ak2ary

I agree with Zimbo

I do not see where Rev Rul 2007-67 says that you do not have to amend the plan to use PPA rates. It gives relief under 411(d)(6) if you do amend...It says that if your plan incorporates the 417e rate by referenec that you do not have to amend. But I've seen alot of plans that say the Applicable interest rate is the rate on 30 year treasuries as published by the commissioner. Well the commissioner still publishes that rate. In that case I would be concerned that I am not following the plan document and you would have to pay the greater of PPA and GATT. Amend the plan ...besides imagine explaining in court, when the participant sues, how your calc was for less than what the plan doc says

For a newer plan, it is simply the restriction on accelerated benefit payments and notices to participants etc... If the plan is well funded as of 12/31/06, it seems that the simplest method is to provide a 2007 AFTAP certification This will get you to 10/1, by which time you will have done your 12/31/07 val and , assuming tech corrections by then, could certify 2007 If the plan is well funded it seems silly to consider not certifying...

EOY vals may use the 12/31/06 valuation results for the 1/01/07 AFTAP See Notice 2008-21 attached Notice_2008_21.pdf

That's beautiful, Mike, just beautiful...brings a tear to my eye

You have to be careful whe you say that you are not using pre-retirement mortality. First, there is a question as to whether the most valuable benefit rules require the use of preretirement mortality in your 417(e) calculations, but the IRS knows they need to issue guidance on this before they can do any enforcement since they have issued oh about a million favorable DL's the other way.. But my point was that you MUST recognize mortality post retirement in any case, so in the instant case, beyond age 65... for the age 65 participant it is (N65-N70)/D65..........+.............. (N70 - N85)/D65 ............. + ............ N85/D65 1st seg rate ........... + ............. 2nd seg rate ............. + .............. 3rd seg rate So the 2nd and 3rd segment rate pieces of benefit have a mortality discount back to age 65. Some have proposed (N65-N70)/D65 .......... + .......... {(N70 - N85)/D70} / ((1+2nd rate) ^ 5) .......... + .......... [N85/D85] / ((1+3rd rate) ^ 20) 1st seg rate ................. ..... + ......................... 2nd seg rate ...................................... + .............. 3rd seg rate for plans with no preretirement mortality, but its simply wrong since it both assumes and does not assume mortality after age 65 in the same calc. For the age 55 guy with pre retirement mortality (N65-N75)/D55 .......... + ........... N75/D55 2nd seg rate ..........+ ......... 3rd seg rate Without pre-retirement mortality [(N65-N75)/D65] / ((1+2nd rate) ^ 10) ............ + ............ [N75/D65] / ((1+3rd rate) ^ 10) 2nd seg rate ................................ + ..................................... 3rd seg rate

So the plan specifically says it is a money purchase plan? Absent such a statement, it is not a money purchase plan. It seems to me that you have a drafting error here. Whats not clear is if the drafting error is the absence of the QJSA language or the sentence that says "this is a money purchase plan" I dont see how its possible to have an SPD that is that far off from the plan doc... but my solution would be to propose to the IRS that this is a profit sharing plan and that it was a drafting error that said Money Purchase and move on They may very well buy that since the plan has a favorable DL and no QJSA language

IRS has publicly stated several times that a plan with a 2007 termination date is not subject to the PPA interest rate rules because the rules are effective after the plan's termination date. Thus, the IRS and PBGC are together on this one....(We'll see what happens for 2008/9 when you are supposed to get another year of phase-in)

An employer must burn credit balance to avoid the restriction on accelerated benefit payments, but if the plan has no accelerated payment forms, it is not necessary to burn credit balance to avoid a freeze.that is optonal. And as I watch the snow fall, I agree that burning the regulations would also help avoid a freeze (assuming nonbargained plan)

In fact, you would in theory run a separate 414(s) test for the group of otherwise excludables

So, in essence, the Plan Administrator corrected an insignificant operational violation under SCP

Good question, it depends on who you ask. For years, IRS representatives were pretty clear that you could use 21/1 with 2 entry dates regardless of your plans entry date provisions. Over the last two years that has become less clear. In the midatlantic region, the IRS audited alot of plans that did this and said, no you must use the plans entry dates unless the document says for determining otherwise excludable/early participation you use 2 entry dates. This dumbfounded the retirement industry, but alas, IRS made these plans adopt an amendment doing this (although they allowed the amendment to be retroactive..no harm no foul) Since then, one national office atty has sttaed strongly that this is the only way to do it, while no one else seems willing to answer the question into a microphone.It creates real problems for prototypes since no such language is in any LRMs etc I believe that outside the MidAtlantic region (and also inside that region) most people use two entry dates for both (I should note that my response is based on comments relating to the otherwise excludable options and combined with statements from IRS that both rules work the same) I have never heard the IRS raise the issue relating to the early partic rule directly however) Hows that for no answer

and I would then agree that you would get closer to a "right" answer than simply applying the annual q prorata across the year...I just wondered how many of those doing it right, were making any adjustment to the annual q

Not quite. The transaction itself may cause HCEs from the acquired company to become NHCEs in an asset sale, because they had no pay from the employer in the prior year. That may be different in a stock sale...but who is an HCE after a corporate transaction is a complicated issue. But you can't ignore that the transaction took place for 401(a0(4) and ADP?ACP...its just that you can assume that each plan separately meets coverage If you merge the plans into a single plan, you have no transition relief .. if the assets of the two separate trusts are commingled but the trusts not merged..you may be ok...assuming commingling the trusts is done properly

They could be disaggregated into a separate plan with all of the other otherwise excludable employees. Tis separate plan, hopefully, would cover no HCEs and would thus be exempt from testing

Under 410(b)(6)©, if the plans passed coverage immediately before the corporate transaction, they are deemed to pass coverage immediately after the transaction and for the remainder of the transition period. (assuming no material amendments). Unfortunately this applies solely for purposes of Section 410(b) and not for 401(a)(4). As a result, you can test the plans separately for ADP/ACP (although if itwas an acquisition the rules are not crystal clear on who is a highly and they may be diffferent in a stock acquisition than in an asset acquisition) and for 401(a)(4). But they must pass these tests separately. If you choose to aggregate the plans for testing, your transition relief appears to be lost. The "plan" for 410(b) did not exist prior to the transaction and has no relief under the transition rules...so you cannot ignore any problems. It also seems to me the BRF testing is a 401(a)(4) issue, and is not extended relief...however you could make the arguement that if a particular BRF covers all of one plan and that plan is deemed to cover a 410(b) group then the BRF covers a 410(b) group and should be ok. I think in practice that, if the plans remain tested separately after the transaction and the BRFs currently and effectively benefited a 410(b) group before the transaction, most would assume that BRFs are ok for the transition period. If the IRS was t take a different position it would severely limit the utility of 410(b)(6)©.

I think that what SVPdescribes is the minimum relief expected from the PPA/GATT change. The question remains, however, about whether the IRS will extend the relief further than that. In early October, your client requested a QJSA notice for a participant who retired and wanted to commence benefits in 2008. So, to fulfill the request, the lumpsum was calc'd based on GATT rates. If the plan changes from GATT to PPA, the lump sum will be less than the QJSA notice described. The employer wants to continue GATT lump sums for those who already got the notices and then switch to PPA. Does this create a protected benefit because the employer retained GATT past the PPA effective date. Is there 411(d)(6) relief for that? Treasury has indicated there will be some transition relief, but hasnt described it. Also switching from GATT to PPA reduces benefits. Does the plan have to have the amendment in place before it starts paying people under the PPA rates (unless the plan simply references 417(e))? This may be a serious issue, cuz even if the IRS says it wont disqualify your plan, it should be fun to explain to a judge how the plan paid a lower benefit than the written plan provides.

When doing things the "right" way, are people accounting for the fact that mortality is not level throughout a year that, in fact mortality at age 62 and 11 months is greater than at 62 and 1 month? Because, it seems to me that, if mortality is not being somehow weighted toward the end of the year, the right way is no more right than interpolating. Seems to me that interpolating is both easier and just as accurate (even if less precise)

try 180-some without a cigarette

Picked a bad year to switch to Sanka..or something like that

Tom- This is the second or third time I have seen someone ask essentially the same question...can you teach me the basics of compound interest and show me how to calculate EBARS. The last time, someone was questioning the EBARs on a practicioners report, so the practicioner thought he should come on to benefitslink and see how those darned things are calculated so he could tell the auditor. Now I appreciate people wanting to learn more and I have spent alot of my time teaching, but it really concerns that people are asking these questions on benefitslink and that forever they will use the answer that you provide as the basis for all their work without understanding why they get the number but simply having rote directions on how to get the number. When I first entered the business I was shown how to calculate the ILP Normal Cost for a benefit by hand... in theory, so I could check the computer output. I was taught that you take the current yeaar's benefit and subtract the prior years benefit. This gives you the benefit for the normal cost. You multiply that benefit by the age 65 number in column 7 from this chart and divide that by the current age number in column 4 of the chart. This gives you the change in normal cost that you add to last years Problem was that if you gave them a chart with columns in different order, nobody could do nothin' It scares me that there are people out there that do cross testing and consult to clients that can't calculate EBARs and don't know what these magic numbers represent. Maybe thats why you changed your name to Mike..so when they screw up they cant say..it was that Mike Poje This may not be fair to Alex, it sounds as if he/she is just starting to leaarn about this area and if so, I praise his/her motivation to try and find answers...I really do It just reminded me so much of the last post where everyone tried to teach EBARs http://benefitslink.com/boards/index.php?showtopic=37078

As long as -Not required to get a safe harbor contribution -Not required to get a top heavy contribution -Not allocated any forfeitures for the year This class of employees can be allocated a zero contribution without causing the gateway to fail because the gateway only needs to be given to those that benefit under the plan for the year (within the meaning of 410(b))

Except as provided in section 412(d)(2), the determination of a plan's funding target and target normal cost for a plan year is based on plan provisions that are adopted no later than the valuation date and that become effective during the plan year. Section 412(d)(2) applies for purposes of determining whether a plan amendment is treated as having been adopted on the first day of the plan year (including a plan amendment adopted within 2 1/2 months after the close of the plan year) That's the whole proposed reg section. To me, and I could be wrong, its telling us to look at the "date deemed to have been made" as the date deemed adopted, otherwise it ridiculous to include the sentence. No amendment reduces the the acccrued benefit as of the date actually made because it would violate 411(d)(6). So you could freeze benefit acruals as of December 1, 2009, deem the amendment to have been adopted as of 1/1/2009.....still the amendment would allow benefit accruals thru 12/1 but could be recognized on the 1/1/09 val I am not saying that the IRS never oversteps its authority, it just in the last couple years has used the, we dont have authority sentence as its reason for not doing things regulatorily more and more often

On the issue of using a single interest rate, I agree that the whole PPA valuation scheme is silly for small plans. Having said that, the determination of the funding target using the segment rates is statutory and I would imagine that, assuming the IRS agrees that its silly, they still would say they have no authority to directly contradict the statute