Andy the Actuary

Once again, you need a professional because you are talking about plan and trust.

Recommend your client engage a pension actuary (at a fee) to assist with the analysis.

My proof of the pudding: I've been working for a multiple-employer plan for years. The participating employers are not noted on the 5500 and no forms have been returned nor does the auditor ever comment. Take a look at the MLB pension plan, you won't find the baseball clubs listed!

To answer your question, please disclose: 1. Accounting or funding or lump sum determination or other purpose (top heavy or 401(a)(4) testing? 2. If funding, is Plan subject to minimum funding standards? 3. State the assumptions There are general guidelines for accounting but no stipulated rates. Federal law prescribes the rates used for funding for plans subject to minimum funding standards. If the Plan is a private plan (as opposed, e.g., to governmental), lump sum sums are determined by the Plan subject to minimum standards.

415(b)(1)(B) limits the benefit accrued to 100% of the high 3 years of compensation. Owing to actuarial increases, it's not unusual that the actuarially increased normal retirement benefit could exceed the 415(b)(1)(B) limit. In such case, it would appear this limit could conflict with 401(a)(9). I have a take-over where this has occurred. The employee is 72 (with 51 years of service!), the AAC=$60,000, the NRB=35,000, the LRB=44,000, and the actuarially increased NRB=69,000. To protect the employee against forfeiture, the Plan would need to incorporate a retroactive annuity start date. Any thoughts?

Based upon your facts, scenario "B" would apply. This accrued benefit method was once referred to as "project/prorate." Your scenario "A" is the projected NRB.

I read that Potrezibie Consulting claimed they are a leading force behind the reemergence of defined benefit plans across the country. I wondered which country?

Any room in 2011 to credit any of the 50K to 2011, assuming the timing would facilitate?

See Notice 2012-61 A T-2 ©

I had stumbled across the example. The client had every intention of applying the PFB but then it occurred to me that by not using the PFB he could increase contributions greatly which seemed like an anomalous result. That is, if you do what Congress initially intended for PPA and you made contributions, then you would be punished. Mr. Rigby and I discussed this little conundrum yesterday and concluded that when the punishment for applying the PFB (i.e., potentially establishing a new base) was conceived, it was not anticipated that Congress would later legislate the higher MAP-21 rates and create some huge credit amortization base. That is, they had charge bases in mind.

Client is interested in contributing (right now) as little as law permits. Here are the facts: FT=18,000,000 AVA=18,100,000 PFB=500,000 TNC=200,000 (frozen plan, expenses only) Amortization payments prior to 2012 = 600,000 Amortization payment after MAP = 150,000 (1) If PFB is waived, bases are eliminated and MRC=18,000,000-18,100,000+200,000 (TNC) = 100,000 (2) If PFB is not waived a. If PFB is not applied, then % = 18,100,000 / 18,000,000 > 100%, so do not establish amortization base, so MRC = 200,000 (TNC) + 600,000 = 800,000 b. If PFB is applied, then % = (18,100 – 500,000) / 18,000,000 <100% so establish new base, so MRC = 200,000 (TNC) + 150,000 = 350,000 < PFB, so may apply PFB to reduce contribution to $0

This could be a first step towards terminating one of the Plans to recapture the excess assets or a move to facilitate selling off a company or division. When all else fails, ask.

I thought the DOL gave actuaries the ability to just print their name and initial it. I sign my name because it's less legible!

Presuming you are a "consultant," it is their call. If you believe it is the wrong call (and you are their legal counsel), you've stated your opinion and they've chosen to ignore. So be it. If I believed they were incorrect, I would not be a party to their actions without qualification. You already know all this but it may be helpful to hear others in your camp. The rollover issue is interesting in that the Plan Administrator is put in the position of giving tax advice though he may claim he is not. Sort of like the EA signing his/her name that actuarial assumptions are reasonable in the aggregate which is okay so long as you're not called to the head of the class to define "reasonable in the aggregate" and support why the assumptions used support that definition.

IMHO, if other than lump sum is elected, the accumulated retroactive payments will not be available to rollover and the payments will be subject to federal income tax withholding that applies to periodic rather than to lump sum payments. I.e., the 20% rule for lump sums does not apply. See § 1.402©-2 Q/A 6(b).

Hey, I have concern that my signature as EA is out there. It's interesting the DOL could care less but requires you change your password quarterly using combinations of unrememberable characters.

Note, this DOL advisory opinion applies to a terminated welfare plan and not a DB or DC plan. The only valuable purposes the notice serves to provide additional fees to the preparer, revenue to the post office department, paper sales to the tree killers, and purposes to those who haul trash. I would opt to provide it upon request, which would likely mean never. It's lovely that the opinion was issued after the date an SAR would have been required to be delivered. Are we certain this opinion was never superseded?

Little Plan Participants

Does this wording from final 436 reg. help? The regulations do not address the change made by section 101©(2)© of WRERA ’08, under which the limitations of section 436 do not apply to distributions permitted without consent of the participant under section 411(a)(11) (that is, distributions where the total present value of the benefit is not in excess of $5,000). The annoying automatic rollover crud is in 401(a)(31) and not in 401(a)(11).

If they terminate, they would fund to 100%. It would likely be less costly than all the expenses to fund to 110% and then they build a cushion against future contributions. Presumably, the existing plan has been around awhile so there's no permanency issue?

Q E-1: How does the plan sponsor elect to defer the use of MAP-21 segment rates until the first plan year beginning on or after January 1, 2013? A E-1: (a) A plan sponsor elects to defer the use of MAP-21 segment rates until the first plan year beginning on or after January 1, 2013, by providing written notice to the enrolled actuary for the plan and to the plan administrator. The notice must specify the name of the plan, employer identification number and plan number, and whether the use of MAP-21 segment rates is deferred for all purposes or only for determination of the AFTAP used to apply benefit restrictions under § 436. (b) The election described in paragraph (a) of this Q&A E-1 is irrevocable, and must be made no later than the deadline for filing the Form 5500, Form 5500-SF, or Form 5500-EZ (including extensions) for a plan year beginning in 2012, or the date the applicable form is actually filed, if earlier. However, the decision as to whether to defer the use of MAP-21 segment rates may have to be made earlier if it affects the application of benefit restrictions under § 436. See Q&A R-1 and R-2 of this notice for information on reporting information on Schedule SB of Form 5500 if the MAP-21 segment rates are applied for a plan year beginning in 2012 for purposes of determining the minimum required contribution under § 430 but not for purposes of determining the AFTAP used to apply the benefit restrictions under § 436. You raise an interesting point that the election for 2012 (calendar year large plan) could be made as late as 10/15/2013 though the 2012 AFN would be delivered by 4/30/2013. To be in sync, you'd have to know where you were headed by the April 30th deadline or I guess you could reissue the AFN -- an undesirable consequence.

Dear Andy the Other: Have faced this situation many times on take over cases. I argue that the TVs must be given actuarial increase because the Plan cannot forfeit benefits due to increase in age. 1.411(b)-1(d)(3)

"Would need" depends upon the procedure being used to perform the test. I.e., if you're using a snapshot approach -- and I'm neither endorsing nor pooh-poohing -- then their accruing a benefit during the year would not affect the test. It's interesting, however, how we get locked into snapshot approach for essentially all of the funding calculations but then eschew the snapshot approach for the 110% test because it doesn't feel right to exclude benefits accrued after the valuation date and up to the date of distribution.

What does the plan language provide?

What does the Plan document provide?