Penman2006

Thanks.

Calendar year PBGC covered plan with a plan termination date of 12/31/07. The termination was submitted to the PBGC and IRS. The plan assets have not yet been distributed. Is a DOL funding notice required for 2008, and if so what do I do about the FTAP since there was no 2008 actuarial valuation required?

Even in normal circumstances, follow-up PBGC audits are fairly common, so make sure you keep accurate records, etc.

Thanks David.

Thank you for your help although that first link is bad now. The second link says that NY state withholding is not mandatory. How old is that material?

Does NY state have mandatory state withholding on a lump sum from a qualified DB plan, and if so, how much?

Thanks. That was my thought.

Plan has been terminated 3/31/09. 2009 val date is 1/1/09. The only participant is the owner. 2009 val results are as follows: TNC = $0 Shortfall Amortization Payment = $10,000 Carryover Balance = $5,000 I think that I can recognize the plan termination amendment made in Feb. '09 and prorate the charges. Agreed? Assuming I can prorate, is the correct result: 1. ($10,000 - $5,000) x 3/12 = $1,250, or 2. $10,000 x 3/12 - $5,000 = $0

If a plan sponsor handed out a Section 436 participant notice regarding benefit restrictions last year, and this year the funding status has not changed enough to change the restriction, is another participant notice required? The notice last year did not mention anything about an annual update.

I am looking at a plan that has a Social Security Level Income optional form of benefit. The plan has an AFTAP < 60%. The level income option produces a value greater than a life annuity (until actual soc. sec. kicks in). Is that a restricted form of distribution under 436?

2008 calendar year DB plan with a 9/30/08 plan termination date. This plan is not covered by the PBGC. I have read some prior posts regarding whether or not it is appropriate to apply RR 79-237 to prorate the minimum funding requirement under PPA. I do not know of anything in PPA that would invalidate 79-237. Does anyone think that the maximum tax deductible contribution should be prorated? (I don't think so but the plan sponsor may do the max so I want to be sure.)

Thanks.

I have a new CB plan for 2008 that defines the accrued benefit as the CB account balance and uses the 30 year T-rate as the AE and the interest crediting rate. There is no past service credit. As everyone knows, under PPA the target normal cost is less than the total cash balance accounts contribution. My software vendor has not yet programmed the at-risk 404 calc. When I work through an example from a session at last years advanced actuarial conference I seem to end up with the exact cash balance account deposit. That's a good thing. BTW, 415 does not come into play in this case. I'm just looking for some input from anyone that's worked though the at-risk calc as to whether that sounds reasonable. Thanks.

I am looking at a 2008 K-1. Line 14 has two separate entries: Code A = 200,000 and Code C = 450,000. Per the instructions, Code A is net earnings from self-employement and Code C is gross non-farm income. What do I use to calculate the pension contribution?

Calendar year plan. Plan document definition of actuarial equivalence specifies the mortality table for converting to optional annuity forms as the mortality table per 415(b)(B), ©, and (D). At at 12/31/08 that table was the 1994 GAR table, but after WRERA on 1/1/09 that table is the applicable mortality table for 417(e). For benefit calculations, does that need to be handled like an amendment to the AE definition, doing the calculation under the old and new definition and taking the greater result? I hope not, otherwise any plan that defined it's annuity conversion mortality table as the 417(e) table would now be in a perpetual state of annually "amending" the definition of AE. (I am remembering that the IRS said a plan document that had automatic increases to 401(a)(17) and 415 is an annual amendment as far as they are concerned ........ wrt the Schedule R question regarding any amendments increasing benefits during the year, and creating amortization bases, although they backed off the plan amendment base issue and eventually allowed the change to be part of the G/L.)

Agree. See 1.430(f)-1(d)(3). "Mess"....agree. We have not even discussed crediting interest on balances at the effective rate or the actual rate. I hope that at some point I see the "big picture" and this makes sense but I'm skeptical.

I just listened to the ASPPA webcast on WRERA and they are saying that you would rely on the prior year AFTAP only for the purpose of determining whether accruals are frozen, all other restrictions would apply.

Yes, it looks like the WRERA $5,000 limit applies even if the plan document has a $1,000 involuntary cashout limit, and, I believe the WRERA provision is retroactive. But, if the plan has a $1,000 involuntary cashout limit is spousal consent required?

DB plan is restricted from paying any lump sums for 2008. Administrator at TPA firm goes on vacation in October '08 and in his absence a lump sum payment of $2800 is mistakely made to a plan participant. The plan has a $1000 threshold for involuntary cashouts. They are trying to get the funds back from the participant but it seems unlikely. What happens now?

I appreciate the answers so far. Today I have been thinking about the correct way to value that asset for the annual actuarial valuation. Market value of assets is supposed to be the value that the asset would change hands between a willing buyer and a willing seller. I assume there would be some penalty for withdrawing from the contract. Since this is a small plan for an older 100% owner of a business it is safe to assume that the plan will be terminating at some point in the future. Because of that I am wondering if it is appropriate to base the annual market value of the annuity contract for valuation purposes on the value of the contract as though it was being cashed out, in other words considering the penalty for early withdrawal? After all, that is what the plan would end up with if it were terminating. If they think they can just roll that annuity contract out to the owner at plan termination then I think there would be a number of issues as pointed out by Andy H. It would be like the owner has had a separte investment account.

A TPA I do some work for wants to put an annuity contract in a new DB plan for the owner. There are other participants in the plan but I was told that the only contract would have the owners name on it but payable to the plan, therefore it's okay that the other participants do not have annuity contracts in their name. Does this sound reasonable and more importantly is it allowable? I don't have any experience with annuity contracts but I always thought they were a ripoff due to fees and expenses and withdrawal penalties. For example, what happens if the plan terminates in five years, what is that contract worth? How do you value it annually if you know the plan will likely shut down before the end of the contract and there are significant withdrawal penalties? Can the contract be rolled over? I would like to hear others experiences with annuity contracts. Obviously I don't have to take the case but I don't want to overreact just because it's something different.

I'm just telling you what I heard. It probably wasn't the full story. I'll take you're word for it. You're a lot better connected than I am.

I attended a webinar yesterday given by my software vendor and they said the basically same thing as they last two posts, that the IRS has the authority to issue guidance to allow the 2008 AFTAP to be based on the 12/31/07 val results, and that the IRS indicated they will do that if necessary (no technical corrections).

Well, I am trying to make sure it would not be the participant's lump sum at the date of actual distribution. I agree the lump sum at date of death makes sense and that was my thought as well but I am just trying to be careful, it's not like this kind of thing comes up all the time for me. So the spouse gets her "account balance" in the plan as of date of death, and you say that account balance becomes basically a segregated account that shares in the asset gain/loss until actual distribution. That will more or less solve the excess assets problem. Thanks for your help.

I provide actuarial services to a TPA and I was just sent the 1/1/08 data. The situation is: DB plan with an owner past NRA and receiving annual actuarial increases on his AB. His 415 benefit limit is based on his high 3 average salary of $125,000. The owner died during 2007. The plan death benefit is the PVVAB. As of the date of death the PVVAB is restricted to the 415 lump sum limit (this restriction just happened btw). The spouse has not taken the distribution yet. The spouse was entitled to $1,290,000 at the date of death. At this point in time if I were to value the deceased participants PVVAB the amount would be $1,250,000 ($40,000 lower) becuase he has aged a year and the 415 maximum lump sum is based on the comp limit. Can she now take out the $1,290,000 she was entitled to at the date of death? I guess that would be looking at it like at the date of death she became a participant in the plan with an account balance rather than an annuity. Not sure if that's acceptable? The plan is now being terminated. At 1/1/07 the assets and liabilities were very close. During 2007 there was a large increase in the assets and now there are significant excess assets. I can't see how the spouse could share in that given the death benefit is the 415 lump sum but if anyone has any ideas I would like to hear them.