Andy the Actuary

Sounds as if will work so long as automatic form of payment is J&S. That is pension -- at least in respect to benefit value at time of conversion -- is J&S unless elected otherwise by participant, and if a spouse, written spousal consent obtained.

Please note that IRS Gray Book Responses indicate only the way the IRS individuals responding were thinking and is not bona fide guidance that you may be successful relying upon (e.g., in tax court).

QUESTION 4 Funding: Reporting of Contributions on Schedule B Company ABC sponsors a calendar year defined benefit plan. On September 13, 2005, the plan sponsor mailed a check to the plan trustee for the final required contribution for the 2004 plan year. The trustee received the contribution several days after the check was mailed and the trustee statement shows the cash contribution to the plan with a date of September 16, 2005. On the Schedule B, should the actuary report the date of the contribution as September 13, 2005 or must the contribution appear on the following year’s schedule B with a date of September 16, 2005? RESPONSE While the actual date of a contribution can vary depending on the facts and circumstances of the situation, in general, the date of contribution is the date the contribution is made by the plan sponsor, and not the date the contribution is received by the trustee. Thus, in the above example, the date of contribution should be reported on the Schedule B as September 13, 2005.

David, please accept my nomination of you for election to the BL Moderator's Hall of Fame. You are well worth the money they don't pay you!

Check out IRS Rev. Proc. 90-49

Thank you. This was a handout at a professional meeting? While I haven't read the entire piece, it doesn't appear to say. Would you please identify the source and the approximate year prepared. Thank you.

So long as coverage/benefits are non-discriminatory. Careful: If Plan was frozen before magic September 2005 date and you haven't been certifying AFTAP, this might now subject the Plan to the 436 requirements.

Not disagreeing with you. Simply trying to show an example of how someone may come up with the other answer.

It helps point out difference in interpretations. In my example, I valued a65 (pv of benefits at 65) at 4.50% to get funding target and then at 7.05% to get single effective interest rate. In short, in determining effective interest rate, I was not valuing 123.79 but rather the pv of the benefits at the effective interest rate. I believe that is how the actuary got to an effective rate less than the first segment rate. This is not a commentary on what should or should not be done.

From 415 final regulations: "(ii) Years of participation. The following rules apply for purposes of determining a participant’s years of participation for purposes of this paragraph (g)(1)— (A) A participant is credited with a year of participation (computed to fractional parts of a year) for each accrual computation period for which the participant is credited with at least the number of hours of service (or period of service if the elapsed time method is used for benefit accrual purposes) required under the terms of the plan in order to accrue a benefit for the accrual computation period, and the participant is included as a plan participant under the eligibility provisions of the plan for at least one day of the accrual computation period." So, did participant earn service to accrue a benefit? The key is "hour of service" (whether or not elapsed time being used) which is typically, "Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Company." The operative words here are "or entitled to pay." The DOA ("dumb old actuary" and not "dead on arrival") opinion is "yes, credit year of participation for 415 purposes." So, even though no pay received, participant was entitled to receive pay. Check out your plan language and then obtain a legal opinion, which is how I would proceed if faced with your question.

Age 45 Segment 1 = 7.50% Segment 2 = 8% Lump sum in 20 years valued at 4.5% Are you suggesting that effective rate won't be less than 7.50%? Just for grins, (71GA,4.50%) used to value a65=123.79. 123.79/1.08^20=26.56 = PV @45 Single interest rate that produces this result=7.05% Perhaps, I'm misunderstanding your 2-cents worth? Wouldn't be the first time.

From proposed funding reg: "Under section 430(h)(2)(A), a plan’s effective interest rate for a plan year is defined as the single interest rate that, if used to determine the present value of the benefits taken into account in determining the plan’s funding target for the plan year, would result in an amount equal to the plan’s funding target determined for the plan year under section 430(d)." Is there some guidance published elsewhere that would lead you to the statement that an effective rate lower than the first segment rate may be impermissible?

Sensible approach offered by my 2-center. Negative numbers may kick out an error-report.

While my 2 cents interptetation of the instructions might be accurate, I would excercise spirit-of-the-law judgment and not report negative numbers. Instructions or not, you're looking for trouble.

I vote for (2). Reporting negative numbers on the SB when not permitted sounds like a non-option.

For what it's worth, this is a takeover plan. The 2010 SB's outstanding balance was about $19k and installment was 10,612, so no issues there. 2011 SB had an o/s balance around $5k, so it looks like the installment was limited to $5k, although the attachment was clearly overridden to make the annual charge equal to $5k, and not the $10,612. Is amending 2011 5500 a viable option?

What did the 2010 SB report???? Your issue is not just occurring now!!

We need some info. Given you still have a COB, the PFB has not been used. Consequently, in considering whether to establish a new base in 2010, you would consider only the AVA/FT ratio without reducing AVA. Dido, 2009. My understanding is you were exempt from establishing a new base if AVA >= FT. And this included establishing a negative base. If my understanding is off-base, please advise.

And this changes what -- the actuarial certification which is not their responsibility or the benefits paid which were what the PA requested the Trustee to pay. Perhaps, they should simply qualify their letter. Also, where have they been the last 10 years? I.e., if THEY were doing their job, this would have been caught sooner. They share in this issue. Finally, you may want to verify that the auditor is correct because the auditors generally don't have the expertise in calculating benefits. Someone needs to have a come-to-you-know-who conversation with them and let them know that the client will be looking to them to share in any penalties. Most of all, the client should consider finding a new auditor -- one who when he identifies issues does not drop them on the client at the last minute and put the client in financial harms way.

Technically, a lawyer question. However, assuming you're talking about lump sums, is there any reason to believe that a participant or spouse would not have given consent for lump sum distribution if lump sum had been greater?

Check MRD provision in plan document for guidance.

No, although they likely would appreciate being thought of as human.

"However, I have to prepare the 5500-SF for 2012" No, you don't. There is nothing in ERISA that forces you to work for someone who flouts the law.

Agree with David Rigby. Understanding and there are some earlier posts, extrapolating the answer the Gray Book provided:-- You can't deduct a contribution for a year earlier than the year you claim on schedule B. So in calendar year plan/fiscal year scenario, you can't deduct in 2012 but claim on 2013 Schedule SB. Since 9/15/2013 has passed, you can't claim on 2012 Schedule SB, and therefore would have to claim on 2013 SB, which means it may be deducted in 2013 but not 2012. To my knowledge, the only published IRS opinion on this is in the IRS Gray Book cited.

Not that the following anecdote helps but . . . I used to submit 5558 by certified mail. I could then always track on the internet. For 2009, I found there was no indication of delivery on USPS. I went to the post-office and inquired. I was told that the IRS receives so many filings that they no longer sign. Has anyone else experienced this? In any event, I now file with "proof of mailing" only.