tuni88

Whoops. Looks like the original post is not explicit in the method the actuary used to make the calculation of the 2007 AFTAP. Here's what he did (lifting this out from letter): Took a bite out of the 1/1/07 credit balance and called it "forfeited" then formed the fraction for 2007 AFTAP as: (Current Liability at 1/1/07 minus what's left of the 1/1/07 credit balance) / actuarial value of assets at 1/1/07 = .70 Smell OK?

Andy, Not Andi, so assumed male. Sorry if I got it wrong. (Hmmm, guess that makes me a female.) 1. There are 4 sets of 3-segment rates in the link. Sets A and B - those on the left - are close to each other and sets C and D - those on the right - are kind of close to each other, but the two groups are quite different. I'm hoping one of the two higher sets are appropriate. When real actuaries (what - my CA designation doesn't make me a real actuary!?) go to do the AFTAP calculations from which set of rates do they choose? 2. Careful, you are beginning to exhibit humor. It might be too hard on your heart. 3. Scary thought. 4. Our actuary will say he got it rght. I'm here trying, sincerely, to figure out if maybe he got it wrong. Am hoping someone will opine on the methodology used in determining our 2007 AFTAP (see original post). If opine is too strong then they could maybe couch it in any terms that would make a cautious person feel safe. 5. Yep. Adventuresome. I try to get educated. (Witness my ambition in obtaining the Florida diploma.) I know more than a little about a lot of things. Makes you the life of the party and opens up all sorts of possibilities. 6. So you're not giving up on me? tuni88 PS - Effen, Scouts Honor means forever and for everyone. No phooey, I won the BSA's God and Country Award. I'm not trying to certify anything - just going for a ballpark talking estimate of what might be our 2008 AFTAP if our 2007 AFTAP calculation turns up bogus.

There is no model notice? Then we'll be winging it I guess. Andy, are you this serious all the time? Lighten up, dude. You risk giving actuaries the reputation of being humorless - ha. I realize my back-of-the-napkin approach is far less than 100% valid. My question is does it have greater than 0% validity. Since you did not dismiss it outright I'm disposed to think that there must be at least a little something to it. Those 11 segment sets - what's the one in the middle? If you don't dare quote it on an anonymous message board please post a link where I can view them myself. Geesh already. Your quote from the proposed regulations - what does it mean in ordinary English? I went back and read the letter we received and my description, in my original post, of the way the 70% 2007 AFTAP was determined was accurate. Does it sound like our actuary's understanding of the calculation is correct or incorrect? If it's incorrect, what possible recourse does our new actuary have to be able to get the 2007 AFTAP up to 70%? Given that only the 1/1/08 asset value is known, how is the remainder of the fraction built? I give you Scout's Honor (and a handshake) that I won't certify anything. tuni88

Andy/Effen, I have my 'CA' - Curbstone Actuary - designation from a match-book university in Florida, class of '99. I'm certain he used the highest allowable rate for the current liability and we've never used other than plain old market value for the assets. We had a +9% return during calendar 2007. I recollect that 8% was the assumption - or was it 7.5%? I presume the actuarial assumptions are reasonable. I'll make the 5.50% increase calculation thingee tomorrow at work, but suspect there won't be much improvement. BTW, so what if it does approach 80%? What are the implications? What do you think of my back-of-the-napkin approach in the original post? And what are the 3 rates I should use? Approximations are OK, I think. Andy, are Effen's comments/concerns valid? I'll have to go back and read our actuary's letter but I'm pretty sure he certified our 2007 AFTAP in the way I described. Since there is no 1/1/08 actuarial report how else could it be done? The only thing there is to work with is from 1/1/07. He wanted to get the 67.2% up to 70% for 2007 so that 2008 could be deemed to be 60% until the 2008 work was completed. Yes we offer lump sums and he says he'll draft a notice once an IRS "soon-to-be-published" model notice is available. "Soon" better be pretty soon, no? (Why the heck would they not have something ready by now?) This DB plan WILL make me lose my hair. It's likely on the way out for us. Too bad. tuni88, CA #99-0001

We have a calendar year plan and our actuary certified last week that our 2007 AFTAP is 70% after having to forfeit a portion of our funding standard credit balance. It would have beeen 67.2% without using some of the credit balance. He used values from the 1/1/07 actuarial valuation report to make this calculation and says he won't be able to calculate the 2008 AFTAP until this summer. I'm thinking I may be able to make a rough estimate of the 2008 AFTAP myself because included in the materials that came with the 2007 actuarial report was a benefit payout projection for the next 75 years and I know what is the value of assets as of 1/1/08. I think I should really be working with an updated benefit payout projection, but is the following a valid approach?: 1. Select the 3 segment rates. [Can someone tell me what are the 3 rates?] 2. Discount to 1/1/08 the expected payouts in year 1 thru 5 (2008 thru 2012) using the rate for segment 1. 3. Discount the expected payouts in year 6 thru 20 (2013 thru 2027) back to year 5 using the segment 2 rate and then discount that result for 5 years using the segment 1 rate. [Or do I use the segment 2 rate for all 20 years?] 4. Similar approach for years 2028 to the end of 74 years. 5. We didn't use all of the credit balance so can I use what's left for the 2008 calculation if neeed? Is this approach too 'simple' to be valid as a rough estimate?

The 2007 AFTAP is (1/1/2007 assets + last 2 yrs annuity purchases for NHCEs) / (1/1/07 Current Liability+ last 2 yrs annuity purchases for NHCEs) Is a lump sum distribution the same as an annuity purchase?

When does the notice have to go to participants for a calendar year plan that is going to have an AFTAP between 60% and 80%?

[AFTAP: "adjusted funding target attainment percentage” Thanks John. It seems our calendar year plan's AFTAP will be between 60% and 80%. So what does it mean that "a participant may elect to receive part of the benefit as a prohibited payment (with the remaining amounts only payable in a nonaccelerated form).?" We offer lump sums so I presume that is an "accelerated" form. Say a non-married employee retires next month with the choice of $500 per month as a single life annuity or $60,000 as a lump sum. Can he get any portion of that lump sum at all? And if so, how much?

Had my noggin noddin.

Question from the peanut gallery: What's AFTAP and why is it a big deal? (I'll hang up and take my answer off the air.)

I'm new here so please excuse me if this question has been asked three thousand times already. I'm seeking a website where I can go to find an interactive tool to input my non-Roth IRA info, personal demographics and whatever else is needed (assumptions regarding the future?) to analyze whether it is likely to be to my advantage to convert my regular IRA to a Roth IRA. Anybody know of such a tool? Thanks.

I think (???) I'm asking about the reconciliation in the AOCI from 12/31/07 to 12/31/08 (year 2). What would its components be? One other unrelated question: Under the 'Change in benefit obligation' section you have a line for assumption changes. Is that required now? Our actuary always included that number in actuarial gain/loss.

I tried and failed. All I got was an immediate "File does not begin with '%PDF-' message and wouldn't let me go anywhere from there. I ain't no techie.

we added a reconciliation in year 2 of the AOCI from year one to year two. What did that reconciliation look like, i.e., what are the items included that take you from last year to this year?

We paid a lump sum from our DB plan to a new 2007 retiree via a direct rollover to the participant's IRA. Do we still have to send the participant a 1099-R?

Pretend it's a few months in the future and you have access to all large-ish US companies who sponsor at least 1 calendar year DB plan. You gather up all the discount rates used for 12/31/07 FAS87 disclosure for each plan and make a graph. What do you guess will be the mode of the discount rate?

Does that ever happen in real life? I thought freezes were for plans that would prefer to terminate immediately but can't cuz there's not enough money in the pot to cover benefits -- they're waiting for assets to catch up to benefits via a cheapening of annuity prices (in a higher interest rate environment, for example) or hoping to get exceptional asset returns or waiting for a future time when they can contribute what is necessary to make up the difference or who knows what. That's what I read in a financial journal anyhow. If an employer is in a position to pay off all plan benefits why would they not just terminate the plan and be done with it? What might be the strategic advantages to freezing a plan for a few years and then re-starting it?

If we freeze our DB pension plan is there any going back on it? Can we un-freeze it a few years later? Are our only two alternatives (a) leaving it frozen or (b) terminating it?

It means I'd be happy to email you the beta-stage Lotus 1-2-3 spreadsheet I created. Send me your email address in a personal mesage by clicking on "Andy The Actuary." The spreadsheet would be sent as a professional courtesy at no charge [i'm not selling software] with the understanding that it is being provided solely for purpose of comparing values with any systems you might use to determine lump sums and would not be intended or warranted for you to copy in whole or part or use for determining lump sum values in behalf of your clients or for any other purpose. ------- Thanks. I tried that clicking bit and it didn't work. Please email to me, as a professional courtesy under the terms you list, at: munis4u2@yahoo.com. Lotus 1-2-3 is still around, huh?

That "I'd be happy to share ..." comment in your original post meant what?

It's so very exciting to witness all this actuary banter. Once you girls have agreed on what's right/wrong/best, can it be put (if it's usable) on the internet where we can obtain a copy?

[First a question: Why wouldn't they want to just carry a few vested terminated employees? Why do they think that is more painful than paying out the nose for a handful of annuities?] It is surprising that these few didn't grab the money when dangled in front of them. Without knowing something of their individual circumstances we can't judge them, but it does go against what the herd does. Several years ago at a former employer we had a lady who developed a deadly condition that required her to retire. The docs gave her 3 months. When it came time to elect her payment option she chose single life annuity over lump sum. We had been in pretty regular contact with her and when we got the election forms back we were shocked, and stumped as to what to do. Even though we are not supposed to try to steer people towards particular options, this one was so odd that we had our HR director call her just to be sure she understood both options and knew the ramifications in her case. She very cooly and rationally responded that she undertood everything and wanted to let stand her decision. We didn't press it further and she ended up getting 4 monthly checks. Go figure.

What? We have to add another payout optional form to our plan? I wonder what else will be needed. Has anyone published a checklist or the like?

We have a small DB plan with about 40 total participants and our plan year is the calendar year. Do we still have to distribute a Summary Annual Report for PYE 12/31/06 and a PBGC Underfunding Notice? Is there anything new to be distributed this year? What notices will we have to provide during 2008? Is there a web site I can go to read a summary of the rules?

I'd be interested in knowing what we have to communicate in 2008.