Andy the Actuary

The DB Plan says to start the pension on April 1 following . . . The election package gets completed by the end of February and is submitted to the Bank for processing. The initial monthly pension check is not cut until April 11, 2011. Have the RMD rules been violated? Suppose this were April 1, 2012 which is a Sunday, and so the check is not dated until April 2, 2012. Have the RMD rules been violated? As a practical matter, the rules have been complied with. Has anyone have experience or knowledge to the contrary?

Okay, thank you. Mr. eeyore was correct that I misunderstood. 1.401(a)-11(b)(2) states "means an annuity for the life of the participant . . ." However, neither this provision nor (b)(1), which defines life annuity, stipulate that the annuity must be level. What is being overlooked?

And in your case, how much was straight life annuity without death benefits?

Well, let's see. I indicated that the life annuity amount was $1,000/month and asked for an example. The response was $1,000 so long as both living that reduced to $500 on first death. Mr. Jfreeborn, am I misinterpreting your response? Are you saying that the $1,000 in your example does not relate to the $1,000 in my question? If so, please provide an example. Clearly, I'm unacquainted with the payment form which is why I asked for some numbers. Mr. eeyore appears to be saying ax = .5 x r x (ax + ay) or r = 2 ax / (ax + ay). Mr. J-F, is this what you mean?

Andy, Thanks for the reply. The plan docs do not describe a "qualified" annuity, but do describe the previously described annuity as their J&S annuity. The plan allows for the participant to select a 50%, 66 2/3%, or 100% J&S annuity. It never mentions which is qualified. By way of example: Participant elects 50% J&S annuity and begins to receive $1,000/month. His wife dies, and now he receives $500/month. There is no option for a typical J&S annuity. so, we have 1000ax versus 500ax + 500ay???? They are equivalent only if x=y, subsidized if x>y, and a rip off if x<y. This option doesn't appear to satisfy anything, let alone common sense. Notwithstanding her untimely and unforeseen death, no doubt Anna Nicole would have prodded her loving octogenarian hubby Howie to elect this form of payment on a Joint & 100% basis. I'm sure the Plan Sponsor wouldn't have been too happy about his once it was discovered how underfunded this election made the plan. If you were the actuary, what would be your FT assumption under 430 for beneficiary designation and form of payment?

Suppose life annuity was $1,000/month. Would increased amount be paid under this special J&S while both living? Could you provide some numbers for example? Also, is the plan's QJ&S defined as your special annuity or is your special annuity simply an optional form of payment?

Ooooooh, a pop-up formula! You can come up with a nice looking formula, say for a joint & 50%, r x (ax + .5* (ay - axy)) + (1-r) x (ax - axy) = ax ==> r = 2 axy / (ay + axy) Let's see x and y both living, then payment is r x ax x dies before y, then payment is .5 x r x ay y dies before x, then payment is r x ax + (1-r) x ax = ax Better check this carefully -- I passed part IV in '73.

Thank you!

Yup, Mom is in the DB Plan unless the Plan was amended to not cover her. That was the point, she's gotta stay in the Plan as a participant and so this will trigger the combined plan limits. The only way to get away from the combined plan limits -- it seems -- is to terminate the DB Plan (and distribute benefits).

Mom and Pop organization has no common law employees. They sponsor DB Plan and DC plan where they defer under 401(k) and receive 6% PS contribution. In 2010, Mom retires under the DB Plan and receives in-service lump sum of her entire benefit. Mom continues in the employ of Mom and Pop full-time and continues to have compensation. My understanding is that although Mom will earn no additional benefits, Mom must continue her participation under the DB plan or we have a 401(a)(26) problem. Because of this, we cannot set up a SEP for Mom for 2011 and contribute more than 6% because she would be considered a beneficiary under both the DB and the SEP even though she's not benefiting from the DB plan in the literal sense. Any disagreement?

A DB plan distributes (a) non-consensual lump sums if the lump sum is less than $1,000 and (b) consensual lump sums if the lump sum >$1,000 and <=$5,000. Otherwise, the Plan does not offer lump sum payment. The 2011 AFTAP is certified as <60%. My understanding is that the Plan must distribute the lump sum in (a) but cannot distribute the benefit in a lump sum in (b). Any disagreement?

Hopefully, I have developed some friends over my years of posting. I ask each such friend (up to 257) show good faith and send me $.25. I believe I have a better chance this way of obtaining restitution for the $64.25 I shelled out in good faith to obtain a PTIN than obtaining a refund from the government. Thanks in advance for your help and a happy New Year to all my buddies even if you can't spare a quarter. Personally, it would have been better news if the IRS had issued the exemption before the government issued the instructions that they weren't backing off of the requirement to obtain a PTIN to file the 5500.

What discount rate ranges are you seeing? Are you seeing difference between those used for publicly trade companies and those used for privately held industry?

From the Standard Termination instructions (http://www.pbgc.gov/docs/500_instructions.pdf): "The plan administrator must file a completed PBGC Form 501 with PBGC within 30 days after the last distribution date for plan benefits (through priority category 6 under ERISA section 4044 and 29 CFR Part 4044) for any affected party. The due date for the Form 501 is unaffected by the timing of any distribution of residual assets, whether to the employer or to participants and beneficiaries."

The plan may also have become precariously close to becoming overfunded. This is a good thing only if you are the tax man lying in wait to collect the 50% overfunding federal excise tax. As Philip Esterhous used to warn, "Be careful."

You're way ahead of me because I've never worked with 411(b)(1)(A). Your example looks fine. The rule clearly cannot practically be widely applied. For example, it would permit an accrual of 3% in years 1-9 and then 73% in year 10, for a total benefit of 100% after 10 years. Of course, this formula would apply to all participants.

Under this formula, won't participant's accrual satisfy the 3% minimum accrual method, provided AB capped at 100%?

My recollection is that 414(s) defines compensation in terms of 415©(3) so would believe you're okay. You haven't mentioned 401(a)(4) and consideration would be that this adoption is nondiscriminatory. Plans may measure service for eligibility, vesting, and benefits accrual using different crediting methods and the only requirement to count past service is for eligibility. Again, assuming past service for benefit accrual, a consideration should be made as to whether or not granting of past service could be construed as discriminatory.

Have been involved with Plans that have received d-letter where plan has been amended to replace "current liabilities" with "funding target as defined in IRC 430(d)(1)" in the 110% provision and have administered in-service distributions under this provision. This ties the test to the FT used for 430/436 and should not be construed that you can value FT under different assumptions at a determination date other than the actuarial valuation date.

Those FBs!* I've gotten so decrepit I can't remember on which foot my left baby toe is attached. ========================================================================= *I would never use such language (at least not publicly)! FB=Federal Bureaucrats

Here's a crazy idea: Change her FIT withholding to reduce net pension check below threshold. Then, don't apply for a refund of taxes until later. This seems legal and may work depending upon how "income" test is defined.

Did you receive any notice that you needed to re-enroll? Was there an announcement somewhere else (e.g., BenefitsLink)? Or, am I just supposed to remember to do this? I'd been wondering about this but received nothing. The form to which you referred (revised January 2010) indicates you must submit it by March 1, 2008. You're late!!!

Here is a turkey recipe that also includes the use of popcorn as a stuffing ingredient. When I found this recipe, I thought it was perfect for people who just are not sure how to tell when turkey is thoroughly cooked, but not dried out. Give this a try. 8 - 15 lb. turkey 1 cup melted butter 1 cup stuffing (Pepperidge Farm is Good) 1 cup un-popped popcorn (Orville Redenbacher's Low Fat is best) Salt/pepper to taste Preheat oven to 350 degrees. Brush turkey well with melted butter, salt, and pepper. Fill cavity with stuffing and popcorn. Place in baking pan making sure the neck end is toward the front of the oven, not the back. After about 4 hours listen for the popping sounds. When the turkey's ass blows the oven door open and the bird flies across the room,.... it's done.

Ahhhhhhhhhh. You would like them to live by the rules they legislate? Oh my. In such case, we could not be the 100% confident we are today that they eschew their self-interest and act strictly to our benefit!!!!

"insistence" has an interesting connotation. The Japanese insisted we sell them oil. We repudiated their insistence. We went to war. Is it better for Congress to get the wrong* thing done rather than get nothing done? *wrong is in the eyes of the beholder. We can argue that 2% off Social Security Tax Rate benefits far more people than 2% off the general tax rate. The other side is will 4.2% ever increase back to 6.2% and what both short and long-term effects will this have on the viability of Social Security unless offsetting changes are enacted.