ak2ary

and make sure the brokerage option does not have a minimum balance requirement which would make it not effectively available to the nhces

How many years has it been frozen for? Is it a true, hard freeze? If continuously frozen since mid 2005 it is not subject to the 436 benefit restriction

One can quote that way as long as the one is not me and doesn't work for me. Actually, you're dealing with 404 and not 430 or 436. It seems to me that I would quote the 404 number as being based on current law and note that, if tech corrections pass, it will blossom to (insert higher number). So you could let the client know that the higher limit is possible, even likely, but don't let the client fund it quite yet

At least the remedial amendment period is still running. Most of the plans I have seen run into this failed due to an inordinately early NRA. In those cases, if you amended the NRA to comply with the final phased retirement regs the issue disappeared... but a half percent pay credit is pretty tough. It seems you have two choices...raise your interest credit (which will cost more money in the long run) or take advantage of the remedial amendment period to raise the previous pay credits. On audit, if the IRS raises the issue, my experience is that they are not flexible on the .5% accrual standard... at all.

All plans can deduct unfunded (at-risk target liability + at-risk TNC) regardless of size

The 133 1/3 rule is only an issue for plans that use it, such as cash balance plans. If you have a one person 415 limit plan, there is no reason to use a cash balance design. A traditional design that meets the fractional rule will work fine. Also IRS has promised additional guidance on the 133 1/3 rd rule that, they say will allow most greater of formulas to meet 133 1/3. Further, technical corrections will apply the cushion to the target normal cost So while this was, in theory, a problem for April 1 AFTAPs...I don't expect it to be a big deal Also BTW in a plan that pays immediate lump sums, the plan will have an at-risk liability equal to the PV of immediate lump sums...so you can fund at least for the lump sums...

You should be very very careful anytime you have to rely on the deminimis exception... the IRS has never used 3% as a safe harbor in fact they are very clear that if you have a definition of pay that will consistently yield a lower inclusion percentage for NHCes, it likely fails, regardless of the differential. For instance assume a plan has a definition of 415©(3) pay excluding overtime...and only NHCEs get overtime...I would not be comfortable that it is allowable even if the differential was less than 1% I have heard National Office IRS reps warn people off this saying that if you need to use the deminimis exception due to normal plan operations rather than a one-time anomaly; you are likely not eligible to use it. The example I have heard given is if the plan has consistently passed 414(s) for a number of years and in a single year the difference is 1%., then you are probably ok, depending on why you failed. For instance, if plan pay excludes bonuses and, in a down year, the company continued bonuses to staff but cut them for HCEs, that may be ok

B- I really hope that is the answer, but have recently spent a fair amount of time looking at variable annuity plans (VAPs) and am growing convinced that the IRS may not come down there, in all cases. I think your limitation to a market rate is a good one, but it would have to come via regulation and I think we are years away from that. A common design in VAPs (plans that are indexed to the actual return on plan assets) is that for determination of your accrued benefit, the plan does not make a reasonable assumption as to the future rate of return on plan assets, but rather the plan terms call for an assumption such that all future plan returns are assumed to be equal to the GATT or PPA rate, regardless of the asset makeup of the plan. The proposed hybrid regs made the satement that the actual return on plan assets is a market rate of return and clearly the third (usually highest) segment rate is a market rate of return. So, either way the plans provide no greater than a market rate. These plans commonly provide that if you take your money future returns are at the PPA rate, but if you leave it in, future returns are at the actual rate earned by the plan. Thus, if you leave your money in the plan you are expested to receive a greater benefit than ifd you take it out. While I agree that has nothing to do with additional service but rather with delayed commencement, it seems to me that, in this particular case, its a benefit accrual for both active and former employees. {The other arguement is, as noted in the proposed reg, that all future VA adjustments to the benefit are acrued at the time the benefit is accrued. But this would invalidate the plan provision that changes the future rate of return assumption for determining the accrued benefit, and many of the plans have favorable DLs (that they shouldn't have for about a thousand reasons)}

fire the client now...right now...if you want to write a note explaining why this data is absolutely necessary ...go ahead as long as you fire the client at some point in the letter. If you don't, this client will push you to lower your standards .. it will be a constant battle...each year you will lose money on the client and ask yourself Why didnt i listen to the 27 people on benefitslink who said to fire this client???? btw i would fire the client now

I think we need more guidance on Target Normal Cost before we can answer this question for sure. I would also like the answer to be that it is an actuarial loss I think that Andy's question is the more interesting question. In a "frozen" cash balance plan with a variable interest credit, the participants benefit payable as a life annuity at testing age changes every year. The participant's benefit payable in qjsa form at NRA changes every year. Is this a frozen plan for (a)(4)/410(b)/(a)(26)??

It could if the interest credit rate exceeded the funding rate

Look no further than the Microsoft case. Their plan excluded independent contractors, Microsoft had each employee that was characterized as a contractor sign an acknowledgement that they were not entitled to any pension or welfare benefits. Courts found that they were employees and that under the plain language of the plans they participate, regardless of the fact that they had acknowledged that they were not entitled to participate.

no

If you pay someone $50 to not defer aren't you creating a "significant detriment" to their exercise of their ERISA rights I'd go with scrabble score for their last name (no hyphens either, that would make a mockery of the whole thing)

See column 3 page 14425 has address and content requirements for the certififcation

Here ya go multi_regs.PDF

Regs came out on the 14th for Multi's I am trying to get a link to a copy

For 2008, you must certify the plan's AFTAP. If you do not yet have the data to certify 2008, or if the results are better you can certify the 2007 AFTAP. Beginning April 1, the 2007 AFTAP-10% would serve as the 2008 AFTAP until the 2008 AFTAP is certified. The 2008 AFTAP is (1/1/2008 assets + last 2 yrs annuity purchases for NHCEs) / (1/1/08 Funding Target + last 2 yrs annuity purchases for NHCEs). The 2007 AFTAP is (1/1/2007 assets + last 2 yrs annuity purchases for NHCEs) / (1/1/07 Current Liability+ last 2 yrs annuity purchases for NHCEs) In both cases, the calculation is done by reducing the assets by the credit balance. However, if the result would be at least 90% for 2007 if credit balances remain in assets, you can leave the credit balance in the assets. If the result would be at least 92% for 2008 if credit balances remain in assets, you can leave the credit balance in the assets. If you are using the 2007 AFTAP - 10% as a proxy for 2008 AFTAP, you must also perform a certification by 10/1 of the actual 2008 AFTAP If you certify the 2008 AFTAP, there is no need to certify the 2007 AFTAP If the AFTAP (either 2007 or 2008) is not certififed by 4/1 the plan is deemed to be less than 60% funded. All benefit accruals are frozen, no amendments can be adopted which increase benefits and accelerated distributions are eliminated If the AFTAP (either 2007 -10% or 2008) is certified as between 60 and 80%, no amendments can take effect which increase the funding target, accelerated benefit payments are limited but not eliminated and the plan must give notice to participants of the impact of the benefit restriction. If the AFTAP (either 2007 -10% or 2008) is certified as between 80 and 100%, no restrictions apply As of 10/1/08, you can no longer use 2007 - 10% as a proxy for 2008. Thus, if the 2008 AFTAP is not yet certified, the plan is deemed as less than 60% funded. All benefit accruals are frozen, no amendments can be adopted which increase benefits and accelerated distributions are eliminated. This status will last until THE LATER OF January 1, 2009 or the date that the 2008 AFTAP is actually certified. I am not aware of any IRS provided standard certification form. The proposed regulations under Section 436 set forth some requirements for content, while the actuarial standards of practice set forth additional requirements for certifications and statements of actuarial opinion

I believe they still apply Hat size would discriminate against Barry Bonds

use height

Also, regarding assets, the 436 regs include an exception that allows the AFTAP calculation for plan years beginning before 1/1/2009 to include the receivable contribution for the prior plan year. See (h)(4)(B). But it doesn't allow the receivable contribution for the current year, so for a 2007 AFTAP certification you cannot include 2007's contribution If you look to Notice 2008-21, when it refers to CL as of the valuation date it is referring to BOY benefits valued as of the EOY..and the benefits accruing during the year are just that, benefits accruing during the year but not part of AFTAP For the 2007 AFTAP certification that is the only method that makes sense (other than the method permitted under 2008-21)

You can certify 80% based on assumed future contributions (but I wouldn't without a certification from the employer), but there is nothing that allows you to make an assumption as to future waivers of credit balance. Because the credit balance waiver rules apply to the low end of your range certification, the range certififcation cannot be based on a presumed waiver, or else it makes no sense. While we are avoiding range certiffications with waivers, we are insisting where forced on a signed letter from the client indicating the amount of contribution to be made for 2007 and, if necessary, the amount of the resulting credit balance to waive. If you go through the 436 regs, they insist on an exact waiver of credit balance in all cases and even give you a methodology to calc it

That's what it sounded like, but the proposed regulation is pretty clear, that you would be performing an "as-is" range certification if the sponsor has not already waived credit balance. Thus, based on your conservative estimate, the plan is 72% funded and your range certiffication would have to be 60% - 80%. If the employer irrevocable waived enough credit balance so that you were absolutley positively sure they were over 80%, you could then do that range certiffication, but the employer has to waive a dollar amount of cedit balance to get you there If you certify the 60-80 range, you are deemed to be 60% for purposes of the mandatory waiver of credit balance and if the employer has enough credit balance to make the plan get to 80% ------ zoooom -------- all that credit balance would be immediately and irrevocably gone The irrevocability of credit balance waivers based on presumptions and estimates is crazy, but its the proposed law

I believe that a careful reading of 436 says that if restrictions applied in the prior year the FATAP for thr prior year continues in to this year until a new certification is done and the 436 proposed reg says that since no restrictions could have applied in 2007, none will apply in the first 3 months of 2008. The earlier restrictions may occur, I am not sure, if a 2008 certififcation is done before 4/1..but not a 2007, because no restrictions applied to 2007 See post on related topic for my thoughts on range certifcations and credit balances Lets keep em qualified...thats my motto too

The 410(b) test must be run using the least eligibility requirements used for anyone benefiting under the plan, based on this I agree with Mike...its B The notion of granting a year of service distinguishes the target employee and makes him eligible, but doesn't give him a year of service for real and you can't get to the C answer that way