Penman2006

I agree that it's fun to say "zimbo".

A participant notice is required if restrictions apply. Section 101(j). Doesn't make any sense.

I agree with zimbo as well.

There are two plans, a PS and an MP. There is no 410(k) feature in the PS plan. Both plans have been terminated. The participant won't return either of the election forms. I should have been more specific. Of course the MP plan has the QJSA annuity form of distribution.

A DC plan has been terminated and everyone paid out other than the owner and one participant. The participant will not return the forms. She is not missing, she just won't return them. This participant has the mistaken opinion that she is owed more money, which is why she will not return the forms. To date the only follow-up correspondence has been by phone. It's been a few months since the forms were issued. The distribution amount is approx. $10,000. Can she be forced out? If so, what is the procedure, and is there any IRS guidance to back it up?

That is my understanding. Also, I think that a participant notice would be required within 30 days of the date the restriction on accelerated payments or benefit accruals applies.

I agree, the responsibility is on my shoulders.

Unit credit method and end of year val date. Plan participant terminates during the year but worked more than 1000 hours and therefore accrued a benefit. Should this person have a normal cost? My initial reaction is "yes" but my valuation software company disagrees and says that for a participant that terminated during the plan year that the whole AB (as of the year end) goes into the AL, rather than the beginning of year AB for the AL and the benefit accrual going into NC. Their method creates an actuarial loss all else being equal. I can't find anything in a text book that would support their position, and I can't think of anything in the Code either. What I can come up with from the Code is that a method that inherently creates gains or losses is not "reasonable". It seems that would apply here. Opinions?

I agree. Now that we can use the 12/31/06 val results for the 2007 AFTAP certification there does not seem to be any reason to not have a certification in place by 4/1/08. Let's hope final regs allow the 12/31/07 AFTAP certification to apply for the entire 2008 plan year as mentioned in the Notice (using 2008 as an example). That would be a practical solution and very welcome relief as far as I'm concerned.

I read some conference session outline that said up to $1,000 per day, but I have not tried to verify that.

Thanks for taking the time to share that info. Jay, regarding my earlier post detailing my considered "strategy" for dealing with plans that are less than 5 years old and currently EOY valuations, one thing I missed is that a participant notice is still required if the restriction on accelerated payments applies. So, contrary to my original thinking, letting the plans be deemed less than 60% funded does have a consequence.....the participant notice. Correct me if I'm wrong but no model notice has been issued. Maybe the notice for a deemed underfunded plan can say "in reality your plan is 100% funded but the IRS is making us tell you it's less than 60% funded". Nice.

Good, thanks.

I think that for the small plans that I have that are less than 5 years old the certification timing is mostly a non-issue. I'll do an EOY val and and EOY certification because it just won't matter that lump sums get restricted for a period of time. If for some unusual reason the lump sum restriction did matter at some point, the termination of a key individual for example, then it may be necessary to switch to a BOY val and do the certification for that particular plan so that the distribution would be allowed. For plans that are over 5 years old and are not already frozen then I don't think there is a way around switching to a BOY val in order to get the certification done and avoid a freeze (assuming the plans are adequately funded). For those plans that are currently EOY vals, I am really pushing for the 12/31/07 data so that I can do the 12/31/07 val before 4/1/08. If I can't get the data I may have to switch to a 2007 BOY val. If I can do a 2007 EOY val though, if there are no changes to the current law, I guess I'll have to do a 1/1/08 val before 10/1/08 so I can do the 2008 certification. This represents my current thinking. I am definitely interested in feedback. BTW, is there any model certification language by the IRS, or just floating around?

Are you saying that the plan AE is defined as the PBGC rate and UP84? I recall that a plan with an integrated formula must use an AE interest rate between 7.5% and 8.5% (at least with respect to the integrated portion of the benefit) in order to be safe harbor otherwise general testing would be required.

Thanks for your feedback Jay. I was hoping this would generate a few more responses.

I have many small DB plans that currently have an EOY val date. Many are DB/DC combinations and for that reason I like an EOY val date because I can do everything at once. Under normal circumstances a number of these plans would not have the 12/31/07 val completed by 4/1/08. Forgetting about the range certification for this discussion, my understanding is that at 4/1/08, without the 2007 results, the AFTAP would be considered less than 60% and the applicable restrictions would apply. Virtually all of these plans are less than 5 years old so the restriction would be limited to not making accelerated distribution payments (lump sums). Most of these plans are small and would not be making lump sum payments during that period anyway. Most of these plans will be 100% funded when certified. My understanding is that the restriction would apply until the 2007 val is completed and the 2007 AFTAP is certified (based on the 2007 results minus 10%). My understanding is that although a plan may be restricted from making lump sum payments, no amendments or notices are required. (A notice would be required if a benefit freeze applied.) If all of the above is true, for these well funded small plans that are less than 5 years old, on a practical level I don't see that there is any concern if the 12/31/07 val is not completed by 4/1/08 and therefore the restriction on accelerated payments applies (for a few months). If that's the case then for the clients that can't or won't get me the 12/31/07 val data before 4/1/08 I don't have to worry about switching to a 2007 BOY val or doing a 2008 range certification in order to have a certification done by 4/1/08. I would appreciate some feedback with respect to the above. Right, wrong, pitfalls? IF the above were correct, then taking it a step further: Unless there is a change in the current law to accomodate EOY vals I will need to do a 1/1/08 BOY val so that I could get the 2008 AFTAP completed by 10/1/08. Otherwise, if the 2008 val isn't completed by 10/1/08 the plan will again be considered less than 60% funded until the 2008 val is completed. But if the plan is under 5 years old that might not be so bad and I could stick with a 12/31/08 EOY val. Just let the plan go below 60% from 10/1/08 until the 12/31/08 val is completed, say that's 7/1/09, then if any lump sums are payable, pay them between 7/1/09 and 10/1/09 (assuming the certification shows 80%+). Could this be a strategy for: A. Keeping life simple B. Getting dis-enrolled and sued into the poorhouse C. Neither A. or B. but at least a good long BenefitsLink posting

My bad. I did not realize there was a small plan exception. As mentioned, there is the certifcation requirement timimg problem. (I really don't have any business trying to answer PPA questions!)

Right now the new law under PPA'06 requires boy vals for 2008. Plus there is the AFTAP certification requirement.

Andy, I have a number of CB plans and all but one are eoy vals. I do not use an eoy census for the boy val. For any 2007 new CB plan I'll do an eoy val. If there is no change to PPA I'll change to a boy val for 2008. If there is no change to PPA I don't see that an eoy census for a boy val would be possible since the AFTAP certification has to be done by October (or else). I hope some change is made in the law to allow eoy vals. I think that particularly for smaller plans/companies eoy vals make sense, obviously for a Schedule C situation, but really for any small business.

Andy the Actuary are you saying to amend the plan to a NRA of 62+ and put in an unreduced ERB of say 55 and for valuation purposes assume everyone leaves at ERA? But my question remains, are changes to the NRA required (or advised) before 2009? What are others doing with their plans that have 55 >= NRA < 62?

Both of the reponses have me puzzled. Deference? Case closed?

I have a couple of calendar year plans with a NRA less than 62, but not less than 55. Based on reading Notice 2007-62 it looks like I can safely continue to use that NRA for the 2007 and 2008 valuations. Is that correct?

I propose that we just start referring to PPA as "GOTCHA" since that seems to be it's primary utility.

I don't know about PPA but I thought that 404 says that for this type of situation you could take the deduction one of three ways: 1. For the plan year beginning in the fiscal year. 2. For the plan year ending in the fiscal year. 3. A weighted average. Then, once you establish a method you're supposed to stick with it. In the example, I guess you would be saying that the you are using the plan year beginning in the fiscal year but for the 4/30/07 fiscal year the tax return was filed before the 2007 plan year contribution was made and therefore it is considered an includable contribution on the 4/30/08 tax return. You would have a problem with that though if the 4/30/07 tax return was extended (regardless of when it was actually filed).

If you have a sole proprietor with a very large Schedule C (say $1,000,000), and you set up DB and a 401(k)/PS plans, is the "comp" used tp determine the DB contribution $225,000 or $225,000 minus 6% PS = $211,500.