Penman2006

Andy, when you said "We have increased the accruals so that they have the same value, if we did not issue 204(h) notices", you mean that all future accruals will be adjusted as well (increased by the AE factor from old NRA to new NRA), right? Per your question, regarding my last paragraph, for anyone that is not past NRA I was trying to keep the optional form calculation exactly the same as before the NRA amendment. I was trying to make it so that after the NRA amendment the only change in the plan is that the age for in-service distributions was moved up to the new NRA. Having thought about it some more it's probably too simple and a bad idea and I'm not going to consider it any further. I already had one of the frozen plan age 61 late retirement situations pop up where the NRA was changed from 60 to 62. Nothing in the doc to help....fun. Wouldn't you think that if someone turned age 61 beofre the amendment that they would be enttitled to the actuarial increase to age 61 for late retirement? If you did not do that you would not be following the plan document, right? Thanks for your help.

I am looking at a plan document that was amended effective 1/1/09 to change the NRA from 60 & 5 YOP to 62 & 5 YOP. Previously ER was 55 & 10 YOS and the reduction was AE. Now ER is unreduced from 62 to 60 and then AE before 60, there is no longer a service requirement. The plan pays the lump sum on termination of employment. There was no 204(h) notice distributed with the amendment. I know Notice 2007-69 gave 411(d)(6) relief but I am still not sure, having read some other posts on various boards, that a 204(h) notice isn't required if you wanted the future accruals to be payable at age 62. The benefit fromula was not changed in any way with the NRA amendment. So how are future accruals handled? Would it be that the 1/1/09 AB (or the AB through the date of adoption) would be adjusted to age 62 and then all future accruals would be automatically an age 62 accrual, or would all accruals, past and future, be adjusted from 60 to 62? I would think the former but there is no language in the document to this effect. Getting to the point, this is a small plan and the plan sposnor was perfectly happy with the age 60 NRA. I am wondering if simply adding an amendment clirifying that "all optional forms of benefit will be based on the age 60 unreduced accrued benefit" would in any way run afoul of the law. Basically then the change in NRA would only effect the issue of in-service distributions not being allowed until age 62 and other than that the plan would be the same as before the amendment changing NRA. I would appreciate any thoughts on this. Thanks.

That's how we handled it on the SF but technically it is a DB plan but it's not subject to minimum funding. In other words, if it matters, answering that question "no" could lead you to believe it's a DC plan. I'm a little loopy.

What if you have a DB plan that terminated 12/31/08 and then they made the distributions during 2009? A Schedule SB is not required after the plan year of termination. How do you file a 2009 5500 or 5500-SF for a DB plan with no Schedule SB attachment without EFAST rejecting the filing?

Thanks.

I am just looking for some input on a problem I have. I took over a DB plan in 2007 and I have completed the 2007, 2008, and 2009 valuations, etc. The plan is a small plan with 8 participants and it's covered by the PBGC. The plan has been terminated as of 12/31/09. The plan sposnor is the client of the TPA that engaged me as the EA. This week I was advised that there was an additional terminated vested participant that we were not aware of. The participant terminated in 2004 with a $100/mo AB payable at age 65. The participant is now age 35. Obviously everything that has been done is technically incorrect. I want to do the right thing but I do not want to needlessly have the plan spsonsor incurring fees. If I look back through the actuarial valuations, if I were to amend the valautions there would be no meaningful effect on the plan compared to what actually happened. In 2007 the sposnor contributed $15,000 more than required so maybe that credit balance would be lower by a couple of thousand at most. They never used that credit balance and and they had a $0 requirement in 2008 and 2009, and that would not have changed if the missed participant were included in those valuations. I just don't know if it's necessary to amend the vals and 5500 filings? The PBGC filings are off and those should probably be amended I feel. The Form EA-S is being amended. The plan has significant excess assets. What would you do? Thanks.

Thanks for the responses!

I'm not sure offhand about the top heavy question. The document I've been using uses the same rate for interest crediting and annuity conversion so you end up with the pvab = account balance. I don't have any CB plans with employees getting 2% TH minimums because they are always provided in the DC plan. (All of my CB plans except one that's frozen are combo's.)

Andy, It looks like 1.410(b)(5) points to 1.401(a)(4)-8©(2) - An employee’s equivalent normal and most valuable allocation rates for a plan year are, respectively, the actuarial present value of the increase over the plan year in the benefit that would be taken into account in determining the employee’s normal and most valuable accrual rates for the plan year, expressed either as a dollar amount or as a percentage of the employee’s plan year compensation. Using the cash balance account would not be using the benefit that would be taken into account in determining the employee’s normal and most valuable accrual rates for the plan year, so I don't think you can do that.

I was asked to do a DB proposal for a company that as of March 2010 terminated all of the rank and file employees and now only the two owners remain. The owners want to set up a plan for themselves effective 4/1/10. If the plan was set up with no past service credit I am wondering if there could be any issues with respect to 1.401(a)(4)-5(a) nondiscriminatory timing of amendments (which includes the establishment of a plan)? Any input is appreciated.

Yes, it's immediately commencing, and yes the plan has been amended to the PPA 417(e) basis. Thanks for your help.

2008 AFTAP<60% and 2009 AFTAP<60%. Plan benefits and new particpants were frozen in 2006. A 436 participant notice was issue timely for 2008. Is another 436 participant notice required for 2009 since everyone in the plan received the notice in 2008? I am thinking it is not required but I'm not sure of that so I want to see what others are doing/thinking. Thanks.

I subscibre to one of the larger plan document providers and in the cover page to their PPA 417(e) amendment they say that until the amendment is adopted that the plan sponsor must pay out based on the larger of the pre PPA 417(e) basis and the PPA 417(e) basis. As I mentioned in my initial post I now think that is incorrect.

Pensioneer, based on your first sentence I think you are talking about just operating the plan under the PPA 417(e) basis without an amendment. They paid one person out in 2008, and that was based on the greater of pre-PPA and PPA rates. What if they adopt the PPA 417(e) amendment effective immediately, wouldn't that allow them to avoid any grandfathering for either lump sum or annuity options going forward from the adoption date? Also, they would not be changing the lookback or stability period.

I have a DB plan document that defines AE as the pre-PPA 417(e) basis for everything, lump sums and converting to optional forms. It defines the Applicable Interest Rate as the 30 Year Treasury Rate and the Applicable Mortality Table as the prevailing commissioner's standard table per Code Section 807(d)(5). The plan pays full lump sums upon termination of employment. I have read Revenue Ruling 2007-67 and IRS Notice 2008-30 and particularly per Notice 2008-30 Q&A 18 it seems clear that the plan sponsor can switch to the PPA 417(e) basis for both calculating lump sums and for annuity conversions without grandfathering anything. Agree or disagree?