Andy the Actuary

You indicated, "We are inclined to tell "Y"" Please, first, please identify yourself generically. Are you benefits manager for the plan sponsor? Actuary? Attorney? Third party administrator? Suggest at least at this juncture to advise the PA to rip out the telephone and deal with "Y" in writing requesting "Y" to send a letter to the PA with her request and stating her position and to provide any evidence to support her position. If participant was divorced from "Y," there should be public records which current spouse may be able to lead you to. Then, turn this letter over to an attorney who should advise how to proceed. Clearly, it's business as usual until the Plan's counsel advises otherwise. "Y" can cause the plan sponsor to spend a lot of $ if the PA does not proceed with careful guidance.

Agree with Effen

His children? Assuming the Plan provides for 5-year vesting (except for the non-existent employees), he would have to start taking MRDs after 5 years.

As the US District Court for the Western District of Washington recently stated in Palmason_v_Weyerhaeuser_Company "In other words, a participant can not sue just because someone working for the defined benefit plan erred, that error has to actually cause the promised benefits of that participant to decrease." Misconduct by the administrators of a defined benefit plan will generally have no effect on an individual’s payments under the plan. In order to establish the requisite personal injury to pursue an award of monetary damages, the participants in such a plan must show that the alleged breaches of fiduciary duty created an appreciable risk that the defined benefits would not be paid. In other words, plaintiffs must show that the challenged investment policy and other fiduciary breaches “create[d] or enhance[d] the risk of default by the entire plan.” Thus, if an actuary makes an egregious error that upon termination is found to have resulted in a significant underfunding and the Plan is terminated under a distress termination, the fact that a participant may forego part of his benefit or option to lump sum may give him cause against the actuary. One would think that a miscalculation of an AFTAP leading to lump sum restrictions applying would also be cause. It sounds like no foul, not suit. That is, if benefits aren't affected but the employer may have to put in unanticipated dollars, then that's no cause for employees to sue. Of course, if employer fails to fund, then there could be cause.

Check Rev Rule 81-159 and see if that will help. The definition of Plan Year in ERISA 3(39) is reasonably general. It is my understanding that the IRS does not abide by Orthodox Jewish dietary laws so Kosherness is not an issue. Rev. Rul 81-159 Plan Year.pdf

Minimum funding standards apply for 2012. If the 2012 5500 whatever has not been filed, then an election can be made to offset the MRC with the PFB. Alternatively, a contribution can be made and an additional distribution made in 2013, or the SB can show a funding deficiency, or you can fail to file the 5500 whatever, or you can jump off the Staten Island Ferry into the East River.

The rules appear to differ when the Plan is terminating, at least as far as I can smell. See attached. IRS Rev. Rul. 85-6 Early Retirement Subsidy Termination.PDF

Thank you!

So, let's say comp=200,000, 31% comp=62,000, MRC DB=1 and DC=61,999. So, DB+DC <= 31% but DC =~ 31% > 404(a)(3) This just doesn't sound right

A plan provides ye olde 1/15, 1/30 early retirement adjustment factor with e.r. as early as age 55. The Plan is terminating and will pay lump sums. The employer is ongoing. As I understand (possibly incorrectly), the distributions must include the early retirement subsidies, if any. That is, we should value the lump sum as the greatest of the lump sums that would start at all possible dates. For example, the lump sum to someone age 35, disregarding non-integral ages, would be valued as the greatest of the lump sums at age 35 of the pension starting at age 65 or the early retirement benefit at ages 55, 56, 57, 58, 59, 60, 61, 62. 63, and 64. This is far more unpredictable now that we have segment rates at play. How has anyone handled this?

Thanks for the clarification. So, in summary: (1) 404(a)(7) applies whether or not employer chooses to deduct contribution. (That was the question) (2) Employer can contribute MRC to DB and up to 6% to DC (in addition to 401(k) elective deferrals) without penalty even if total of DB and DC contributions > 25% of compensation (3) Contribution to DC can exceed 6% (without penalty) so long as DC+DB contributions <= 25% of compensation.

Don't quite understand the conclusion. I understand that you conclude it applies to the amount deductible rather than the amount deducted. However, I don't understand the 31%. Doesn't the individual 25% DC limit, 404(a)(3), still apply as if this were no DB plan? That is, 50,000/193,548 = 25.83% so exceeds the 404(a)(3) limit.

One person-plan. In 2012, employer makes contribution to profit sharing plan of $50,000 and MRC of $10,000 to defined benefit plan. Employer does not deduct $10,000 db plan contribution. May employer fully deduct $50,000 ps plan contribution? Or, despite employer did not deduct db plan contribution, is employer deduction to ps plan still limited to 6% compensation? Another way to ask this: Is the application 404(a)(7) driven by the amounts contributed or the amounts deducted?

When the SB joins the Efast club, does the attached pdf reveal whether it is an actual signaure or scan of a signaure? A scan of a signature is subtley different from a scan of a rubber stamp. While not stated, the game has tacitly changed. However, you are correct about what the instructions require. The paper filed B's prior to Efast should not have been rubber stamped. The issue is if it were Bernie Madoff's plan, the 5500 might be deemed an untimely filing.

Re: David. Given that you may want some flexibility, you may want to describe the asset valuation method in terms of the investment assumption and then state the investment assumption under your assumptions section. That way, when you change assumptions, you're not changing the AVM.

There may not be if you can't get to 80%. But, if not, you have big problems if restriction notices were not sent out.

My recollection is that the mandatory credit balance forfeitures when there is presumed underfunding is covered by the final (2009) r430 regs. Search for "presumed AFTAP."

Effen, are you suggesting that if you are talking to two accountants, you will get three opinions?

Agree with Effen. I was thinking one-person plan as well. Still, so long as the present plan language does not conflict with my earlier opinion, I'll stick with it.

Does plan provide that benefits are frozen except for changes in 415? If not, then frozen=frozen. Don't understand the getting closer to 62 business. Wouldn't we determine AB at NRD on freeze date and apply 415 at that time. Or, is the assumption that benefit can be paid immediately? In any case, first decide does frozen=frozen.

My understanding that 415(b) limit applies to limitation year, which in your example would be 2013. Thus, while the AB would have been determined as $160,000, the lump sum value when converted to an equivalent life annuity would be compared to $205,000.

Are there extenuating circumstances why the SB cannot be prepared or delivered? Presumably, all 2012 contributions have been made by 8/7/2013?

Tis presentation may be useful: http://www.asppa.org/Main-Menu/confswebcasts/webcasts/archived/101812/docs/webcast-outline.aspx

Wasn't one of the principal reasons the relative value regulations were issued was to ensure participants were aware that early retirement subsidies weren't included in the lump sum calculation?

This is non-plussing stuff ! Sounds like the kind of rider that would be attached to a life insurance rather than annuity contract. Uncle and sorry I couldn't help.