Andy the Actuary

Do not count on form entry validity when getting an all-clear on the edit checks. I've made several misentries [some even intentional!] and still am given a clean bill of health. I wish my internist's scale were that kind!

Or, was it Aretha's first spouse?

Carrots stated it more clearly than I. Thanks.

Not required for 2009. Funding standards cease to apply once plan is terminated.

Let say it's a new plan with partners age 48, 52, 55, and 57 -- each earning well over the 401(a)(17) threshold. They will all go out at age 62. Now being like all good partners, they are petty and go ape over the inequity of one partner getting an iota more benefit than the other. So, (1) set lump sum a.e. at say 4% and say 94GAR. Then, determine maximum benefit at 62 for 48 year old such that you are assured lump sum at 62 will not exceed 415(b) limit. I don't know how you would do this but do it anyway. Then, you will determine ILP or EAN or whatever you call it level cost=L. Then, annual theoretical cost for age 48 is L48. Annual theoretical cost for age 52 is then L52=L48 x 14/10, for 55 is then L55=l48 x 14/7, and for 57 is then l57= L48 x 14/5. Accumulate L52 at 6% to 62 back into benefit, L55 at 6% to 62 to back into benefit, and l57 at 6% to 62 to back into benefit. Staff would have to have a benefit formula that yielded greatest accrual rate and new partners would have to be based on L48 -- even if younger. Assuming no gains and losses, PPA, famine, pestilence, or plague, Partners will all have contributed same amount. Now, this exercise is not to say you can hit it on the button, but you can't get reasonably close by having different benefits for each partner. Frankly, I'd invest in money markets to give this silly arrangement the best chance of working.

Yes, check out your favorite book -- The Pension Answer Book -- q34:8 (p34-7) of 2005 edition -- for definition of eligible rollover distribution. Not only would it be available but would be mandatory.

Unfortunately, this is likely not to fly because you will need to recertify the AFTAP and it may be a material change. This is in one of the more confusing sections of my favorite proposed confusing reg from August 2007. See yellow highlighted area on page 11. IRS_Proposed_Regulations___Underfunded_Pension_Plans.pdf

You can likely find industry statistics (e.g., from the AMA) but you may not like the results. How we've handled this is to actuarially increase the factors in the formula so that we have a wash.

The "towny" pension attornies have agreed that the following is appropriate where R=restricted portion and N=nonrestricted portion. Assume early retirement applies. (a) participant may defer election on R+N (b) participant may elect immediate annuity on R+N that is no greater than actuarial equivalent of life annuity* ***** apart from caveat in (b), (a) and (b) are nothing new ***** © participant may take N in a lump sum and (i) defer election on R or (ii) take R as an immediate annuity that is no greater than actuarial equivalent of life annuity Note, that deferral may result in forfeiture upon death if plan does not preserve present value (which of course could be restricted!) *watch out. I have plan that allows 60 monthly payments as a distribution option. This option could not be elected in respect of R.

Same idea regarding the use of no pre-retirement mortality for one-person plans.

Problem with common law employees might be the benefits cost of providing unreduced benefits at age 55.

These regs seem much ado about nada. Your approach sounds fine so long as no common law employees. The question is what retirement ages you assume for funding. The only critical issue is if at 55 the participant wants his/her benefit, he/she either must terminate the plan or retire from work.

Given that Jack was about 5 when Jill and he went up the hill, I believe we're safe! Thanks for both replies.

Jack, a 5% owner, was born 2/15/1939 so Jack turns 70 1/2 on 8/15/2009. His RBD is 4/1/2010. The defined benefit Plan covering Jack allows for inservice distribution after age 70. Jack elects to take a lump sum distribution in July 2009. Q1: Is part of the lump sum considered to be a minimum required distribution and therefore not eligible for IRA rollover? In short, does taking a lump sum distribution nullify the ability to defer the minimum until the next April 1? Q2: If the answer to Q1 is "yes," is it valid to determine the minimum distribution as his lump sum divided by the joint life multiple for Jack and his wife (Jill)?

Yes, indeedy. Congress fixed the system as witnessed by, "Chrysler's pension plans are $9.3 billion underfunded. The company likely won't have to make a contribution for about two years, because of the intricacies of pension funding rules, says Charles E.F. Millard, director of the PBGC until this past January." So, here's a Company that because of the new system designed to protect [someone?] gets a two year free pass, when they in theory should be contributing toward reducing the underfunded [whatever that number really is].

Hot off the presses: http://www.watsonwyatt.com/us/pubs/insider...ArticleID=21132 As my Granny Garple used to say, "Spit in one hand and wish in the other and see which one fills up faster." Only, she didn't say "spit."

Or, you could add and burn. The deal is that if you can counted as of 1/1/2009 the discounted value of contributions made after 1/1/2009 (now attributed to 2008), you enjoy 110% of such amount in the average value -- at least ostensibly for 2009.

(2) No, but if you haven't yet, you might want to consider asset smoothing. This will likely give you assets for AFTAP purposes of 110% of MV. Also, if client has made any contributions in 2009, you may be able to credit them as 2008 contribution which gets counted before the calculation of average market value.

It would seem Plan A NRD pertains only to the frozen benefits under Plan A and not to new accruals under Plan B. It does not seem reasonable that Plan B would be forced to adopt age 62 and increase costs. Clearly, the way to make some sense is to amend Plan B to provide for early retirement at 62 so you can attempt to eliminate bifurcation of the benefit election. I use attempt to mean you can present an employee with an election at age 62 that combines benefits but you can't force him to elect early retirement for his Plan B benefit. The real question assuming both plans were final pay plans is do the benefits coordinate? That is, does Plan B count all service and then offset by the frozen plan A benefit, or is the benefit simply the Plan A frozen benefit plus the Plan B benefit in respect of future service? In any event, this is one nasty mess that is destined for administration and communication problems. I pray in your behalf that either both or neither of the plans permit voluntary lump sum distributions. I can envision the mess restrictions on one of the benefits could cause. Anyway, to answer your original question. I've worked on plans where different employee groups had different NRAs so would see no reason why one employee couldn't have two NRAs for different benefits.

COB 1/1/2009 = $100,000 x (1-.4)= $60,000 PBFB 1/1/2009 = $50,000 x 1.06 = $53,000 Total CB 1/1/2009 = $60,000 + $53,000 = $113,000 But, assume you use $50,000 of COB to offset min for 2008. Then, you have $100,000 of excess contributions COB 1/1/2009 = ($100,000 - $50,000) x (1-.4) = $30,000 PFB 1/1/2009 = $100,000 x 1.06 = $106,000 Total CB 1/1/2009 = $30,000 + $106,000 = $136,000 This may or may not help but at least it should be considered.

There is some question about whether or not 77-2 applies a la the proposed funding reg. In the case of a freeze or short plan year, it is believed yes. Under this assumption, (2) appears appropriate (since otherwise you're prorating the FSCOB).

From David R's reference: "Your maximum guaranteed amount is based, in part, on your age on the plan termination date." Consider someone age 45 who started disability payments in 1985 of $4,000/month. It would be absolutely draconian of the PBGC now to cut the person's benefit to $1,125. Then all of those airline flight attendents who were crying about losing their pensions would finally be telling the truth!

You may find value in: http://www.ssa.gov/foia/html/ltrfwding.htm

Anyone seen a government draft or final release????

My read and observing discussions at the 2009 EA meeting among JH et al, meant you could for 2009 (not 2008) change your interest rate selection for 2009 and thereafter to either the segment rates, segment transitional rates, or yield curve for either the month containing the valuation date or any of the four preceding months. This change can be made with automatic approval. This change is for funding and 436 purposes. You would need to read the PBGC language to see if such change flows through if you had chosen to use the "alternate funding target" to compute unfunded vested benefits in 2008. This may be difficult to conclude since nothing specific has yet to be issued.