Andy the Actuary

The Pension Protection Act of 2006 removed Code Section 412(l).. Q&A 30 from the 2008 Gray Book states: PPA Other DB Plan Issues: Top 25 HCEs Until the IRS issues formal guidance for the Top 25 HCE rule after PPA, does the existing rule continue to apply? If so, how should it be applied? RESPONSE The Top 25 HCE rule continues to apply. Until additional guidance is issued, it would be reasonable for the sponsor to continue to use a method consistent with prior practice (i.e., continue to use a current liability type approach). It would also be reasonable for the sponsor to assume current liability can be replaced with the “funding target” concept introduced by PPA. See §1.401(a)(4)-5(b)(3)(v) which states that “any reasonable and consistent method may be used for determining the value of current liabilities and the value of plan assets.”

Thanks Mike ! Best, andy

Does anyone have anything to add regarding this issue, and in particular, the use of HATFA rates to determine the FT (a proxy for currently liabilities)? As I see it, the IRS did not publish MAP-21 rates for 2015 so even if you agreed it was okay to use MAP-21 but not HATFA, where would you get the rates? (I.e., good faith estimation of MAP-21)?

Could you please provide some names. I might lose less money that way than investing in the market.

Just an opion without any research: So long as produces rate that produces lump sums as least as great as the Applicable Interest Rate should be okay. It's simply another form of subsidy. Obviously, disclosure of a negative interest rate can raise eyebrows.

"Sometimes the "correct" course of action isn't the one that is legally defensible at a cost. Instead, it is the action that ensures one needn't defend anything - legally defensible or not." (Mike Preston)

What does plan document specify? Problem arises if TV passes NRA that forfeiture is not permissible, so plan may need to be amended to have retroactive annuity start date provision. Also, you have age 70 1/2 issues. While 50% penalty is imposed on recipient, recipient could go after PA for failure to notify him. By the way, was participant noted on Form 5500 SSA?

Sort of thought that. I only do about 10 of these and I'm heading out to the hammock in 2016 so may opt for the manual entering of information on MyPPA and EFast2 unless someone offers a kinder solution.

I have been a Relius user for 20+ years. I recently downloaded the 2014 forms. To my surprise, I cannot print the forms or save to pdf. Worse, there does not appear to be an IFile option. Would someone who is more familiar with Relius please comfort me by saying these features are coming in a future release.

Relius charges more

It wasn't so long ago that interest rates meant interest was being paid.

It's simply lovely the level of security to use the IRS Fire submission system. Had Homeland Security been as vigilant, 911 would have been averted. Hey guys -- How about one user name, password, and if it must be pin number for FIRE, EFAST2, PBGC, ad nauseum. After all, we're generally (except for IFIRE) filing public information.

Conjecture is when all is said and done you might regret ever having posted this question.

(1) How is the treatment described in the actuarial report? (2) Sounds as if there may have been a plan amendment to allow for lump sums? (3) On surface, feels like an assumption change. I.e., the assumption was 100% elect annuities; the assumption is changed to 100% elect lump sums. Look at item 24 SB instructions. Note the comment about decreasing the short-fall. This would seem to mean if there is no short-fall before, then IRS approval would not be required.

To what extent would you want to caveat the MEP2014 requirement, "Actuarial Certification – The plan actuary certifies that the plan is projected to avoid insolvency indefinitely if the suspension of benefits occurs."

One Plan I work is sponsored by an organization with constant turnover of HR and has difficulty knowing their anus from their ulna. They are forever failing to start TVs at 65 no matter how much tickling. We amended the Plan to incorporate a retroactive annuity start date so at least once they started, it was started in consonnance with the Plan.

What sayeth the plan document? The actuarial increase is design. Alternatively, a plan is only required to provide an actuarial increase if the PA does not give the suspension of benefits notice. That said, if the plan does actuarially increase benefits, then the frozen benefit would be increased as well to avoid an unpermissable forfeiture.

1. What sayeth the plan document? 2. What sayeth the plan document?

Right or wrong, I used HAFTA rates because they represented the basis on which the MRC was determined.

Okay, so the procedures for changing organization and EA have been renewed via IRS Announcement 2015-03. It's been 10 years since I was engaged in a takeover and I ask this question out of curiosity since my business book is closed. Suppose, you cannot replicate the prior actuary's work within the prescribed 5% tolerance. Presumably, the remedy is to apply for a change in funding method. Are there other alternatives? Suppose you have acquired the new client by lower bid. Have you reflected in your bid the cost of applying for a funding method change? It would seem like the last thing a client who has engaged your because of lower fees would want is more expense for work that would not have been required had he stayed put. How is this handled?

Dilemma time. If you protect the retirees, then you must take away from the TVs and more importantly, the actives. If you take away from the actives, how do you justify the contribution rates for lower benefits? Of course, we're waiting for the lawsuits not from the employees but from the employers who contributed for a certain level of benefits. Where's their refund since in their minds they contributed for benefits that won't happen? There's a big difference between funds being exhausted and Trustees making judgment calls to hurt certain population sectors. It's at times like these that I reflect fondly on having watched Stan Musial win his last batting title in 1957 and thank somebody for keeping me from practicing in the m.e. sector.

While what you say may be correct, it would not make sense. For example, Plan has $2 billion in assets and $3 biillon in total liabilities, and the guaranteed benefits liability is $1.5 billion. What you're suggesting is that PBGC takes over and gets 1/2 billion windfall. Wouldn't they apply the excess 1/2 billion since it does not extend their liability. Let me just say that I have been practicing in pension since pre-ERISA and have never experienced the displeasure of being involved with a PBGC takeover. Anyway, here's the blurb from that wonderful document known as the Annual Funding Notice (Single Employer): "In some circumstances, participants and beneficiaries still may receive some benefits that are not guaranteed. This depends on how much money the terminated plan has and how much the PBGC recovers from employers for plan underfunding." While I cannot assure this is correct, presumably the PBGC would apply asset allocation categories if assets exceed the pv of guaranteed benefits. Can some please help?

Dear Mr. 2 cents: Not that familiar with when the PBGC takes over in respect of a ME plan but doesn't the PBGC first protect benefits in a pay status and start cutting actives, TVs, etc? I.e., doesn't it establish asset allocation priority categories? In such case, there may be enough money to cover retirees whose benefits have been in a pay status for 60 months. Wouldn't the new law permit trustees to cut retiree pension's first?

The 4980 tax was originally 10%. In 1989, it was increased to 15%. Then, in 1990, it became 50%. However, we note that if 25% is transferred to a replacement plan, it reduces to 20% and 20% of (100%-25%) = 15%.

Certainly, AE could change dynamically but only if (a) cause an increase in benefit and (b) was not discriminatory in operation. I'm an actuary and not an attorney so check with a benefits attorney for an opinion you can rely upon. Oh, I failed mention, I'm studying to be a politician.