Andy the Actuary

Anyone care to conjecture a rationale for this ruling which appears to be a solution for a non-existent problem?

A DB plan is terminating and there will be between 7-12 participants who purchase annuities. The broker assisting with the annuity solicitation commented: As we got further into our discussions with each carrier and realized that we did not have many participants that were interested in the annuity option, our choices narrowed further as group policy providers became disinterested. Lincoln National would not allow their products to be used with a terminating pension plan. Principal Financial could only work with us on a group platform, which would require more participants to choice the annuity option. MetLife and Prudential also declined to open their annuity products in this instance due to the size of the quote. Since American General is willing to offer individual annuities, they became the leading option. Are these comments consistent with what others are finding?

The final 436 reg. provides: C. Limitations on Plan Amendments Increasing Plan Liabilities In accordance with section 436©, the regulations provide that a plan satisfies the limitation on plan amendments increasing liability for benefits only if the plan provides that no amendment to the plan that has the effect of increasing liabilities of the plan by reason of increases in benefits, establishment of new benefits, changing the rate of benefit accrual, or changing the rate at which benefits become nonforfeitable is permitted to take effect if the AFTAP for the plan year is less than 80 percent (or is 80 percent or more but would be less than 80 percent if the AFTAP were redetermined taking into account the benefits attributable to the amendment). It would seem that the spirit of "establishment of new benefits" would override the exemption that was granted to plans frozen September 1, 2005, but a "Gray Book" may address this more definitively.

What do the DOL regulations stipulate?

Thank you both. I sensed the same impact as checking the box below the signature on SB that indicates the EA has not fully reflected the law. In short, avoid checking the "qualified" box.

This has not yet happened. It's a situation where auditor thinks footnote accumulated benefit reporting values re:FAS35 should incorporate RP2014 mortality.

What are the practical considerations (e.g., promting audit) of Auditor issuing qualified opinion and checking qualified box, 3a2, on Schedule H?

Sorry, my confusion. Rule is (as you reported) cannot deduct for an earlier year than the Schedule SB year.

Assuming calendar year, understanding is contribution made in 2015 cannot be deducted in year 2015 if claimed on 2014 SB.

Yipes. You either need a benefits attorney or a lot of reading patience!

What does Plan document say?

Please don't swear on these boards. It reminds me of those f'in cable shows I eschew!

This is the approach we customarily take. We provide a list of the wages considered and indicate to the employee that if they have evidence to support these are incorrect, provide it and the issue will be reconsidered. Once you've bought into proving, you've committed yourself to operating on the employee's terms and may be pressured to provide information you don't have. It's unclear how you prove anything without going back to time records and analyzing the pensionable compensation carried on record. The bigger question is are you dealing with a cynical person -- you know the kind who will typicallly raise his/her hand 5 times in a general information meeting or are you dealing with an irate employee who wants to bar-b-que the company? You need to determine which one. Clearly, if the latter, you can expect the suggested approach only to fuel the fire. Recommendation: Do not communicate with employee until you have more information and possibly have consulted legal.

If their change in benefit under the DB Plan is $0, then your conclusion is consistent.. But you're aggregating . . .

Not my answer but from IRS Publication 6393

Benefiting In general, an employee is treated as benefiting for the purposes of the coverage tests, only if the employee receives an allocation of contributions or forfeitures, or accrues a benefit under the plan for the plan year. However, employees are treated as benefiting if they fail to receive an allocation of contributions and/or forfeitures, or to accrue a benefit solely because the employee is subject to plan provisions that uniformly limit plan benefits, such as a provision for maximum years of service, maximum retirement benefits, or application of offsets or fresh start wear-away formulas.

Suggestion from a trusted broker was to contact BCG Terminal Funding.

Supposedly an insurance company issued a $40 million personal disability income policy to Detroit pitcher Max Scherzer to safeguard against injury in 2014 when he played without a contract. The Principal won't issue a life annuity! What reason did The Principal give for declining to bid?

Whad? Never heard of such a thing. Which insurance companies have been solicited? Would anticipate that an insurance company such as The Principal would write this annuity.

Surprised at results. Consistent with Effen, have see tis several times. If IRS Is adamant, it might be helpful if they put their words into print.

Part of the distribution would be the RMD.

Presumably, plan is terminating and we're looking a sole proprietor. Been awhile since I looked at 415 regs, but answer would appear to be (a) unless plan has retroactive annuity start date provision.

I will not argue this because it was not my contention. I wanted to share that attorney client about 5 years ago used the regulations in 1.72-17 and 1.72-17a as justification that a basis was created. Since to my knowledge he was not audited, he must have been right.

I sort of recall from years ago some analysis whereby a basis was established so that the employee would not be taxed on that part of the distribution attributable to after-tax contributions.

Agree and assets for 404 purposes should not reflect the contribution, so that assets 12/31/2014 for 430 and 404 purposes differ.