Andy the Actuary

Thank you. It is, however, worthwhile to add the grey book caveat: ". . . the responses do not necessarily represent the positions of the Treasury or the IRS and cannot be relied upon by any taxpayer for any purpose," which has even more teeth for nonwritten comments.

This particular 401(a)(4) reg was always somewhat nebulous. It was never stipulated on what day the valuation was to be made or what interest rate to be used in the CL range. For that matter, 412(l)(7) only loosely defined CL, but there is no more (l)(7). The key perhaps is 1.401(a)(4)-5(b) which provides that ". . . any reasonable and consistent method may be used for determining the value of current liabilities and the value of plan assets." So, while your suggestion appears to be a reasonable method, there may be other reasonable methods. For example, valuing 110% of the CL (FT?) as of the date of distribution (rather than the actuarial valuation date) using the 430 "effective" interest rate could be viewed as a reasonable method.

RE: Pre-retirement Mortality in lump sum calculations: Is it a matter of the least you must do versus what the Plan Sponsor agrees that the Plan will do (i.e., what the Plan says)? Clearly, words in the law and the Plan do not cover every nuance (or is that nuisance?). Often, it is a matter of recommending doing what is reasonable so long it is done in a uniform and consistent manner.

I would suggest the greater of two pv's: (a) 417(e) of 415 limited benefit at 65 using segment rates and 417(e) mortality post retirement -- this is Mr. P's example and (b) PV of 415 limited benefit lump sum at 65 using Plan Rates and discounted to 45 using 3rd segment rate. Where I believe the distinction would come in more pronounced is if you were valuing the PV at age 63, then under calculation (a) all 3 segment rates would be used where as under calculation (b) only segment rate one would be used. In short, in (a) you're going to be valuing a PV at 65 not using seg 1, 2, and 3 for <5,5-20, and 20+, but for x (years), 5 to 20, and 20+ years; or 20-x and 20+ years; or 20+ years I suspect there are other reasonable approaches.

In these times when sifting through answers is not so easy, your example helps. Modifying your example, if the Plan's lump sum basis was '94GAR and 5%, you would calculate the lump sum at 65 and then discount to age 45 using the 6.09% rate. if the lump sum were discounted to age 55, you would discount using the second segment rate.

The Plan document should allow for this transaction for anyone with L.I. Also, presumably we are not talking about L.I. that does feature springing cash values (i.e., cash values that increase dramatically in the near future), which the IRS hasn't taken too kindly to.

Wrong: Here is my watch before stem broke off and before it grew a day-counter: http://cid-7da3bb1ef9fa38ae.skydrive.live....nie%20Watch.jpg

If the client has already expressed their intent to terminate at the end of the year, then good actuarial practice would require that you consider this material fact. Otherwise, no. Of course, the TNC does use one year of salary growth, but the cushion amount uses whatever future salary growth that the actuary finds reasonable. Perhaps, you have brought up a point worth polling? On one hand, you suggest "good actuarial practice." How does one argue against this? Yet, sometimes this involves tempering the law as written law as you're suggesting. The other side of the coin is when there is some unreasonable aspect of the law, we fight to uphold it. While I know my decision may not be the most popular or even thought to be reasonable, my vote would be to apply the law as written. That means that if the Plan is presumed ongoing as of the actuarial valuation date, then project compensation beyond one year in determining the cushion amount.

I believe I would have to wait around for 9 years -- 10/1/2017.

It would seem the funding target would be calculated by discounting to age 55 the expected payments from 65 to 75 using the second segment rate and discounting to age 55 the expected payments from 75 and thereafter using the third segment rate. This assumes your lump sum basis is 417(e). If not (say for example, '94 GAR and 5%), then as Sir Blinkeford, the triclopsian denizen of the deep argued (and I now concur), you would use the single second segment rate to discount the PV at 65 to age 55. See: http://benefitslink.com/boards/index.php?s...le+segment+rate The regs. say 7 years for amortization re:430. Provided there was room in the max deductible, you could always amortize faster. If anyone disagrees with these contentions, please refer to my disclaimer.

I've decided to grind this out. First, however, can anyone tell me if 5769 is a leap year?

Days will continue to change from 1 to 31, so tomorrow day will show "1" (when it should be "2")

It's now October 1 but my trusted Timex shows a day of 31. Unfortunately, while it took a lickin' and kept tickin', the stem broke off, so I'll just have to wait until the day the watch shows is back in sync with the actual calendar day. How long will I wait? Can you provide a simpler route to the answer than just grinding it out on Excel?

With or without my disclaimer, I also offer my unfettered opinion that you've got it right.

DOL Reg. 2530-200b-2(a)(1)

So, then the AFTAP was less than 60% as of April 1 and participants should have been notified that no lump sum payments (assuming the client notified them that only 50% could be paid) could be paid. As of April 30, notices were in arrear. The client now is libel for up to $1,000 day per participant fine and potentially bankrupt. The actuarial bill will not be paid and Blinky will have company at the bottom of the sea. The good news is eventually everyone will have a client who reneggs on his commitment so no matter how hard we cya, we'll all be at the bottom of the sea with the Blinkster.

Please correct if wrong but assumed is the Plan states the pension will start at age 65 and further, if no election is made, the Plan would provide for a J&S if married and normal form if unmarried. In such case, shouldn't the pension be paid in this manner and the back payments made from age 65? An actuarial increase is not equivalent to awarding payments. If you actuarially increase a life annuity (i.e., unmarried) and the pensioner dies after receiving one payment, then he (his estate) has come out way behind. You may wish to check the regulations on retroactive annuity start date to see if any meaningful guidance is provided. I'll stop here because this is more of a legal than actuarial matter.

I would suspect that not mentioning the contribution receivable may allow you to handle the certification without change. It certainly does not rectify the situation. See attached for how ye olde cya-er approached this, which is simply what I concocted in absence of any guidance. temp1.doc

You should have two pieces of paper - a commitment from client to make 50k contribution and your AFTAP certification. What did they say? Was the client commitment noted in your AFTAP certification?

Excellent, forgotten point: An hour of service is an hour for which an employee is paid or entitled to pay (blah, blah, blah)

Even for "soul" proprietors

Sounds like we're talking about how much of a contribution is reflected on Schedule C (allocated to wife) and how much on 1040. What actuarial cost method has been used historically for allocating contributions for Schedule C purposes? For example, is it an immediate or spread gain formula? It's quite possible the valuation report will not disclose this answer.

Sieve, FYI, that would be US Senators Larry Craig and Mike Crapo from Bose, Idaho

Has anyone located or seen a draft of the "new" 402(f) notice? If so, please tell it I am looking for it.

"A verbal contract isn't worth the paper it's printed on" -- Louis B. Mayer