Andy the Actuary

Thank you, I stand corrected. No base will be established.

Calendar year plan has following characteristics for 2008. 2007 contribution without regard to FSA CB was $0 so no quarterly contribution due. FT = 2,000,000 TNC=100,000 Assets=2,400,000 FS COB=900,000 Client wishes to avoid making any contribution for 2008 and in the great hereafter. If client elects to burn 600,000, then for 2008, we have FT - (Assets - FSCOB) + TNC = 0. Further, there will be no quarterly contribution requirement in 2009 and most likely, no contribution after burning or using credit balances in 2009. Alternatively, client could choose not to burn credit balance. This will effectively set up 7 year amortization of CB which client can then offset using the FSCOB. There would, however, be a quarterly contribution requirement for 2009 and it might be $0 or FSCOB could be used to offset. Appart from the apparent administrative advantages of the first approach, is any advantage to the client perceived selecting one approach over the other?

I use Corbel Relius software to prepare 5500EZs and, like Ms. Friedman, have experienced no problems with filing the final 5500EZ before the appropriate form is available.

A calendar year fiscal year credit union client must complete and file year end financial reporting in the first week of January. Thus, for example, 12/31/2008 FASB 158 disclosures must be completed by say January 5, 2009. We can wink and determine the discount rate a week or so before 12/31 so can have the FASB 158 spreadsheet ready for completion once year-end assets are known. The assets that are traded on the usual markets can be easily evaluated. But, what about limited partnerships, real-estate trusts, etc. whose evaluations may have a 30+ day lag? Is anyone able to shed light as to what major accounting firms have commented? For example, if evaluations have a 30-day lag, would it be acceptable to use an October 31 valuation for such investments? The dilemma here is that if you're not going to comply with FASB 158 to the letter, why not simply continue to measure assets/liabilities as of an earlier date or use a hybrid, such as assets as of 9/30, liabilities as of 9/30 but valued using a 12/31 discount rate? What are the repercussions of the auditor commenting that FASB 158 has been applied in a way that complies with the statement? What have you kids in the peanut gallery worked out with your clients and their auditors?

Suppose we currently have a DB plan with Doc and two helpers. The entity is a C-Corp. The Plan's current NRA is 52 and Doc is 45 with 13 YoS. Helpers are age 35 with 2 YoS. Suppose we change NRA to 65 but allow for unreduced early retirement at 52/20 YoS. Now, suppose it's for real that the Doc will call it quits at 52. So, the expectations are the Doc will terminate at 52 and so goes the corporation. The helpers will not have 20 YoS at 52, so their benefit at 52 will be the accrued benefit payable at 65. That's how we expect life to play out. Question: Can we fund the plan under the assumption that it ends when the Doc turns 52? That is, can we assume the employees will not work long enough to get a fully-subsidized early retirement benefit but the Doc will?

Ask whoever requested you to complete the form for instructions. Of course, they will have no idea what you're requesting. You can then indicate that you can't complete the form until they provide insturctions. Meanwhile, you lose the client and possibly your entire practice but it will be a happier life. Seriously, whoever is requesting will need to provide direction.

Exemption applies. Benefit may be distributed in lump sum.

I have increased my age so that I may legally imbibe.

Need a lot more facts, such as what tax year, subject to PBGC, overlapping compensation, non-overlapping compensation, unfunded current liability or funding short-fall, etc. In other words, the scope of your question is broad. If you're looking for a quick, safe but likely not the optimum answer: 10% of the compensation of the employees covered by the frozen plan, not to exceed the DB plan unfunded whatever using the market value of DB plan assets to value the DB plan unfunded whatever. Now, the real answer: You should consult with the enrolled actuary who signed the Schedule B.

Clearly, one of the problems -- at least in the some of the stock actuarial reports package systems produce -- is that the cost method may be inadequately or improperly described as EAN. EAN would have a specific definition to the reviewer. What is going on that the IRS is attempting to replicate costs? This sounds unusual and there may be some greater problem in the background that they're investigating.

IRS_Rev._Proc._2000_40_Change_in_Cost_Method.pdf Presumably, you're talking about the 2007 valuation. So, how has this been treated in prior years? What you're proposing appears to satisfy the Rev. Proc. 2000-40. See attached.

Sex and age change operation We were just talking about having an assumption for sex changes, plus another two mortality tables. How is this going to affect your NRA? 401(a)(9)? 415 limits? I'm still trying to determine who the spouse is in my QDRO!

Assumption is that the standard form is a life annuity so it is assumed that by normal form you mean an actuarial equivalent J&S. In such case, your approach seems reasonable. Any bias in the tables would come out in the relative values. In any event, you could only get rid of the tables on a wear-away basis so they'd still be around.

Sex and age change operation

Under the cost method change automatic approval Rev. Proc. 2000-40, EAN is defined by spreading costs from plan entry age, which makes sense for why it is called "Entry Age" Normal. However, there are numerous examples of EAN being spread from employment age when benefits are credited from DOE rather than DOP. In such case, an employee first being valued brings with him an EAN accrued liabilitiy or a loss. I use EAN prosmiscuously because the method just described while in the EAN family is not EAN. Just make sure your valuation report describes what is going on and if you switch to the quasi-EAN, you may not hang your hat on Rev. Proc. 2000-40.

So, is bottom line as follows. As of 12/31/2008, person age 45 with 20 YoS has now accrued Normal Retirement benefit of $1,000 month starting at age 65. If person works 10 more years, he would satisfy rule of 85 and would now have a NRA of 55. If the Plan provides, he could take an in-service distribution. Now, it is 1/1/2009, and the Plan will be amended to change the NRA to 62 -- period. So, the person now has a $1,000 month pension at age 62 and has enjoyed a windfall because his NRA is three years earlier. Further, once the person reaches age 55 (and would satisfy the rule of 85), the person now has a benefit of $1,000/month actuarially increased from age 55 to 62 payable at age 62, or immediately (not actuarially increased all the way) if he terminates employment after age 55 and before age 62. The point is he can no longer take an in-service distribution prior to age 62. This is particularly nasty because of the uncertainty of what constitutes termination of employment for a sole proprietor. This is one example and presumably this provision can be constructed without wearaway, with wearaway, or with extended wearaway and with/without windfalls? Any thoughts?

see: http://www.jpmorgan.com/cm/Satellite?c=JPM...l_Page_Template

(iii) Certification for prior year. If this paragraph (h)(2) applies to a plan, and the date of the enrolled actuary’s certification under paragraph (h)(4) of this section of the actual adjusted funding target attainment percentage for the plan year preceding the current year occurs on or after the first day of the 4th month of the current plan year, then, commencing on the date of that prior year certification and continuing until the earlier of the date the enrolled actuary issues a certification under paragraph (h)(4) of this section of the adjusted funding target attainment percentage for the plan year or the first day of the 10th month of the plan year as described in paragraph (h)(3) of this section— (A) The adjusted funding target attainment percentage of the plan as of the valuation date for the plan year is presumed to be equal to 10 percentage points less than the actual adjusted funding target attainment percentage of the plan for the preceding plan year; and (B) The date of the prior year certification is treated as a section 436 measurement date. This is interesting language because when no certification was issued, as M. Effen states, the plan was frozen and notices became due April 30. Question: Suppose lump sum distributed in May 2008 but you now (July 18) certify 2007 AFTAP at 90% (retroactive to 1/1/2008 valuation date). So, was distribution permissible or impermissible? We're employee notices needed or not needed? Will Pauline be saved from the speeding train?

Thank you for the extremely thoughtful reply.

Thank you. Do you know when various rates are published. I knew the old gatt interest rate used to be published on the first Tuesday of the subsequent month. Is that the same for the 417(e) segment rates?

When does the IRS Publish 417(e) segment rates? Is it in an IRS Notice at the end of the month following? Thus, are the June segment rates published at the end of July. In such case, how has Datair already reported them in their handy-dandy table. Are the rates published sooner or did Datair compute them? If the IRS publishes in such fashion, how in practice would you administer a plan whose lump sum basis changes monthly? Handy-Dandy Datair Table: http://www.datair.com/rates.htm

http://a257.g.akamaitech.net/7/257/2422/01...pdf/06-2844.pdf

(1) The PV has to be at least as great as the PV of the NRB deferred to age 62 (2) What does the plan say about how the lump sum is calculated at age 60? I.e., does it say the PV of the ERB? If so, then greater of PV of ERB and (1) This issue is precisely why the Relative Value Regs were born. Some Plans provided only (1), which is okay. But, the value of (2) is much greater. So, the RV regs purport to make this disclosure, and they do provided you're a pension professional and not someone who works a bottle cap machine in Cabool, MO [thought Mike Preston would like Cabool] P.S. Is Sieve's photo of the late, great Terry Sawchuck?

Thank you both. Never been down this road before. Don't expect any issues (especially during my evaporating working career) but nonetheless, various validation valuates very valuable. No numbers have been crunched yet but life expectancy of DB plan was one of them as will be cost savings and benefits comparisons.

An employer sponsors a rich DB plan (2% average compensation per year of service, max 60%) and non-safe-harbor 401(k) plan with 100% matching of first 3%. DB Plan covers 300 employees of which 270 contribute to 401(k) plan. 9 of 300 are HCE. Most new hires anticipated to be employed as NHCEs but a few may ultimately work their way up. Some present NHCEs will ultimately become HCEs. Employer is considering: (1) Present employess stay in DB and 401(k) plan. (2) Future hires not in DB plan but in 401(k) plan. (3) Future hires get 3% profit sharing contribution, a feature to be added to 401(k) plan. Apparent coverage issues: (1) Eventually DB plan will waste away to fewer than 50 employees so 401(a)(26) test will fail. (2) At some point -- but not for awhile -- DB plan may fail 410(b) (3) No problem with DC until DC plan covers HCE. At that time, would be concerned about 410(b). Might (if can't pass ratio test) have to aggregate with richer DB for average benefit testing. It would seem if 3% benefit is in 401(k) plan, might have to give gateway to others (i.e., to current employees) but if 3% in separate ps plan, no gateway issues, since all employees under the plan get the same %. WOULD APPRECIATE COMMENTS ON THE ABOVE AND IF I'VE MISREAD THE SITUATION AND THERE ARE OTHER ISSUES THAT NEED TO BE CONSIDERED.