Andy the Actuary

You may be able to offer a lump sum settlement as an option (some attornies say yay, others nay) with spousal consent but in no event can you force cashout. Plan would have to be amended to provide election. Be prepared to purchase annuity.

In short, it appears you were questioning whether contribution is 50K or 45K. Concur with Abanky. I.e., excess assets are "net" assets in excess of FT, not in excess of phase-in percentage of FT.

Your facts appear so straightforward. Is there some subtlety with which you're concerned?

One of my clients obtained a d-letter with FT substituted for CL in the 110% test.

In short, every day above the ground is a great day unless you are an onion.

The following was from the 2009 EA meeting. The gist was that a contribution could not be deducted for a (tax) year earlier than the (Plan) year for which contribution was claimed on schedule SB. Does anyone have an update or confirmation on this? Contribution Deduction Timing •Can employer claim prior year tax deduction for grace-period contributions reported on current year’s Schedule SB (tax year = plan year)? -Some authority for claiming deduction •Regs. §1.404o(a)-14(d)(2)(ii) and §11.412©-12 •Rev. Rul. 77-82 •PLRs/TAMs 7945115, 8210014 (TAM 200604040 revoked for contributions for hours worked in current tax year), 8714008 -Current IRS ruling position apparently ties deduction to reporting on prior year Schedule B/SB •Rev. Rul. 76-28 (plan must treat contribution as if actually received on last day of employer’s tax year) •PLRs/TAMs 199935062, 200311036, 200523033, 200526022–How to apply when tax year ≠plan year?la

yes, provided no key employee benefits. 416©(1)©(iii).

what a pile of crap!

Be sure to read your estimated Social Security letter. It contains: Will Social Security still be around when I retire? Yes. The Social Security taxes you now pay go into the Social Security Trust Funds and are used to pay benefits to current beneficiaries. The Social Security Board of Trustees now estimates that based on current law, in 2037, the Trust Funds will be depleted. Because people are living longer and the birth rate is low, the ratio of workers to beneficiaries is falling. Therefore, the taxes that are paid by workers will not be enough to pay the full benefit amounts scheduled. However, this does not mean that Social Security benefit payments would disappear. Even if modifications to the program are not made, there would still be enough funds in 2037 from taxes paid by workers to pay about $760 for every $1,000 in benefits scheduled.

First, it is unclear whether or not you are the actuary making the changes. Is that you or has there been a change in actuaries? It almost sounds as if some other actuary made changes and then you will recertify. I'm sure I'm the one who is confused. In any event, don't recertify. Then, there has been no material change and the Plan has been operated in compliance with the original certification. Has the plan sponsor requested a recertification?

Draft of what was sent to certain clients: "This email applies to sponsors of defined benefit plans if your organization presently maintains or is considering maintaining an Intranet webstite. An Intranet website for this purpose is an internal website for sharing information among your employees but not with the public. The Pension Protection Act of 2006 (PPA) now requires that certain information from your defined benefit plan 5500 must be posted on an organization's Intranet website. The posting requirement does not appear to apply to other plans such as a 401(k) or health and welfare plan. While no posting reguations have been issued, a good-faith effort would be to scan and post the IRS Form 5500 (pages 1, 2, 3) with the Schedule SB (without attachments). Thus, you would not post Schedules A, C, D, G, H, I, R, and SSA. Note, that the information required to be posted is public record and so is otherwise available to employees (and the public!) anyway. At this time, there is no guidance as to how soon the information should be posted. But, as a rule of thumb, if you have filed the 5500, it's time to post. PPA does not require you to notify your employees that information has been posted. Also, there is no requirement to notify and allow former employees and retirees to enter your Intranet website to view the posted information. "

See IRS Rev. Rule 92-76 for provisions a plan may contain to work somewhat around the restriction.

The presumption is the plan is not terminating and that the lump sum is a significant portion of the Plan assets. In such case: (1) Plan would need to be at least 110% funded after distribution. (2) If plan would be less than 110% funded after distribution, cannot take a percentage of the lump sum. See IRS Reg. 1.401(a)(4)-5(b)

Take a look at the Plan document language. While your conclusion makes perfect sense, it's possible the plan does not give you the out and you just can't ignore them because there is de facto no discrimination. I.e., the pre-termination restrictions still apply and the Plan can only distribute the life only actuarial equivalent. If all else fails, get a legal opinion.

So, 120 days after June 30 means by October 28. The AFN for a calendar year plan year yyyy-1 thus must be provided by April 30, yyyy, unless yyyy is a leap year, in which case we're talking April 29. 2010 AFN date is 4/30/2011; 2011 AFN date is 4/29/2011. Has anyone seen any DOL interpretation that would simply say end of 4th month?

Please help. Final pay plan. Plan frozen after 10 years because of AFTAP. One year later you would unfreeze. Then wouldn't you be using 11 years to calculate the new ab? I realize that you had already used 10 years prior to the Plan being frozen. But, would the amendment then cause you to have to look at the new benefit as granting more than 5 years of past service?

The concern was not about failing if accruals were reinstated; rather, the concern was if the plan were amended to reinstate accruals, then you might have to consider the issue of grants of past service.

What was their argument that it should be eschewed?

During a visit to the mental asylum, the vistor asked the director how do you determine whether or not a patient should be institutionalized? "Well," said the director, "we fill up a bathtub, then we offer a teaspoon, a teacup and a bucket to the patient and ask him or her to empty the bathtub." "Oh, I understand," said the visitor. "A normal person would use the bucket because it's bigger than the spoon or the teacup." "No." said the director, "A normal person would pull the plug. Do you want a bed near the window?"

You may want to review your decisions in light of the 401(a)(4) conditions regarding grants of past service. If you reinstate by special amendment, you may be caught by 401(a)(4); if the reinstatement is automatic, you may not. You may need to pose this question to someone who signs his/her name followed by Esq.

In the proposed 430/436 regs, "elect" appears 190 times; in the final regs, "elect" appears 492 times. I suggest you get your clients to the polls early to ensure they make all of their elections!

On what basis did the IRS indicate it would not approve the Plan document if the standard form for married participants was a J&100?

According to the King James version of The Bible, Samson said, "With the jawbone of an ass, heaps upon heaps, with the jaw of an ass have I slain a thousand men." I suspect with the "balls of their ass" Samson would have opened a pawn shop?

Although intents by Westchester County law are valid for no more than 11 days, on what basis (chapter, verse, stanza) are you envisioning the IRS might find the approach unreasonable? On the basis that you fund for a J&100% for nine years and then the client changes his intent in the last year? Wouldn't you still be funding for a lump sum which would be the best estimate of the annuity purchase price? Otherwise, if you're not going to buy an annuity, (1) what would justify the expense of keeping the Plan alive in perpetuity when no contributions are being made? (2) How would you deal with the residual assets when the last to die has died? (3) What happens if the joint life cohort survives the money and/or contributions are needed? If you are pushing the envelope to 415, you'd better buy the annuity lest you end up with about 120% give/take more money than if a lump sum were distributed. Then, your client will discover the true meaning of unreasonable when the excise tax man shows up at his front door. In this respect, what do you do if 20 seconds before you purchase the annuity the spouse dies and now you can only buy the actuarial equivalent of a life only annuity? All of this sarcasm adds up to don't do it. It may be feasible but it seems replete with issues down the road.

If you gotta have segment rates, your suggestion of using 2nd (or even first or third) segment rate as a proxy for the effective interest rate is wunderbar. You have my vote as king. However, to the contrary, I have found the annual funding notice to be invaluable -- in particular, for adequately covering the bottom of my bird's cage. Yes, how about trashing PPA which depending upon the situation may or may not be fundamentally sound (e.g., static population will produce escallating TNC). Tieing to yeild curve and not to investment expectations leaves an unsettling feeling. Again, that interest funding interest rates differ in determination and possibly from timing of determination of 417(e) rates demonstrates that we are going through a lot of mechanical gyrations not to hit a moving target. The one-size fits all mortality table is a total joke. That Congress has come back several times with relief demonstrates that they place little faith in what they created. However, they march proudly that they have fixed the pension system. Now if you step down as king and I am elected king, here is what I will do to revitalize the DB system [repeat of Feb 20, 2009 post]. (1) Outlaw FASB158 for forcing employers to post liablilities for benefits not even earned and boxing employers into a corner by mandating the fiscal year end measurement date. (2) Reinstitute 10 year vesting and graded 15 year vesting with provision for new schedule to apply to future accruals (from hire date) (3) Allow plan to specify fixed interest rate and mortality table for lump sum benefit calculation using standard interest rates and mortality tables. This could be adopted without grandfather (4) Eliminate top-heavy rules. (5) A plan sponsor who in every year contributes no more than the PPA minimum (w/o regard to FSCOB) will not be subject to reversonary excise taxes upon plan termination. (6) Eliminate quarterly contributions except possibly for the very large, unfunded plans. (7) All PPA elections are deemed made by the plan administrator's signing the 5500. (8) Eliminate the PBGC risk premium for plans with unfunded vested liabilities of less than $x million. (9) Rescind PPA accelerated benefit restrictions except for "key" employees (HCEs would still be limited by 401(a)(4)). (10) PPA amortization would be changed to 15 years. (11) Inform all government bodies that their role is to audit and not to punish. (12) Eliminate spousal consent requirements (or alternatively, allow cigar smoking in government buildings). (13) Get rid of the yield-curve crud. (14) Eliminate every other burdensome and uncessary requirement I haven't thought of. As stand-up comic Buddy Young Jr. [billy Crystal] admonished his audience in the movie Mr. Saturday Night, "Don't get me started. "