Andy the Actuary

I'm not a tax man but it would seem as if each partner first would be allocated an amount to bring his/her benefit up to his/her lump sum. Is there any reason why the expense for the other participants would be allocated differently from any other expense as outlined in their partnership agreement -- the same way the pension deduction was taken?

Anyone interested in forming an insurance company to accommodate orphan annuities? I thought we'd call it HHIC. It would offer annuities for the nuisance cases. It would build in appropriate expense margins and for interest and mortality guarantees, but mostly for high profits. HHIC is an acronym for Hold Hostage Insurance Company.

Presumably the drop-dead date for opting out of HAFTA for 2013 for a calendar year plan is 9/15/2014 for 430 and 9/30/2014 for 436. 9/15/2014 is the last date a contribution for 2013 could be counted on the 2013 SB. 9/30/2014 is the AFTAP drop-dead date whereby presumptions apply. I made all of this up so please feel free to disagree!

Sorry to be so negative but normally the folk you can't locate are assembly line workers who were employed in a factory in Cabool, Missouri and who sign their name with an "X." We likely could readily find anyone who reads this post via one of the suggested internet social media websites. We've dealt on occasion with former employees who subsequent to their employment became guests of their state penal institution. They are very adept at making themselves scarce. If they have an identity, it's possibly not their own!

Finding those who have gone for their non-financial reward is reasonably achievable. Locating former employees whose name is John Smith and who live out of their cars is not so doable. Unfortunately, the IRS and SSA discontinued a great tool -- the mail forwarding service. They had no need to discontinue. Just charge more!

I have seen a number of slides of talks on plan terminations and pension briefs that address the location of missing participants. Each one contains language such as: "Use Free Electronic Search Tools. A fiduciary must make reasonable use of Internet search tools that do not charge a fee to search for a missing participant. Such online services include Internet search engines, public record databases (such as those for licenses, mortgages and real estate taxes), obituaries and social media." Not one -- and I mean not one -- ever gives any examples, websites, etc. They either hold this information to themselves as top-secret information they will gladly sell you, or they don't know of any -- they simply believe there's got to be some!

So long as employees do not meet one of the other exclusions (union employee), they would be included if they otherwise met the Plan's membership requirements.

Unless the law of the p.o.ed employee is at play. This could possibly be a long-service young low-paid employee who was expecting a lot more.

Lou's suggestion is a good one provided the participant has not relocated to Madigascar.

Purchase an annuity that retains all Plan election options and features. Since you found her, I don't believe she qualifies for the PBGC missing participant program if the Plan is subject to PBGC.

Very helpful, thank you. The pros/cons have been laid out but were not part of a signed agreement. Now, they will be.

Have a 5 person professional DB plan where age 50ish principal stands to get a lump sum of about $1.5 million -- the 415 maximum. The principal does not want to spend the money to obtain an IRS Determination Letter. When we've requested a D-Letter on plan termination for such plans, we attach to the 6088 the benefit calculations. The D-Letter, thus, not only serves as an insurance policy for the client but also to some extent for the actuary. If you've been involved in such situations, have you requested the client to execute a hold-harmless agreement since they are acting against your recommendations in not requesting a D-Letter?

Have a 5 person professional DB plan where age 50ish principal stands to get a lump sum of about $1.5 million -- the 415 maximum. The principal does not want to spend the money to obtain an IRS Determination Letter. When we've requested a D-Letter on plan termination for such plans, we attach to the 6088 the benefit calculations. The D-Letter, thus, not only serves as an insurance policy for the client but also to some extent for the actuary. If you've been involved in such situations, have you requested the client to execute a hold-harmless agreement since they are acting against your recommendations in not requesting a D-Letter?

Client should have made minimum quarterly contributions by 4/15/2014 and 7/15/2014 based upon 1/1/2013 and 1/1/2014 valuations that were performed pre-HATFA. Of course, client was instructed to but failed to make contributions so should have notified participants and possibly PBGC (at some later date). We just found out about this. And then? And then? And then? Eh, eh. Along came HATFA with the result that the 2014 MRC=0, so in fact, no quarterlies were required in 2014. Perhaps, this question is no different than if we were just preparing 1/1/2014 valuation now (and there was no HATFA) and we discovered 2014 MRC=0 even though 2013 suggested the safe-harbor quarterly. Not sure how the rest of you would treat this but I'm going nighty night.

If the plan provision related to the 110% test refers to the Funding Target under 430, then since HATFA determines this FT, it should apply.

Here's my sample language: As President of Potrezebie, Inc., I hereby make the following election in respect of the Potrezebie, Inc. Defined Benefit Plan (the Plan): I elect for the Plan’s Enrolled Actuary to defer implementation of the interest rates prescribed under the Highway and Transportation Funding Act of 2014 for purposes of both Internal Revenue Code Sections 430 and 436 until the first Plan Year beginning in 2014. I understand that this election is irrevocable and that the 2013 actuarial report dated May 29, 2013 and 1/1/2013 AFTAP certification dated May 31, 2013 will not be revised. I threw in "irrevocable" because that was part of the MAP-21 guidance and figured it applied. Anyway, it's moot because the election won't be revoked.

Personal preference is to let it go. If questioned, plead a history of timely filing and offer up an explanation that does not volunteer as much information as your post. It should be forgiven. Normally, I'd advocate proactivity but how many calls might you make to get to someone who can help? And then, you might not like their answer!!!

IRS gone back and forth on "exactly" versus "at least." I'm actuary for a plan that is terminating with substantial excess assets.

I submitted a question for an IRS Webnar on Plan Terminations on whether the IRS position was "exactly" 25% or "at least 25%" of the reversion being transferred to a DC. IRS Rev. Rule 2003-85 indicated that 100% of a DB Plan reversion could get transferred to a DC Plan and no excise tax would apply. I.e., the requirement to transfer exactly 25% was relaxed. It this position consistent with current policy, and if not, where has current policy been codified? The IRS Field Actuary Larry Haberle actually read my question verbatim and then proceeded to indicate that the facts of my question were incorrect. Namely, IRS Rev. Ruling 2003-85 indicated that more than 25% (but not 100%) of the reversion was transferred to a DC plan. That was his response -- not even that the position was, or no longer was, the current IRS thinking.

I submitted a question for an IRS Webnar on Plan Terminations on whether the IRS position was "exactly" 25% or "at least 25%" of the reversion being transferred to a DC. IRS Rev. Rule 2003-85 indicated that 100% of a DB Plan reversion could get transferred to a DC Plan and no excise tax would apply. I.e., the requirement to transfer exactly 25% was relaxed. It this position consistent with current policy, and if not, where has current policy been codified? The IRS Field Actuary Larry Haberle actually read my question verbatim and then proceeded to indicate that the facts of my question were incorrect. Namely, IRS Rev. Ruling 2003-85 indicated that more than 25% (but not 100%) of the reversion was transferred to a DC plan. That was his response -- not even that the position was, or no longer was, the current IRS thinking.

Too late for you to change this year but I filed all 5558s in early June. Better to have and not need than need and not have. If you filed 5558s at the end of July, suggest given the problems from last year, you may want to consider waiting until October to submit the 5500.

President Obama signed the bill on August 8.

1. I looked at one case. Revising 2013 will increase PFB. 2014 quarterlies made to date but now they is some excess. Combined, will eliminate 4th (1/15/2015) and 5th (9/15/2015) contributions. 2. Agree 3. No comment 4. Assume the IRS guidance will be analogous to when MAP-21 was implemented (e.g., allow revocation of credit balance waivers and credit balance dollar amounts applied) Fortunately, I've yet to file any 5500s (all on extension) so 2013 can easily be revamped. Unfortunately, have already issued 2014 valuations so preference would have been for HR 5021 to allow for employers to elect not to apply for 2014 as well as 2013. Some of these valuations will need to be revised even though no contribution required!

Never seen it done and not sure how it would fit within " prudent man" rules. Take excess and invest in some highly speculative security that if it hits, it hits big. You will pay some hallacious tax if it hits. However, let's suppose regular income taxes plus excise taxes are 90%. Then, 10% of some very large reversion could well exceed the original reversion. So, suppose reversion is $1 million. You net $100,000. So, if speculative investment of $1 million grows to $10 million, the net reversion is 10% of $10 million = $1,000,000 = 100% of initial reversion! And the IRS thanks you. Now if the speculative investment tanks, watch out.

4. Other -- Find a new vocation.