ak2ary

The regs in 1.411(d)(4) prohibit employer discretion as described above..it would essentially be a cutback I think the only available reading of "may" is that its the employee's discretion

2010

So assume the 1/10th of 415 is FT Assume also a 100 x death benefit Under proposed regs the entire pv fut death bft was FT Max deduction is 150% of FT So assume a 62 NRA and you are adding the 150% of the PV of fifteen to twenty years of life insurance coverage of over 1.5 million for each guy to the max deduction you calculated its ridiculous and the final regs fix it but you prolly get close to those numbers

The amendment simply grants one year of past servixe...not a timing issue

By definition, the reinstatement takes into account at most one year of past service for a automatic accrual and since that is less than five years, I see no reason to look at timing issues. I have reverted to my initial position that most plans that freeze at 60% will do so due to the timing of the AFTAP certififcation noyt due to actually being less than 60% funded and, so shoould not actually be frozen. As a result I don't want to have to amend to restore accruals and worry that I may have to make a 436 contribution to allow my accruals to resume. In essence you may wind up paying twice for the accrual in the year of restoration... Plans that are actually under 60% funded need more personalized attention than "what are you doing for your plans about restoration?"

Follow up on caveat Assume 60,000 made 9/15/11 not 1/1/10 2010 effective rate 6% 2010 actual rate 10% 1/1/10 PV of contribution = 60,000/ (1.06^(20.5/12)) = 54,315 Excess contribution = 54,315 - 15,000 = 39,315 True excess = 54,315 - 25,000 = 29,315 Excess due to prior PFB use = 10,000 Adjusted PFB @ 1/1/10 = PFB @ 1/1/10 - PFB used for MRC = 17,000 - 10,000 = 7000 Adjusted PFB @12/31/10 = 7000 x 1.1 = 7700 Excess contribution to add @12/31/10 = (29,315 x 1.06) + (10,000 x 1.1) = 31,074 + 11,000 = 42,074 PFB @ 1/1/11 = 7,700 + 42,074 = 49,774

Someone asked me to post this In the webcast today I gave an example of interest on excess contributions for the year of deposit. The excess contribution that is truly in excess of the gross MRC is credited with interest at the effective rate while the portion of the excess contribution that is excess only because of a prior application of the PFB is credited at the actual rate Consider a plan that has the following 1/1/10 MRC 25,000 1/1/10 PFB 17,000 2010 Contrib 60,000 made 1/1/10 PFB election On 1/1/10 the employer elects to apply $10,000 of the PFB to offset the MRC Since 10,000 of PFB is utilized to offset the MRC, the remaining amount of MRC is $15,000 after the offset This means that the 60,000 contribution consists of $15,000 to satisfy the MRC and $45,000 of excess contributions. The excess contribution of $45,000 consists of $35,000 of true excess (60,000 - 25,000) and 10,000 of additional excess due to the PFB utilization that adjusted the MRC from 25,000 to 15,000. When rolling these contributions forward to 1/1/11 to add to the prefunding balance, the 35,000 will be credited at the effective rate for 2010 and the $10,000 will be credited at the actual rate of return. Caveat- this assume the contribution is made on 1/1... if it was made later, the 60,000 would be discounted back to 1/1 using the effective rate and the discounted contribution would be divided into true excess and excesss due to a PFB utilization as of the 1/1 dates. These present values would then be brought forward to 1/1/11 at the effective and actual rates respectively

that level of discretion is dangerous...the Administrator shouldn't have three choices, he should have one ....or he should have fiduciary liability insurance

of course there is a school of thought that says...after the first distribution, your $7,000 participant will only have a remaining PV accrued benefit of $3500...which can be immediately distributed..so in essence the whole $7,000 can be paid...in essence doubling the $5000 limit to 10,000 under 436

It seems to me that the schedule SB contains all the info required in an AFTAP certtification and may very well be considered to be one

the irs admits that we have no useable guidance on the impact of 436 restrictions on 412 costs. They backed away from the proposed reg almost as soon as it was issued. some argue in this case that you can't fund for the "frozen" accrual....others argue that you shouldn't a lower miinimum as a reward for an untimely valuation.<br /><br />ACOPA has issued a comment letter specifically on this topic only a couple of weeks ago which should be on ASPPA website. essentiallt it says that the restriction should be ignored until, under the terms of the plan, the benfit is permanently foregone,absent an amendment.<br /><br />in this case, assuming a one year retro restoration of benefits, the 1/01/2008 freexe becomes permanent 10/1/09 and would not be recognized for the 2008 or 2009 vals

Or look at my allocation groups above Assume the employer elects to make different contributions for each group It can elect to make a zero contribution for some groups if it wants but if it makes a zero for the first group, in order to benefit you need to be at least 30 That violates the 410(a) age service rules Same thing if you had service based classifications and gave contributions to everybody except those with less than 5 years or something like that

Depending on the number of employees, it may be cheaper to just let the plan be disqualified

That is a good point, wise 3-eyed creature of the deep The proposed regs (altho not the law IMHO) make the partial lump sum mandatory for plans between 60 and 80% although the law seems to say that plans between 60 and 80% may offer the partial lump sum. Given that, falling below 60% would generate another restriction under d, which would generate a deemed waiver. Unless final regs do an about face and follow the law, I stand corrected

You are aware that the prior valuations are wrong. As a result your opening credit balance/funding deficiency is wrong. I don't believe you can just go forward from that point, if you are the actuary. VCP cannot be used for this, unless the benefit payments have been wrong (in which case they can be corrected in VCP) If this is a small plan and the principal's benefit is significant to the valuation results, I believe that you would be required to redo the past valuations and file amended schedules B. Others would argue that you could simply do an attachment to this year's B showing why you changed the opening crtedit balance on this year's B versus the closing balance on last year's B. The fact is though, that 5330's are due to pay excise tax on funding deficiencies and you as actuary didn't do anything wrong and shouldn't assist in hiding mistakes made by other practitioners. If you can't get the excise taxes waived, the client should get them out of the hide of the prior actuary.

You could of course setup two plans....

No you cannot use component plans In disaggregating for component plans each participoant has to be assigned to exactly one of the componenets, so you cannot take the first three tiers for everybody and call that component 1 and the last tier and call that component 2 because some employees will be in both components. You must test the whole contribution as a single allocation.. If you want to divide the people into component plans, you can do that ...but you can't divide the contribution for any employee into two components.

Hate to help a yankee fan but 404(a)(7) does not apply Determine the max deduction separately for each plan Both are deductible Sincerely AK2ARY Met Fan

There is a requirement to waive to get to 80% if the plan offers lump sums, but there is no requirement to waive credit balances to get to 60% unless the plan is collectively bargained. So if you have credit balance but not enough to get you to 80% you can allow the plan to drop below 60% and retain your credit balance 436(f)(3)©

Assume a plan has an interest credit rate of 6% (assuming thats legal, which it prolly aint) Based on the plan's provisions the current theoretical balance provides a benefit of slightly more than the th min that plan can pay a benefit of greater than the th min without considering 417e but does it satisfy the th minimums we dont have an answer but its hard to imagine that it does. The th min is in no way described as a theoretical balance it is only descrribed as an annuity at nra and is subject to 417e.

The problem is of course that if the plan is amended to provide the early retirement window, the IRS would consider that a significant amendment and that would invalidate the transition relief

AFTAP is based on the accrued benefit at the beginning of the year regardless of whether its a BOY or EOY val, so unless the amendment has a past service liability that extends past the beginning of the year its not in AFTAP for year 1 But it does effect AFTAP for year 2 if its adopted in year 2 but provides for benefits in year 1 and its not at all clear what the impact on the Year 2 AFTAP has on the ability of the amendment to take effect for year 1

From the description above...it is clear she has issues from earlier years with underpayment of FICA But that is well beyond the scope of this post

I assumed from She has the past service to give her a benefit, but as of the beginning of the year, her average salary was $0? that she had the service

I agree that the minimum the plan could be written to give him is zero...that doesn't mean that the plan couldn't be written to give him the additional accruals on top of the actuarial increase...I've seen it done, usually by accident. So like most questions on this board it comes down to "what does the plan document say?" You have to be really careful here, because the plan may say in one section that the benefit is the 1000 plus the additional 50 and since he has already been paid the 1000 you think he gats the 50. But, as Ron correctly points out; in most cases you'd be wrong. The plan also has a section that deals with the remaining accrued benefit following an initial payment and, usually it says you reduce the entire accrued benefit by the actuarial equivalent of the benefits that have already been paid and, as Ron describes, the answer is prolly zero. So iffin I was you I would read it, then read it carefully, then read it again, then decide what it says.