david rigby

I have a plan that offers lump sums to all retiring employees. Current data shows 53 people in pay status and 58 who have received lump sums anytime in the past. Don't know for sure, but I suspect this is a direct result of the J&S requirements for spousal signoff.

Yes, Rev. Ruling 2001-62 is the correct one. But a word of caution. I should have pointed out that the change in mortality table for the purpose of determining a minimum lump sum. The plan definition might be different.

Perhaps my original suggestion could be modified as follows: Hire a competent pension actuary to design your procedures. A existing product/service may already exist!

Purchase of an annuity is usually an option. However, it is the participant's option most often. Your situation seems like a good solution on a practical level. However, if the plan sponsor already has another DC plan, you might consider the alternative of merging the MPP plan into the other.

Keith is correct. However, I would not bother with a "load" for the unisex mortality. Instead, just use the appropriate mortality table in the calculation. BTW, for most US plans, the applicable mortality table will be changing on 12/31/2002.

Perhaps it is just my bias, but I am partial to the phrase "Hire An Actuary".

Or do you mean that the TPA will reside in Bermuda? (It is a shame that they no longer teach sentence diagramming.)

Assuming that "cash option" means the addition of a lump sum form of benefit distribution, a simple technique of estimating any increased funding (and expensing) needs is to value the post-decrement liabilities using an interest rate that more closely follows the GATT rate.

In the U.S., most of the contributory DB plans are sponsored by a governmental organization. If that is the case here, please use caution in applying the Code.

Some valid points from mbozek. An issue that has gotten little attention in this discussion is cash flow. While plan X may be 105% funded (and there are many methods of measuring this), plan Y might be 75% funded. Of course, it is desirable to make these measurments in the same manner and with similar sets of assumptions (especially the discount rate used for the time value of money). Assuming that, then the lower funded plan will require greater contributions (that is, more cash from the plan sponsor). This might be useful to a prospective investor. I don't mean to imply that cash flow is the only issue. However, it might be worth mentioning, particularly in a published article, that the total cost of any pension plan is not what goes in but what comes out in the form of benefits and expenses. The cash that is used to pay these benefits and expenses comes from investment income or cash contributions. If investment income is less than anticipated, then additional cash contributions will be required.

Try this thread: http://benefitslink.com/boards/index.php?showtopic=15664

You might ask that it be submitted in the next Gray Book. Contact Larry Sher or Don Segal. Email addresses available at http://directory.soa.org/CGI-BIN/LANSAWEB?...web3+mdx000+prd

If you have old exams, it also helps to take a practice exam, under timed conditions.

Well, to be precise, the quoted items for General Motors are found in the Schedule B for the plan year beginning 10/01/1999. Thus, for example, the actual investment return would apply to the actuarial value of assets for the 12 months ending 9/30/1999. www.freeErisa.com (It is very possible that the actual yield on market value of assets was higher.) But more importantly, as MGB points out, let's not get confused about actuarial assumptions for funding purposes (for example, those items quoted by vebaguru) and accounting purposes (which seemed to be the focus in the original post). And another point, the assumed rate of return (for accounting purposes) can legitimately be affected by the asset mix. If the plan sponsor chooses a more conservative investment strategy such as 40% stocks and 60% bonds, then the expected yield (long-term average) would be lower than a 60/40 mix.

Please rephrase the facts for clarity. What are the requirements to receive a contribution (please don't tell us what it does not have, but what it does have). Thanks.

I like the advice above from mbozek and QDROphile; "forfeit" the entire amount, but keep a record of it, so that it can be paid if he shows up in the future. Document your procedures. Amend the plan first if necessary.

Next best resource is other people with which to study.

Hmmm. Your facts do not bode well, as you have admitted that you are ignoring the most basic of all "help": time. Other resources may not be able to make up for that.

Well, yes you could. You could also deposit the entire amount in my bank account. But both might be considered imprudent.

I could find nothing in Rev. Ruling 95-31 that directly addresses this. The only Q&A in the GrayBook is 1993-3: Q With respect to a short plan year, how are quarterly contributions based on 100% of the prior year's minimum determined and when are the amounts due? RESPONSE Until guidance is provided, any reasonable method can be used.

If 415 is an issue?

I claim no special insight into deliberations of the GASB, but the last statement from vebaguru seems misleading to me. Expecting that GAS statements will be similar to FAS statements might be a bit hasty. (I doubt that anyone would state that GAS 27 looks like FAS 87.)

As usual, MGB's explanation is a good one. A minor addition: amortization most often refers to the gradual repayment of a fixed dollar amount, a mortgage or the discussion in Item 1 being good examples. Imagine a simple example, where a plan sponsor creates a new DB plan, and recognizes prior service. Immediately, the plan has created a liability, but has zero offseting assets. This fixed "Unfunded Liability" must be amortized. Most actuarial funding methods will amortize this fixed amount explicitly. Some methods will use an implicit amortization. Future adjustments to this, thru investment experience for example, will usually be amortized separately.

That would be governed by the terms of the plan document.

In many examples I have seen, the cost of giving the 100% vesting has been pretty low, so the employer just does it. The recommended procedure is a formal plan amendment that does not use the phrase "partial termination". Also, compare the cost of giving 100% vesting to cost of PLR and associated legal/auditor/consultant fees.