Andy the Actuary

In the range 0-999,999,999 [one billion numbers], how many times does the number 8 appear? Count each occurrence. For example, the number 8,088 counts as 3 rather than 1. This was inspired by a recent Car-Talk puzzler. "Click and Clack" can explain everything other than why my car radio is always tuned to a hip-hop station after it is returned by the parking lot attendant.

A wild stab? Is this owner-employer George Steinbrenner?

Why not simply terminate the plan? To keep it open on the if-come that the client may later want to reopen it will require the client to continue to bear legal and actuarial costs without the benefit of significant current tax deduction. Is there any other reason why the plan needs to be maintained?

Is the exception applicable? 1.401(a)(26)-1(b)(1) states "A plan other than a frozen defined benefit plan, blah, blah, blah satisfies 401(a)(26) blah blah blah if the plan is not top-heavy." First, the plan in question is frozen; second, it is top-heavy, so even if underfunded, not sure the the exception applies. However, the ERISA outline book supports this exception for a frozen plan provided the plan is not top-heavy. This just seems to be another confusing area to which a propeller-head must defer to the good judgment of a legal beagle.

Yes, it seems like just yesterday it was 10/27/2008.

Presuming these contracts are irrevocable commitments, the question would be would the IRS disqualify the purchaser's plan if the insurance company did not modify its contract? The logical answer would be what you bought is what you get and that should be acceptable. I know from recent experience (where an active plan sold off some liabilities for terminated vesteds) that if the annuities provided for a lump sum option at 65, they would specify the basis at time of purchase. The fact that PPA has been introduced won't change this. This is an uneasy area because my "Show-Me-State" mentality is always searching for words to back up a position. In such case, I've never found any.

In the 1950's, pop singer Eddie Fisher had a huge hit with "Count Your Blessings." It went like this, "When I'm worried and I can't sleep, I count my blessings instead of sheep, and I fall asleep, counting my blessings." In actuality, when Eddie was worried, he did hard drugs, and bleeped out. It worked for him -- he's still alive.

Public Service Announcement A number of clients have asked what in the name of J. Fred Muggs they are going to do about the 80% threshold in 2009. This is particularly a concern to those who dumped in a considerable sum in 2008 so that their plan could continue to pay full lump sum benefits (except to the HCEs). In 2008 it would have been a stigma, perhaps even a sign of poor asset management, to all of a sudden announce that lump sums were restricted. So, many employers ponied up. Now, bless this stinking market. Only those people who went to cash early or who are lying made money during this slump. Most (yours truly included) got decimated. The market now provides a natural and reasonable rationale for letting the chips fall where they may. While participants will not welcome with smilies the benefits restriction notice, they will understand the reasoning and may not be so apt to burn the employer in effigy. If the market continues to decline throughout the remainder of 2008, don't be surprised if Congress comes back with some temporary 436 relief (perhaps removing for 2009 the deemed 10% reduction of the 2008 AFTAP presumption). Of course, don't be surprise if they don't.

In your example, I would calculate the IA cost as before but adjusting assets so that the the aggregate IA cost agrees with the amount contributed.

Yes, while opinions may converge, where are the words? In "Twelve Angry Men," 11 jurors converged on guilty but in the end they acquitted.

Are you suggeting this is the case even if it is demonstrated with the provision that the plan satisfies 410(b), 401(a)(4), and any other code sections you can think of??? If you say, that is the case, then why so? Not that I'm so arrogant as to discount the opinion of experts, but there should be some official language (code, regs, notices, rev rule) somewhere that says you can't do it.

What is the problem with continuing the IA method? It can be used for funding (old assumptions, etc.) so long as it produces a contribution greater than the PPA minimum under 430 and not exceeding 404. If it produces a lesser contribution, you could make a second pass at the IA method with the assets appropriately adjusted so as to come up with the 430 minimum. Presumably, the issue (perhaps not your issue) is how much of the contribution to report on Schedule C and how much on 1040. The IA method should still work. It's sort of what was done when the plan has inactives -- we'd first reduce the assets by the present value of inactives benefits and then perform the IA process.

The third eye -- to my understanding -- is not a matter of supposition. It's already exists.

First question: It would seem as long as 410(b) is satisfied. Second question: Since benefit is not accrued until last day of plan year, this would make sense. There may be an issue if the plan is top-heavy.

Mr. triclopsian denizen of the deep, I thank you for your comment and offer that out of respect for your avitar and signature, I will no longer use road maps to giftwrap fish.

Thank you for your notice which I found helpful. Ooops. I was not particularly clear. I was questioning about the annual statement of accrued and vested accrued benefit that participants may be given or may request.

Say a plan provides for voluntary lump sum payment upon termination of employment and lump sums are calculated using the GAR94 and 4% [assume 415 does not apply]. So, in determining the FT, we calculate the lump sum and then discount using the appropriate single segment interest rate. When we calculate the effective interest rate "i," it appears appropriate to calculate the lump sum as before using the plan rate and discount at "i." Under current segment scenarios, "i' might be 6%. Does anyone see this calculation any other way? For example, does anyone believe it is appropriate to recalculate the lump sum at "i" so that perhaps "i" then is closer to 4.75%?

Has a model notice been issued? How are your clients treating the requirement to distribution pension statements?

Okay, a little cutting/pasting from the pdf of Notice 2008-85, and filtering through some string functions, etc., etc., and so forth -- but no data entry -- produced the attached. Please (anyone) who has the time, randomly check some values. It will be greatly appreciated. Thank you. Andy t. a. NOT08_85.xls

Can anyone advise where I can find in Excel format all of the mortality tables stipulated in IRS Notice 2008-85?

Actually, mine has been reduced to a 201(k) !!!

The new 401(k) logo to commerate the super-bear market:

I was going to go this route since I have not yet submitted to the IRS, except that this is a large plan (over 100 participants), and if the IRS does not approve the amendment, I may have to rescind the original plan termination, and re-terminate the plan with the appropriate amendments. This would be a huge delay in making the payouts, and the client would not appreciate the additional participant notifications. It would also add additional administrative cost to the employer by extending the timeframe. I am considering re-terminating the plan at this time so at least the termination date is still in 2008 and 2008 would still be the final funding valuation. Be sure to review filings that may have been conditioned on the Plan termination date. For example, you may have forgone submitting a Schedule B or claimed a waiver to paying the variable PBGC premium. Also, did the amendment to terminate specifically freeze benefits? Before you do this it would also be advised to note the (negative) effect such action might have on employees. Given you have not filed for a d-letter, you could amend the termination amendment. This seems far less problematic and disruptive.

Two lawyers - three opinions. I know of many benefits attorneys who when they go for a d-letter with a plan that contains an unusual provision, simply bury it in the restatement arguing that disclosure is not required by the d-letter procedure . Others, follow your preference and note the provision in the cover letter and request the IRS to comment. While still others use the hybrid of noting the provision but do not request the comment. Since I do not sign Esq. after my name, I don't have to vote in on this one.

Plan terminations may on occasion tacitly change the rules. Many are familiar with owner/hce's waiving accrued benefits though it's not called waiving benefits. Have also witnessed lump sums being offered to persons receiving monthly pension payments. The amendment to add a lump sum option is another. I would recommend sending the amendment to the IRS reviewer if the IRS has not yet issued a D-letter.