Andy the Actuary

Thank you.

A db plan was totally frozen as of January 1, 2005. The services provider has indicated to the client that if the AFTAP falls below 60%, the Plan may not pay any restricted payments. I have reread the code and August 2006 proposed regulations and do not get this interpretation. I.e., there would be no prohibited payments except possibly to HCEs. Do I need to go for an eye examination?

Not stupid at all. I had this discussion recently with a person involved with this situation. I know we would still file a 5500 rather than a 5500-EZ for 2008. Nonetheless, it is unclear when the plan ceases to be subject to PBGC juristiction. I'm unsure at this point how to notify the PBGC they're no long involved without filing with the PBGC. These are questions that need to be addressed.

Back in June the employer who sponsored a collectively bargained single-employer plan sold its assets. All non-owner employees were terminated and distributed lump sums. Remaining are two owner employees (the corporation remains open) who had transferred from the union long ago. Their total lump sums are small and total under $50,000. The two owners wish to terminate the plan and distribute their benefits immediately to avoid carrying this plan into another plan year. There is absolutely no risk to the PBGC. This cannot be done and still respect the PBGC 60-day formal notice requirement. Tacitly, they gave themselves the 60-day notice requirement. Has anyone experience with the PBGC or thoughts in this regard? I.e., would the PBGC revoke the termination? This would be not-good since the owners are under NRA and therefore would have taken an impermissable distribution.

Thank you. I'm taking the position of asking for spousal consent. Better to ask for spousal consent if not needed then not ask if it is needed. Of course, Murphy's Law will have it that some estranged spouse won't give the consent. We get into the category of spending lots of money on attorneys on a matter of so minuscule consequence. The exposure is too small to ponder (just a couple folk affected).

The intention is to make distributions to a terminating Plan shortly -- say January 1, 2009. Plan assets have been invested in a money market fund. Excess plan assets will be allocated to the participants by increasing benefits. The election package will state this fact but will communicate the benefits without regard to any possible increase since the exact amount is not known. The Plan, indeed, will have excess assets. Participant Molly Potts has a lump sum of $4,850 based upon her formula benefit. After allocation of excess assets, her lump sum is expected to be around $5,100. I.e., less than the consentual limit before excess asset allocation and greater than the consentual limit after excess asset allocation. Question: Should election package require spousal consent even though lump sum based upon non-increased benefit is less than $5,000? This, of course, is a "damned if you do, damned if you don't" situation. Comments from the peanut gallery?

Two actuaries, three opinions. If the Plan termination date remains 12/31/2007, then PPA does not apply and use the '94GAR/Treasury rates to compute lump sums. If a participant terminates employment prior to the final distribution date but after 12/31/2007, then what is done? Proposed (1) Still use '94GAR/Treasury rates and (2) 436 does not apply. The interesting situation would be if you followed this path and then the termination date was revoked (I've witnessed the PBGC do this because of delay in filing with the PBGC). So, the Plan did not terminate but you treated it as if it did. Ouch!

Not so fast. This plan is terminating. The non-responders cannot "hold hostage" the completion of the termination. If they do not respond, and you cannot purchase a deferred annuity, what's next? You may need to argue your case to both the IRS and PBGC, neither of who is likely to chant anything other than the mantre, "buy an annuity."

Anyone who can extrapolate Chester A. Riley (no Beulah, not the 21st US President) from the notice is aaaah, welllllll, pretty old and watched too much black and white TV as a child. And you bet your life on this statement.

Agree

Truly one of the most administratively horrid concepts employed byDB plans, especially since Plans are sometimes incomplete in their definition. No matter what you spell out, it is easy to produce an exception, in particular, when there are brief service breaks or the employee is paid for fewer than 60 months. If the definition does not say completed months, then use the highest consecutive 60 months and if fewer than 60 months of compensation, then average over the working period (I use days/365). I've seen plans that collapse the compensation history to account for service breaks. I've also seen plans that use calendar years and pro-rate the first and final years by days. Would suggest keep the Plan document definitions flexible and document in the plan's administrative procedures manual as adopted by the plan administrator. Oh, don't have one of these?

Unfortunately, the PBGC missing participant program specifically exlcudes non-responders: Q: May I use PBGC's Missing Participants Program for a participant whose whereabouts are known but who refuses to return the election forms? A: No. You must purchase an annuity for the participant in order to complete the termination. The annuity contract must preserve all of the participant’s benefit options. Essentially, the Plan Sponsor must purchase an annuity for non-responders whose lump sum exceeds the non-consentual lump sum limit. If no annuity can be purchased, the Plan Sponsor is held held hostage. There are other postings on this particular issue with no particular relief.

Thank yu fr katching my hypographikal eror

1. The annuity should preserve whatever benefits, rights, and features the Plan has. 2. Amend the Plan to offer lump sum payment. 3. Make sure the Plan offers the 75% QOSA. 4. Amend the Plan to allow for voluntary lump sum payment. You may wish first to discuss with the broker who will procure annuity bids to ascertain minimum size. It may be stated as minimum premium, minimum monthly pension, or both. Then, amend the Plan to allow for voluntary lump sum payment. Note, you could amend plan for automatic cashout of $5,000 or less (I don't believe the $5,000 is protected). Only issue then would be setting up an IRA for someone who fails to make an election.

Any comments regarding appropriateness and completeness of the contemplated form would be appreciated. Election_to_Apply_FSCOB.pdf

Suppose plan is terminated 12/31/2008 in a nondistress situation, then 430 ostensibly does not apply to 2009. Well, if it doesn't apply, then we wouldn't perform an actuarial valuation. Well, if we don't perform a valuation, how do we certify the AFTAP for 2009?

And this means? "atwhay emay orryway"

Doc said I had to cut this out as well as other pasta dishes.

To quote the ghost of Grandma Tzeitl in Fiddler on the Roof, "A blessing on your head, mazel tov, mazel tov."

In SFAS, "A" stands for accounting. Yup, it's theirs, not ours. The employer with auditor's blessing should establish the assumptions. The actuary comments if it believed the assumptions are inappropriate. Of course, since Sarbanes-Oxley, it's not atypical for the accounting firms to disavow that they've ever heard of FASB and in all liklihood will hold, "you tell us what you want to do and we'll tell you if it's acceptable." This is not a bad attitude but the reality of observations. As far as words, do you find the words "an actuary must certify blah blah blah?" If you search FASB87 for "actuary," you will return no hits, other than statement 230: 230. Information about the plan's actuary was suggested as another possible disclosure. Recommendations were to provide the name and professional qualifications of the actuary and comments of the actuary about any anticipated changes in plan costs or contribution rates. The Board concluded that such information is outside the scope of financial reporting. http://www.fasb.org/pdf/fas87.pdf

It is assumed you are the takeover guy or you would have this information. Therefore, the prior actuary should have at least the demographic information and some amounts that either are or resemble the appropriate compensation information. Once you have assembled a database, you can finesse this by providing all employees [not just the handful] with a statement of accrued (and possibly projected) benefit and list the data. The statement would then indicate that "the statement was prepared using the following data and you should advise blah blah if your records of compensation differ from those reported." This would also satisfy the new benefit statement requirement provided we eventually know exactly what that is. In short, no one will never have to know that walls bump into your client.

You are in deep trouble as I used to belong to a wter pistol club. We used to drink 'til 12 and pistol too.

You forgot to specify that the range is limited to integers, so using real numbers (integers plus fractions), the answers is an infinite number of occurances. Sorry, I had to be a stickler on this one. Okay, Yankee. Restrict to non-negative integers. Exclude imaginery, irrational, transcendental, various and sundry numbers as well as deuteronomy.

The DB Pension Answer Book author is an EA and probably wouldn't mind being contacted (I'm too busy posting meaningless puzzles).

You can set up a count, for 0-9 it's 1; for 0-99 it's 20*; for 0-999, it's 300; . . .; for 0-999,999, it's 600,000. The sequence appears to emerge as n x 10(n-1), where n= number of places *8,18,28,38,48,58,68,78,80,81,82,83,84,85,86,87,88,89,98; note, 88 counts as 2