximum deductible contribution ?