Andy the Actuary

The supplement that accompanies the AFN from my former employer showed an MRC with MAP-21 of $15 million and without MAP-21 of $78 million. My conclusion is they are not adequately funding the plan and I intend to write the IRS, DOL, PBGC, FTC, FCC, WSJ, NY Times, and Al Sharpton. It's totally implausible that a plan participant can feel anything but panic let alone assess the plan's funded position. For Congress to say you must employ certain assumptions to determine your contributions and then punish you for using these assumptions demonstrates just how little understanding they have for pension issues. It is of interest to note that unlike the prior Summary Annual Report, the AFN does not disclose how much the employer funded or intends to fund (in 2012). It's possible they might even fund the $78 (or more) rather than the $15 million..

And "I Wonder Why" "No One Knows" "Where or When." Just remember "Be Careful of Stones That You Throw" and "Don't Pity Me" "When You Wish Upon A Star" "In the Still of the Night" because I'm nothing more than just a "Wanderer." That would be "Majestic."

FPJAX: For years, your suggestion is precisely how the sponsor funded the plan for years. In fact, that's how they built up a significant FSCOB. Then, they sold to an Asian company and have funded on a minimum basis ever since. While I intend to bring up the subject, I don't anticipate they will be in the mood to fund even a $60,000 contribution to increase the AFTAP to 100%.

Have an almost frozen DB plan. About 110 participants, most inactive. No lump sums, not even if <=$5,000. Only one (union) participant is still earning benefits -- about $12/month in 2013. At 2012, we had under MAP-21: FT 1,610,000 Assets 1,700,000 FSCOB 835,000 MRC=15,900 FTAP= 45% AFTAP=105% Assets yielded about 10% during 2012 and there were no unusual demographic changes. At 2013, we have: FT 1,755,000* Assets 1,695,000 FSCOB 900,000 MRC=138,000 FTAP=45% AFTAP=45% Consequently, must burn about 260,000 of FSCOB to get AFTAP to 60% so that one participant can earn $12/month. Assets would have had to yield about 12.65% just to avoid the burn of the FSCOB (i.e., maintain AFTAP at 100%). Only hope is that employee still earning benefits quits. May I be retired as interest rates decline and assets suffer a loss. FSCOB will disappear real fast and contributions will skyrocket. In short, this example illustrates how Congress has eroded the efficiency of DB plans. And the Big Guys at the EA meeting are so optimistic about DB plans! *FT using 2011 assumptions=1,640,000

Agree with LS but a good practice would be to give one final written warning about how payment wiill be made. This presumes that other requests were not written and did not articulate the default in writing. Since you have an onry participant, you want all communications in writing. This is a good practice in any event with all participants so there is never any question of how the plan administrator acted.

Did he add FOS to the end?

Point well taken. It does depend upon your marketing strategy, your marketing targets, and the services you provide. I always marketed directly by relationship. No one was ever concerned with my credentials. Since I'm from St. Louis, they were only interested in where I went to high school. The letters suffixes certainly help sell your curricula vita as well as any articles you might pen. Generally, not too much credence is given to an opinion presented by an unqualified professional.

Nope, "Deep Thinker For A Price" Normally, sign "Andy the Actuary, Enrolled Actuary" My clients understand what this means. They are not partial to alphabet soup.

DTFAP

Not suggesting this is viable but is thinking altered if no action taken in respect of in-kind contribution and client makes a cash contribution -- an additional contribution -- in the amount of the MRC? Then, at least in-kind contribution was not made to satisfy MRC.

NA=Assets-FSCOB-PFB If NA>=FT, then MRC=MAX(0,FT-NA+TNC) From Final 430 regs preamble: "If the value of plan assets (less the sum of the plan’s prefunding balance and funding standard carryover balance) is less than the funding target, section 430(a)(1) defines the minimum required contribution as the sum of the plan’s target normal cost and the shortfall and waiver amortization charges for the plan year. If the value of plan assets (less the sum of the plan’s prefunding balance and funding standard carryover balance) equals or exceeds the funding target, section 430(a)(2) defines the minimum required contribution as the plan’s target normal cost for the plan year reduced (but not below zero) by the amount of the excess."

You likely won't get answers but only opinions. Here's what I intend to do. While it's been stated it's acceptible to put the supplement in front, that seems to place more importance on it that it deserves. I was planning to insert it right after the other meaningless table of FT, Assets, COB, PFB. I was also planning to show the MRC without regard to elections to apply credit balances even though they occurred. There is nothing to preclude you from showing the MRC both ways, which is certainly just as confusing and meaningless as showing the compare in the first place.

Here's some language from a Plan for which I am actuary: "After payment to an Employee described in Subsection 16.3(B)(iii) below [an HCE] of all Benefits, the value, including contributions made before the distribution date, of the Plan assets, determined as of the first day of the Plan Year, equals or exceeds one hundred ten percent (110%) of the value of the funding target (as defined in Section 430(d)(i) of the Code) for the Plan Year" The FT is determined using the MAP-21 rates. We follow the Plan. Not sure you get the same answer if the Plan is more loose in its definition of how the 110% ratio is determined.

It's understandable how the frustration can mount over dealing with government agencies. (It does for me.) There is no doubt that government professionals may be experiencing similar frustrations when dealing with practitioners. The GP are people trying to do a job that many of us wouldn't want. More likely than not their personsal opinions sometimes differ from how their job description demands they must opine. You can be assured that their eyes are not totally blind to our comments on these boards. They bleed if cut. These boards are generously peppered with criticism, direct and indirect slurs, and inuendo regarding the integrity and honesty of the agencies with which we must work. This furthers no one's cause and does not foster a working relationship. This is not to suggest that if you have a bad experience that you are urged to bury your head in the sand; rather, there are professional and unprofessional ways to express your disappointment, discomfort, and even your disgust. I may have violated my own preaching in the past and if so, shame on me (and I apologize). However, if so, this makes my suggestion of acting professional no less meaningful.

A calendar year Plan deferred implementation of MAP-21 for all purposes for 2012. As of 1/1/2013, we have MAP-21 Pre-Map-21 FT 12,000,000 14,000,000 Assets 15,000,000 15,000,000 PFB 1,525,000 1,525,000 --------------- --------------- ShortFall ( 1,475,000) 525,000 As it stands, 2013 AFN (in 2014) would have to include supplement because funding shortfall of at least 500,000. However, if Plan Sponor elects to waive 25,001 of PFB as of 1/1/2013, then shortfall on pre-Map-21 basis becomes 499,999 and 2013 AFN supplement would not be required. Any disagreement or thoughts?

Look at the optional forms of distributions section of your plan. Determine under which conditions, if any, a lump sum may be distributed.

What does the Plan document state?

Whoa. An annuity purchase (i.e., irrevocable commitment) is treated like a lump sum distribution. Forget about HCEs. If restrictions apply, then you could not purchase the entire pension.

Speaking only for myself, there is no exercise more worthless than the time spent attempting to place information from unfriendly asset statement(s) into the correct bucket. In fact, the only one who seems to look at and question this stuff is the auditor. In particular, sometimes determining the the basis/proceeds for realized appreciation can be a nightmare. This is particularly exasperating when during the year the plan sponsor switched investment managers and the basis as of the date of switch is lost or mistracked. I have typically indicated that I am an actuary and not a trust accountant and that I would accept whatever their auditor comes up with, which sort of thwarts the audit process. How have practitioners proceeded, for example, when they simply cannot identify the cost and proceeds basis?

Does IRS Reg. 1.415-5(b) help?

Does 3113 have any meaning in the Jewish calendar??? I know that palindromic numbers date back to the Mayans who were still stuck on trying to invent "0"

You will note in 1.401(a)(4)-5(b)(1) that the 110% rule does not apply "if the Commissioner determines that such provisions are not necessary to prevent the prohibited discrimination that may occur in the even of an early termination of the plan." Presumably, this means you could amend the Plan to stipulate that the provision only applies in the event the Plan at any time covers an NHCE. You could then submit the Plan for a D-Letter. An attorney could tell you whether a favorable D-Letter would mean you're home free.

Under the assumptions, the 25-year MAP-21 rates are determined as 4.99, 6.67, and 7.49. This leads to a 30% corridors of 3.49-6.49, 4.67-8.67, and 5.24-9.74. We are then comparing 1.90, 4.92, and 6.04 to these corridors and only the first segment rate falls below the corridor. The second and third lie within the corridor so we use them. Of course, the corridor comparison would be to the applicable segment rates under 430(h)(2)(C )(i), (ii), and (iii) if you are not using other than the September rates. For example, if you were using January 2013 rates, the comparison would be to 1.62, 4.40, and 5.45 as Xerxes pointed out. I apologize for having the September mental set since all the plans I administer use September to provide the most lead time for estimates. It would be appreciated if someone confirms this application or comments that I have misapplied the rules, which is always an allowable possibility.

You'll note from attached that even if we zero the 2012-13 24-month average segment rates, the 2014 MAP-21 rates would be 4.38, 5.48, and 6.04. In short, the leverage comes from the drop off the high early rates and replacing with much lower rates. For 2014, at least, the MAP-21 segment rates have little sensitivity to the 2012-13 24-month average segment rates. mAP21-13.xls

No problem at all Mike. The intention was not to argue anyone out of his/her opinions and feelings. Rather, it was simply relating some past experience.