Andy the Actuary

I don't read it that way. The terms of the plan also include the PPA benefit accrual restrictions, via a retroactive amendment at some point. If under the terms of the plan no one gets additional accrual from 9/1/2005 - 12/31/2009, then the benefit restrictions do not apply in 2009. I apologize for bening obtuse but the terms of the Plan call for a benefit accrual effective 1/1/2009. There is no retroactive amendment. The Plan is amended prospectively to increase benefits. PPA just overrides. If you don't mind, please explain your thinking to this wooden-headed actuary from the Show-Me State.

The Plan would be amended to freeze future benefits. There was no accrual because of depreciated assets rather than a plan amendment reducing benefits already accrued. As mentioned, we technically don't even have to freeze benefits. We simply don't certify the AFTAP. [i would walk away from this one or ask the Sieve to draft me a hold harmless agreement to prevent a penalty shot.] I had lunch today with a litigator friend who has been involved in some ERISA actions [i apologize for associating with litagators; he apologizes for associating with actuaries]. His unresearched opinion is that ERISA preempts so this was not a legal issue. On the other hand, he was itching to represent the employee plaintiffs. When I told him this was all hypothetical, he let me pick up the lunch bill.

Agree, we could provide a deminimis benefit $x/year of service. Even though no benefit accrual would be provided for 2009, the Plan would still be amended to provide for such accrual. Therefore, it would not be frozen as of 1/1/2009. It would seem that restrictions would apply. We are in limbo. 436 didn't apply for 2008 so no certification was required. Presumably, we would either follow presumption as if 1/1/2009 were 1/1/2008 or we would certify AFTAP as of 1/1/2009. In any event, if we never certified the AFTAP thereafter, lump sums could never be paid. (a) All of this discussion is theoretical and likely not what the law was intended to accomplish. I have no live case I'm agonizing over, but felt this process could appeal to some. If doable, it is an alternative at least to be considered. (b) How you would communicate this to employees so they would understand that this is decision is based upon asset depletion and investment considerations is beyond me. If I were an employee, I might (if I understood anything) feel the entire act was a rouse to circumvent a vested right.

You would have to concerned about grants of past service, but this can be easily handled by not giving any. There shouldn't be any 401(a)(26) or 410(b) issues since no one benefits. Would agree (thanks for bringing it up) that 416 presents an issue. In the example, you wouldn't accrued a benefit in 2009, but you would continue to accrue years of service for top-heavy benefit calculation purposes so once the AFTAP was 60%, additional benefits could be accrued for the year of top-heavy service. Perhaps the way to prevent these accruals is is to refreeze the plan 12/31/2009 rather than 1/1/2010?

First and second points beg an optimistic perspective which agreed may be unrealistic. Third point needs to be expanded to address participant's lawyering up when they are told they cannot take a lump sum.

Any problems with the following? A DB plan that offers voluntary lump sum payment at time of termination was frozen 1/1/2004. The AFTAP as of 1/1/2008 was 63% (though not certified). Assets have tanked (surprise). The Plan Sponsor would like to defer payment of lump sums until Plan investments have healed. The Plan would be amended in 2008 to unfreeze the formula effective 1/1/2009. As of 1/1/2009, the AFTAP is now 52% so no benefits can accue during 2009. Further, no lump sums can be distributed in 2009. As of 12/31/2009, the Plan is amended to freeze benefits as of 1/1/2010. No lump sums can be paid until the AFTAP is certified to be 60% and full lump sums cannot be paid until the AFTAP is certified to be 80%.

How would you justify funding toward the J&100%? There is likely a 0% chance that plan will be settled in other than a lump sum. I remember seeing Noonien Soong on Dick Clark's Where the Action Is circa 1966. I believe they were singing "Purple Rice and Pink Lima Beans."

agreed. How about this. Facts 1-1-2008:FT = 2,000,000 Assets=3,000,000 FSCOB=1,000,001 TNC=500,000 FSCOB of $500,000 applied Facts 1-1-2009:FT=2,200,000 Assets=2,800,000 FSCOB=500,001 TNC=600,000 Since as of 1/1/2008, $1 = FT - (Assets - FSCOB) >0, Quarterlies apply for 2009. Plan Sponsor may: (a) Pay quarterlies of 125,000 and 100,000 by 9/15/2010 (b) Burn 500,001 of FSCOB as of 1/1/2009 © Apply 500,001 of FSCOB as of 1/1/2009 and pay 99,999 by 4/15/2009 (d) Apply 125,000 of FSCOB to each of first four quarterly contributions and then pay 100,000 by 9/15/2010 Only (a) does not require an employer election And is it any wonder that each morning "they" ask me what day it is?

Participants will appreciate their DB plans more if you include with each pension statement a graph of the DJ and S&P500.

(For FASB87 purposes, the Plan would not be considered frozen?)

If 79-237 applies, I will lobby Mo. Senator Kit Bond. It's unfair (I voted for Obama) that 79-237 would still apply whereas 77-2 no longer applies. Or does it? Assuming that the plan will be made sufficient to make full distributions at termination, this is a matter of academics, that is unless your client is being prosecuted for Medicare fraud, in which case you'd better get it right, whatever right is. May I suggest for your next caveat: "You can't practice billards on a ping-pong table and then expect life to behave rationally." (andy t. a.)

Can the attorney provide a sample of such provision?

Your gut instincts are wise. Don't send out estimates unless you understand the system's mechanics or you have a recent piece of paper provided by the Actuary that certifies he/she has reviewed the process blah blah blah. Any estimates should qualify they are estimates and that amounts illustrated may be greater than or less than actual amounts based upon the history of service and compensation at time of termination as well as verification of dates of birth, etc. If you must illustrate a lump sum, use a high enough interest rate so that the final lump sum is greater. Remember no matter how often or in how many ways you say "estimate," all that may be heard are the numbers. Relief is on the way. Starting whenever the DOL can find their "round tuit," there is a new requirement to provide either a benefit statement or notice that a benefit statement may be requested. This should happen in 2009. The preferred approach is to have the actuary* provide an annual benefit statement (unless the Plan is frozen). This should satisfy the legal requirements as well as continue to sell the benefits of the Plan, which the world now appreciates in light of the past few months economic Armageddon. I don't care to be critical of the unknown so I will leave it up to my cohorts to express precisely how convoluted this spreadsheet morass sounds. *This is a common by-product of the actuarial valuation.

I just found it as well in a lovelier form: http://www.irs.gov/irb/2008-01_IRB/ar13.html#d0e14745 $14,500 !!!! A.Y.F.K.M.?* *I apologize for the implied use of profanity on a public website. But come on -- Nothing like imposing an additional financial hardship on an employer trying to deal with the pain of a financial hardship!!!

While this seems like an easy question, I'm having difficulty identifying the current IRS user fee to request a 430 funding waiver (which I've never before done). Any help would be appreciated.

It might benefit from a propeller as I do?

I can only respond to these comments: "Ooooh, chip, chip, chip."

Sorry to confound. Here is a recent photo (click on photo to improve clarity).

Yield curve determined for month containing valuation date. Elections of valuation date month or preceding 4 months apply to segment rates. 1.430(h)(2)-1(e). Thus "The" yield curve.

Unfortunately, the solution is for PPA to go the way of TRA86's Sec. 89, especially if DB plans are to remain viable. Any temporary forgiveness or relaxation that Congress may grant will simply push the problem into future years.

So long as NRA is reasonable. From the final NRA regs: (3) Benefit distribution prior to retirement. For purposes of paragraph (b)(1)(i) of this section, retirement does not include a mere reduction in the number of hours that an employee works. Accordingly, benefits may not be distributed prior to normal retirement age solely due to a reduction in the number of hours that an employee works.

They would each be a substantial owner so the same conclusion would follow.

How can you be unreasonable? You're following the law and nothing known to personkind is more reasonable than person-made law. (The un-pc "mankind" and "man-made" sound better)

Consider using the assumption that anyone whose AA on the actuarial valuation date >= NRA is assumed to retire one year later. Then, you will (possibly) get a TNC and will live happily ever after.

David, thank you. You've given me the key to the Rosetta Stone. Much appreciated. Best Regards, andy