Andy the Actuary

Suggest you contact Amy Viener at PBGC on this one. I found her helpful and she responds promptly. I believe she was formerly with Wm. Mercer. Viener.Amy@pbgc.gov

To your point: I don't know anything. Wholeheartedly concur!

You'll likely never get an answer on this one. You answered your own question: To whom would you give it??? It would only be meaningful if it were a distress termination.

First, by board, presumbably you mean benefitlink bulletin board? If so, then concensus may give you warm fuzzies but not a hook to hang your hat on. There is no guidance per se, at least that any of the BL posters appear aware of. You may find helpful the posts at http://benefitslink.com/boards/index.php?showtopic=42518

The revised Schedule SB has modified the disclaimer under the EA's signature: 1. [ ] If the actuary has not fully reflected any regulation or ruling promulgated under the statute in completing this schedule, check the box and see instructions. 2. [ ] If the actuary has no idea whether he has failed to fully reflect any regulation or ruling promulgated under the statute in completing this schedule, check the box and join the crowd.

I did not discuss COB and PFB because there are none. Assume COB, if any, was burned 1/1/2008. There are no excess contributions for 2008. So, with that in mind, can 2008 accrued contribution be used to to determine 2009 minimum for all purposes even though 2008 contribution made 9/15/2009. Or, for purpose of determining 2009 minimum to determine 2009 quarterly, does 2008 accrued contribution have to be made prior to 4/15/2009?

In 2008, calendar year plan was 99% funded so quarterly contributions apply for 2009. 2008 minimum was $400,000. Plan sponsor indicated will make contribution on 9/15/2009. FT on 2009 is $3 million; Assets on 1/1/2009 are $3 million, excluding $400,000 accrued contribution. TNC 2009 = $360,000. 2009 contribution is $0 when discounted 9/15/2009 contribution is included in assets. Minimum quarterly contribution is lesser of $400,000 and $0, so quarterly contribution is $0. Or is it? For purposes of determining quarterly contribution, can you include contributions that have been accrued but not yet made? That is, should quarterly contribution due 4/15/2009 be $90,000 rather than $0?

Mine also but the instructions to Form 10 are so very peculiar and mysterious. It would have been simpler to say the reportable event occurs 30 days after the missed installment unless it has been made by then.

I've seen this and have provided in the past the UC NC for CL. If I was so requested, I'd provide the TNC. I do not recall there are any instructions or guideliness other than the sound practice of applying a method consistently from year to year.

A calendar year plan with over 100 participants (last year, this year, every year) failed to make its 2009 quarterly contribution due 4/15/2009. It did not correct by 5/15/2009. On June 22, plan sponsor indicated they didn't make the quarterly contribution but not for financial reasons. Instructions to PBGC Form 10 states "A reportable event must be filed within 30 days after a plan administrator or contributing sponsor knows or has reason to know that a reportable event has occurred." The instructions indicate the PBGC may assess penalities of up to $1,100/day. Question: Is PBGC Form 10 due (a) May 15 (b) June 14 or © July 22 ? Has anyone experience in dealing with the PBGC regarding similar circumstances? My inclination is to have the plan sponsor make the contribution post haste so that this can be include in the Form 10 filing.

FWIW, I've become involved with a PBGC-covered plan that terminated last year without benefit of PBGC review. I contacted the PBGC, and they told us to file the plan termination papers now, including a post-distribution cert. They said we were guaranteed an audit of the plan termination. .. Scott What were the circumstances? For example, had all non-owners first terminated and then the owners terminated (i.e., the business closed)? Or, did the Plan simply bypass the standard termination process. In the original post, the Company closed and participants were paid their due as terminated employees. The termination process was not followed in accordance with instructions on their website. The PBGC appears to have read new meaning into these instructions.

Thank you. The position cited in the ERISA Outline Book is consistent with your assertion.

My recollection is the controlled group threshold is 50% rather than 80% as it pertains to IRC Sec 415.

Unsure what is meant that "there are no controlled group" issues. Hopefully, it is a controlled goup, because if not, then you will be creating a multiple employer plan and assets would need to be segregated. For example, Company 1 Company 2 F1 100% 50% F2 10 F3 10 F4 10 F5 10 F6 10 Assuming family aggregation does not apply, this does not look like a controlled group.

Will any of the recent relief help? WRERA changed thresholds and asset averaging. The recent announcement will allowing changing interest rate sets. Finally, employers still have up to 8 1/2 months after the close of the Plan year to make contributions even though only that part of the contribution made before the tax deadline would be deducted for the Plan Year. When discussing small professional plans, I would always urge that the purpose of the plan was to accumulate lots and bump up against the statutory limits to justify my fees, legal fees, and their time. Clients were advised not to undertake the DB unless they felt positioned to make substantial contributions for the long-term. The purpose was not to afford the opportunity to contribute 50K when the DC threshold was 30K and the client had had a good year. When the clients kept ignoring what I had to say, I got out of the business. You are only the bad guy if you didn't disclose all that could reasonably be anticipated to go south when you installed the plan. You certainly couldn't anticipate new pension law but did you ask, "Will you be able to make a contribution if you have a bad business year and explain that the plan offered limited flexibility?" If you has similar discussions, you're not the bad guy and you may do well to have the client go next door before your invoice moves further to the end of his priority list. End of Sermon

Now, here is something interesting if my math and memory are correct. 2008 FT = $2 million 2008 Assets = $3 million 2008 FSCOB = 1.5 million (not burnt) 2008 TNC= 500,000 2008 Shortfall = 2 - (3 - 1.5) = 500,000 but no amortization required since assets greater than FT (FTAP>100%), so 2008 minimum = 500,000 = TNC Since 2008 shortfall, quarterly contributions required in 2009 Plan frozen 12/31/2008 2009 FT = $1.8 million (not determined until 6/17/2009) 2009 TNC=0 (No hard admin fees expected to be paid by the plan) 2009 Assets = $2.1 million. 2009 required contribution = $0 (known on 6/17/2009) quarterly contribution of $125,000 (given we don't yet know that 2009 contribution is $0) due 4/15/2009 is intentionally not made pending the 2009 actuarial valuation. So, this well-funded plan must notify PBGC by 5/15/2009. It will be interesting to see how the PBGC reacts to the myriad of nuisance notices. We should note that the small-plan relief afforded by PBGC Technical Release 09-3 applies for 2009 plan years only.

I don't see where the $325k comes from. Can you elaborate? Yes, you take 50 not made + 50 not made add 225 and then change 225 to 325 to correct bad example. I surprised you were unable to determine that I was having a bad mental ([x] day [x] month [x] year?). Thank's for reading carefully and calling to my attention. Example has been corrected.

Argument is that FSCOB is applied at beginning of the year so that in practice there really wasn't a quarterly obligation since the minimum contribution had been satsified. When the election was made on 4/1/2009 to apply the FSCOB, there was no discounting to the FSCOB because the election was made on 4/1/2009 rather than 1/1/2008. I can think of no other code area that has been of more work and less value than the quarterly contribution requirement as it pertains to small plans. Lot of times to "do things right" (whatever that means), you're breaking a contribution into two pieces and applying a penalty to part. E.g., quarterly contribution of $10,000 due 7/15/2008; employer makes contribution of $10,250 on 8/1/2008. $10,000 of it is discounted with the interest penalty to 7/15/2008 and then without the interest penalty to 1/1/2008. $250 is discounted to 1/1/2008 without interest penalty. The bottom line result is a few dollars and an operational headache. I truly believe if I were younger, I'd do something more intellectually rewarding like become a telemarketer.

As usual, you are correct, and I was mired in a day dream. Thank you. I restate the question. Calendar Year Plan has 2008 quarterly contribution requirement of $50,000. 2008 contribution requirement is $250,000. Plan has FSCOB of $600,000 and employer elects on April 1, 2009 to apply $250,000 of FSCOB to reduce contribution to $0. Plan fails to pay $50,000 on 4/15/2008 and 7/15/2008. On October 1, sponsor contributes $325,000 and so employer has $75,000 of excess contributions ignoring interest discounts. It appears since election to apply FSCOB was made well after quarterly due dates, PBGC should have been notfied of missed quarterlies (at least once). Question: In determining excess contributions 1/1/2008, what should be the discount rates? I.e., should 5% penalty apply? I argue "no" since funding obligation was honored effective 1/1/2008 when 4/1/2009 election was made to apply FSCOB. So, assuming employer makes election to add to PFB, PBF 1/1/2009 is simply $75,000 x (1+EIR)^(3/12) ignoring interest discounts. Comments?

Sounds great but what are you going to argue if the IRS requests all of the plan documents and complying amendments?

Plan's AFTAP was determined without regard to FSCOB on 1/1/2008 and was certified as 147%. This is in accordance with IRC 436(j)(3). Instructions to completing line 15 of Schedule SB, however, indicate that AFTAP should be computed in accordance with IRC 436(j)(2) -- i.e., subtract FSCOB from assets, which in this case would be 57%. My inclination is to show 147% under the assumption that the instruction is inappropriate and than showing 57% suggest all sorts of nasty stuff applies, which don't. Note that Schedule SB instructions indicate FTAP, line 14, are to subtract credit balances. AFTAP line 15 is not as clear. Any thoughts?

Calendar Year Plan has 2008 quarterly contribution requirement of $50,000. 2008 contribution requirement is $300,000. Plan also has substantial FSCOB which could be applied to take care of $300,000 minimum. Plan fails to pay $50,000 on 4/15/2008 and 7/15/2008. On October 1, sponsor contributes $300,000. Plan assets decrease 30% over 2008. ERGO, sponsor elects on 4/1/2009 to apply FSCOB to cover $300,000 minimum in 2008 and add $300,000 to PFB and forego pouring $75,000 of FSCOB down the water closet. It appears since election to apply FSCOB was made well after quarterly due dates, PBGC should have been notfied of missed quarterlies (at least once). Question: In determining excess contributions 1/1/2008, what should be the discount rates? I.e., should 5% penalty apply? I argue "no" since funding obligation was honored effective 1/1/2008 when 4/1/2009 election was made to apply FSCOB. So, PBF 1/1/2009 is simply $300,000 x (1+EIR)^(3/12). Comments? SEE REVISED POST BELOW

I was looking to sell my overfunded DB plan! Actually, a friend told me about it. He was searching for stock certificates, which is the category underwhich it was listed. This offer is tantamount to "I have 20,000,000 in Nigeria and I need your help . . ."

http://cgi.ebay.com/Sell-Assign-Pension-Pl...%3A1%7C294%3A50

That you are preparing the 2008 Schedule SB implies the 2008 Plan Year has ended. In such case, employer cannot now elect to burn 2008 balances. So, employer would elect to burn COB or PFB in 2009. "(ii) Election to reduce balances. Any election under paragraph (e) of this section to reduce the prefunding balance or funding standard carryover balance for a plan year (for example, in order to avoid a benefit restriction under section 436) must be made by the end of the plan year to which the election relates."