Calavera

Interest credit should be considered a part of accrued benefit and not a part of actuarial equivalency, and therefore, in my opinion, could not be suspended.

I believe your question is still valid. Jim was trying to address several different issues in one example such as: missing RMD's payments, actuarial increases post 65, SOB, actuarial increases post 70 1/2, offset of benefits by benefits received, etc. So the way I see it in your case: Step 1 - Does plan provide for accruals after NRA to be offset by actuarial increases in the benefit? Step 2 - If no - follow first part of example 10 until age 75. If yes - follow first part of example 11 (my version) until age 75. However, if you think that the offset is not permitted after age 70 1/2 even if the answer to the Step 1 question is "Yes", then follow example 10.

Ex 10 and 11.xlsxWell, it took me a while to dig through the examples 10 and 11 in Jim's article. I have to say that I agree with the Example 10 solutions, but disagree with the Example 11 solutions. 1. I believe Jim actually miscalculated the age 71 monthly benefit amount by accidentally projecting it to age 72. 2. I still disagree that post MRD need to provide both, actuarial equivalent and accruals, when plan provides for accruals after NRA to be offset by actuarial increases in the benefit. There are two reasons for my disagreement on post MRD calculations: 1. A-9 of 1.401(a)(9)-6 states that the actuarial increase required under section 401(a)(9)©(iii) for the period described in A-7 of this section is generally the same as, and not in addition to, the actuarial increase required for the same period under section 411 to reflect any delay in the payment of retirement benefits after normal retirement age. (emphasize mine) 2. Gray Book 2007-17 states that “any additional benefits accrued after that date” are those required under the rules of IRC §411(b)(1)(H), which provide that an accrual for additional service during a year may be offset by an actuarial increase for delayed retirement. Attaches is my Excel file development of Jim's solutions and my version of the Example 11 solution. Please refer to David Rigby's and My 2 cents' disclaimers above and check with plan's ERISA counsel second.

I believe the key is in the following question: Does plan provide for accruals after normal retirement age to be offset by actuarial increases in the benefit? The Gray Book emphasize "may be offset", which means it has to be spelled out in the document. Look at the difference between Situation 10 and Situation 11 in the Jim's article.

Also need to be sure that beneficiaries of trust are not stuck with 5 year distribution upon death, and can take the distribution over life time.

I guess it is not clear from the law perspective. Since it was covered as the beginning of plan year, you will be filing 2014 PBGC premium, and you will pay full premium amount without any proration, I would probably treat it as covered for the 2014 tax deduction purposes. I would suggest to run it by ERISA attorney and/or tax advisor.

Did you actually request from PBGC to remove the DB plan coverage?

I never had a case when I wouldn't be able to replicate the results at the end of conversion. Generally, as long as the prior actuary is communicating with you, you will be able to match prior year results. However, often you discover that the issues with the replication you had in the beginning of the process are due to prior actuary errors. Then it would be about nature of the errors, materiality of impact, and decisions about letting it go or redoing the prior work. I guess if the prior actuary is unresponsive, you may have issues, but I never was that lucky. It may be a good idea to mention it in your engagement letter.

Not sure but I think transferred out of plan who is not 100% vested yet could generate the difference.

There were 2 very good articles on post-NRA distributions by Jim Holland that could be found here: http://www.asppa.net/Document-Vault/PDFs/PCFALL2012.aspx http://www.asppa.net/Document-Vault/PDFs/PCWINTER2013.aspx Hope it helps.

Depending on the size of the plan, PBGC coverage, and how late the contribution was, you may need to notify participants and you may need to file PBGC Form 10.

T-10 net of '51 GAM for age 63 is .00132

Be sure that a part-time employee have never worked more than 1000 hours per year since original date of hire.

I don't think so. It is Dad B's ownership that is attributed to Child #4. Since all children are over age 21, and each has ownership in only one company, they all should be ignored. Therefore, I believe there are no control groups in this example.

And you still show 2 participants (husband and deceased spouse)

I don't have any authoritative opinion. So I would do what Lou S. said above. To estimate the impact of tax deferral I may start with comparing the following 2 scenarios, using the assumptions of: 1) current income tax rate; 2) future income tax rate; 3) future capital gain tax rate; 4) interest rate; 5) year of full taxation Scenario1 - IRA Rollover - Accumulate the amount to the year of full taxation with interest rate and apply the future income tax rate to come up with net amount after taxes. Scenario2 - Cash Distribution - Apply the current income tax rate to the amount. Accumulate the remaining amount to the year of full taxation with interest rate. Apply the future capital gain tax rate to the earnings portion of the accumulated amount to come up with net amount after taxes. Then I would take a difference between 2 net amounts and discount it back to today's date with the same interest rate.

Owner1 would own 60% and the wife would own 60%. But you don't add them for CG purposes (no double counting). You use either one of them. My approach was to consolidate ownership percentage for one spouse, and completely disregard another spouse for CG determination purposes. In this case you will have Company A Company B Owner 1 100% 66.67% Owner 3 0% 33.33%

A Sole Proprietor deducts his contribution on the form 1040 against his earned income. His earned income is Net Schedule C income reduced by 1/2 of SE tax. He also need to have additional room to deduct any other retirement plan contributions (if any) and self-employed health insurance deduction (if any).

Yes, assuming he has room for deduction from tax perspective.

I think it is a controlled group. Because of the attribution, husband is deemed to own 90% of A. So the totals for common owners (Husband and Unrelated Partner) will be 100% for both companies (>80%) and the identical ownership will be 65% (55%+10% > 50%)

The deduction should be allocated by their ownership, unless there is a special partnership agreement stating otherwise. I don't think there is a prescribed methodology, so any reasonable method should work. Whatever methodology they used in the past for deduction of contributions they should continue to do the same. You can find more benefitslink discussions by searching for "partnership agreement".

And here is the "plain English" summary of the above mentioned court case http://www.plansponsor.com/English-Language_SPDs_May_Not_Violate_ERISA.aspx

It is just harder to unfreeze the plan and balance the benefit accrual with the current asset to get rid of overfunding. It is easier and more precise to solve for the lump sum rate right before the distribution. So instead of using 417(e) rates it will say 417(e) or #.##% whichever produce higher lump sum.

Don't know if multiemployer rules are different, but it is possible for a retiree from a single employer DB plan to continue receiving benefits higher than the PBGC guaranteed benefits. The meaning of the early-retirement reduction is to receive the smaller benefit for the longer period. The value comparison depends on the reduction. I would suggest speaking with an accountant or a financial advisor who may review this situation from the multiple personal angles to help with this decision.

If plan is already frozen, the easiest way would be to amend the plan lump sum rates.