Andy the Actuary

Don't believe you can certify after 10/1 and accruals will stop if not a new plan.

I believe there is a range certification that offers some relief though some jeopardy exists if the call is close.

There are only 14 participants so we will know spouse's stuff in advance. Perhaps I differ from most but my benefit election packages always illustrate the amounts under the various options using the spouse's date of birth.

I am being obtuse. I think I got it. It seems that all that would remain is to state the basis under which benefits for the relative value of the lump sum are determined, namely the 417(e) stuff. Thank you.

Okay, so there is no mistake about what we're talking about, here is a possible paragraphs: Relative Values Comparison Federal law requires that your election package disclose the comparative value of each benefit payment option. The purpose of this disclosure is for you to be able to compare the relative value of each payment option. Comparison is made by converting each optional form of payment to its actuarial present value and expressing the present value as a percentage of the present value of the "Qualified Joint and Survivor" form of payment. All optional forms of payment are approximately equal in value. The comparisons are based upon the 1971 Group Annuity MortalityTable and 6.50% interest. Using different actuarial assumptions would affect the comparisons. All comparisons are based upon average life expectancies. The relative value of payments ultimately made will depend upon actual longevity. Consequently, you should consider your personal health as well as the health of your designated beneficiary, if applicable, and consult with your personal financial advisor in your decision of which optional form of payment best fits your needs. Now, we we were to illustrate these comparisons, all would be at 100% except for the the QJSA, which might be at 150%.

So, without regard to your advocating whether or not one should use such presentation, am I correct that in your opinion the described approach is consistent with the reg?

Thank you for the download which if I read correctly, supports the okayness of using the 71GA, 6.50% in that "The term "reasonable actuarial assumptions" applies when comparing optional forms of benefit that are not subject to the IRS Sec 417(e) rates and tables." It is certainly reasonable to compare such forms on the basis on which their derived unless such basis was de facto unreasonable.

Thank you. Pardon me for being obtuse: So, then if we are using 417(e) to compute lump sums and show all the relative values, including lump sum, using 71GA and 6.5% interest, you believe this satisfies the regs even though it produces a very high value for the lump sum?

It sounds as if you're saying that you must compute the present value of QJSA using the 417(e) rates and then compare the lump sum to it. If this is what you're saying, would you please provide the reference in the regulation that provides for this as I seem to be missing it. There was some languange about not having to comply earlier with regs if QJSA was most valuable using 417(e) rates. I'm confused.

David, thank you. Isn't really feasible. Employer is selling assets of corporation. Plan (a negotiated plan no less) permits immediate lump sums upon termination of employment irrespective of Participant's age and amount of lump sum, so purchasing deferred annuities with lump sum option is not going to help. Worse, closing date is mid-June (I just learned all of this this week) so we are scrambling. In this situation, best would be if all participants elect lump sum payment which is virtually assured irrespective of relative values. I simply don't want to put the client in jeopardy by intimating to participants that lump sum is far and away the surperior choice and more or less a Hobson's choice. On the other hand, . . . Am I missing your point. If so, would appreciate your comment.

A plan sponsor is shutting its doors and all employees covered under the DB Plan will be terminated. The Plan offers life only, J&50, J&100, 10C&L, 20C&L, and lump sum. Actuarial equivalence for determining monthly forms is 71GA and 6.50%. Any problems with saying in the election package that monthly forms are actuarially equivalent and same value and then illustrating lump sum relative to life only form. Because of low lump sum interest rates, the lump sum will be about 150% relative to the life only. Of course, anyone who both reads and understands this will be led to elect a lump sum. Clearly, the results look vastly different if for example, we were to use the lump sum basis for determining relative values. The disclosure does make the statement that using a different determination basis would produce different relative values.

Are those all that are being published? How will you satisfy 436 so that lump sums can be distributed?

I had your concern so I captured this at the time: Instructions_for_Form_5500_EZ__2005_.pdf

What was the context of the question? What was it the inquirer wanted to know? ERISA covered such areas as benefit accrual, participation, vesting, funding, reporting, etc. all of which the one-person plan is subject to. Much of the IRC wording parallels ERISA.

Yes, because at least in theory there will be an actuarial loss that will be part of the 430 calculation and the remaining partners will have to fund this loss. I did not suggest a CB plan since I ass-umed the plan in question had already been implemented.

These are always interesting especially when you have highly paid people whining about equity. Suggest rather than allocating assets each year, maintaining separate book accounts for the partners. Each year, the book account will be increased by the book contribution (on an IA basis) and then by investment income at the market rate of return for the entire portfolio. This is clean since each partner starts with a book account of $0. Each partner will also be required to contribute an additional amount which could be a percentage (e.g., based upon partnership income allocation percentages) of the total contribution under 430 in excess of the sum of the partners IA contributions. This additional amount will not affect the partners' plan book accounts. When a partner leaves, there will be a gain or loss depending upon whether his lump sum is less than or exceeds his book account. Such additional amount would adjust the partner's equity account at time of settlement (taking away from or giving to the other partners).

Notice 2008-30 provides for permissive withholding on eligible IRA distributions that are converted to a Roth IRA. Is anyone aware of whether the default is no withholding or a specified withholding? If a specified withholding, then what is the percentage? In short, does the election form state that (a) no fit will be withheld unless you specify otherwise, or (b) fit of x% will be withheld unless you specifiy otherwise?

IRS proposed regs. issued 4/11/2008 referred to 1.430(f)-1© a number of times. For example: (3) Plan assets equal or exceed funding target. For any plan year in which the value of plan assets (as reduced to reflect the subtraction of certain funding balances as provided under §1.430(f)-1©, but not below zero) equals or exceeds the funding target of the plan for the plan year, the minimum required contribution for that plan year is equal to the target normal cost of the plan for the plan year reduced (but not below zero) by that excess. While I believe this means subtract credit balances (that's what the statute says), it would be helpful to be able to see this reference and this poor old soul can't find it.

Not sure of the facts. Person quits at 65 but is not 100% vested. This implies the person's NRD was the later of age 65 or 5 years from the date first participated. Hence, would this be by age 70. Former employees are supposed to begin receiving payments by their NRD and if they don't make an election, payments should begin under the automatic J&S. The only time I've witnessed a former employee start his pension after NRD is when the plan administrator failed to take timely action. What is missing?

185,000 x a65 x (1+j)^(x-65)/ax unless there is a forfeiture upon death afte 65.

Unless the attorney/actuary foul up and forget to file timely with the PBGC and the PBGC responds by revoking the plan termination date.

Some old thoughts leaked out this a.m. as I was reminded of a Plan many years ago where the attorney dragged his derrierre filing with the PBGC and the PBGC revoked the termination. Had PPA applied and no certifications were given then there could have been poop to pay. So the question would be: Should a certification be given on a pre-2008 termination to cover the possibility that the PBGC could revoke the termination? By the way, I had never before or since heard of the PBGC revoking a termination so consider this an unlikely occurrence.

If not subject to PBGC and you change "plan" to "employer," then concur, though it is believed by some that the government routinely discrimates against HCEs.

There is an issue of professional ethics. The goal should not be to blow off the spouse and if due dilgence doesn't uncover that a distribution was reasonably made, another course of action should be followed. Since a deferred vested participant is generally reported on SSA in the year following a service break, while possibly the case, it does not follow that the participant would be listed if a cashout occurred. All this said, there is the balance of how much your client wants to spend in the sake of truth for a benefit that may have a lump sum value of a couple thousand dollars. It's truly your client's call and all you can do is aprise him of the due diligence that should be expended and then it is the client's decision. Again, you can seek the cooperation of the inquirer but the onus should not be on her to demonstrate that she didn't receive the notice in error. Then, again, it's not my money.

If Plan was subject to PBGC coverage, than sponsor would have filed form PBGC 500 and EA would have signed EAS. So, you may be able to identify EA who may help. Also, should have filed Form 501 post-distribution which will tell you if annuities were purchased. Problem could have been that annuities purchased before Plan termination and then would not have been reported on 501. You may be able to get prior 5500s through "Free Erisa" (which won't be for free) to see if annuities were purchased. In such case, you may be able to identify insurer. You mentioned wife, which suggests widow. It may be that husband died and no death benefit is payable. You would need to obtain date of death of participant and plan document in effect in 1976/77 to see if death benefit available. Yes, always prudent as part of plan termination process to complete Form SSA for those former deferred vesteds to received a distribution. Finally, I don't know about the legal aspects of this but I believe the onus would not be on the wife to demonstrate anything about entitlement and distribution. So, tread lightly as you may end up incurring more costs than coming to a settlement. After all, she has produced a document that shows an entitlement.