Andy the Actuary

David, this was helpful as I was not aware of this directory. Unfortunately and presumably, it lists only actuaries and not other government professionals. By the way, Harlan Weller does report an email address in this directory. Hence, I would still lobby for a well-advertised, consolidated, comprehensive source. Sorry if any offense was taken to the word "secret." This flip adjective was more pointed toward others wanting to guard government employees' contact information than the employees, themselves, seeking to guard it.

Such information should be anything but guarded. In fact, it would be of benefit if an on-line database of IRS/DOL/Treasury/PBGC benefits related contacts was maintained. Then, you could easily obtain telephone number, fax, street address, and email address. If such on-line directory is available, please advise. Otherwise, you may wish to email Dave Baker to express your interest in such a directory becoming a BenefitsLink feature. Dave's non-secret email address is davebaker@benefitlinks.com.

Depends upon the extent of ownership. Refer to IRC 415(h).

Despite prodding as well as disclosure of what has to happen, there are just going to be some (calendar plan year) clients who just are unable to get census in time to certify the AFTAP by April 1. Surprise! So, supposed the 2007 AFTAP is certified as 85%. Then, the presumtive 2008 AFTAP effective April 1 is 75% and restrictions apply. The Plan must provide notice of the restrictions to some persons (see my most recent post) by the end of April. Suppose the client gets information in time to certify the 2008 AFTAP by April 20. Must Participant still be give notice? In short, is the effective deadline for certifying the AFTAP April 30?

To whom must notices be provided when benefits are restricted? It appears a fundamentalist reading of the proposed regulations would suggest everyone. And while this may be the correct answer, it can produce a totally ludicrous and unncessary result. Certainly, why would you notify participants whose benefits are in pay status, or for that matter active or terminated vested deferred participants who are not eligible for payments during the period to who the restrictions would apply? Is there guidance of which this actuary is unaware?

As part of the floor-offset arrangement, I believe the 401(k) plan would have to provide what one my clients refered to as "the spouse's sxxx" That is, the J&S stuff would apply as the automatic form of payment and generally would require witnessed spousal consent to waive.

See 411(b)(1)(G). Also, depending upon her age and the plan, IRS Reg. 411(a)-7© provides that the normal retirement benefit cannot be less than the greatest early retirement benefit. Hope this helps

Will accept information under client's name but then assess reasonableness. Issue -- well, at least it used to be an issue -- was postulating appropriate investment assumtions if you're unsure how money is invested. If in doubt, ask. More of a problem is on one-person plans. Irrespective of what you request, the client may send a final month summary, year end evalution, or even a year-to-date evaluation that does not allow appropriate response to the question on the EZ: amounts received other than contributions (exclude unrealized amounts).

Yes, Effen, in particular how is the actuary to compute "deferred tax asset/liablity" offset to "accumulated other comprehensive income." Which reminds me, as a nonaccountant, it took me Avogadro's number of readings of FASB158 before I comprehended that the misnomer "accumulated other comprehensive income" is an equity item!

We all continue to endure the same frustration -- Namely, FASB 158 is an accounting procedure and we are not finding guidance from the accounting firms. To the contrary, they look to actuaries to advise. I simply provide the disclosures as in FASB87 and believe it is up to them to apply them or tell me what else they require.

We won't take a poll but I suspect there are hundreds (maybe thousands?) of plans that have elected "alternate allocations" under ERISA Sec. 4044 (even though some of these plans are not subject to PBGC), have obtained a "D" letter, and have distributed assets to one or two participants (HCE/Key employees) that were less than sufficient. Given that waiving an accrued benefit is clearly impermissible, it would be very surprising if such technical corrections are issued. Are you suggesting that you may no longer be able to get the "wink" and will now have to fund a plan to 80% before distributing benefits upon Plan termination? Even if this is correct, funding to 80% would still not ensure a sufficiency. What about if you have one-participant plan and the participant dies?

I failed to mention my motivation is to spare the client a few sheckles. If I provide a piece of paper that says "I hereby certify," then I will charge for this. I derive no good feeling for charging my clients for anything which is of absolutely no value unless law so requires, which of course, we do all the time. Your point is well taken. I don't want my client to end up in pension -- or worse debtor's -- prision. I'm unare of any penalities so long as EA advised Plan Sponsor/Participant of restrictions.

A one-participant plan was established a few years ago and granted past service so that the benefit multiplier (60%) is maxed out. The participant, though not retirement age, has also maxed his FS3 compensation. Consequently, all benefits are fully accrued and no new benefits are accruing; thus, there is no unit credit normal cost. Plan Participant is age 63 and may continue plan for about 5 more years. Plan sponsor continues to contribute in the 115K neighborhood which will exceed the 7 year amortization of the funding target by about two fold 2007 AFTAP is 55% and if we burn credit balance, 2007 AFTAP is 72%. Since it is a one-participant plan, no benefits will be distributed until plan is terminated. Only issue I see are that quarterly contributions should be made since won't be able to use credit balance. We would simply opt for interest penalities which would still make total nut less than what's being contributed. Question: What happens if we make no AFTAP certifications whatsoever? Any potential risks sensed if the facts remain unchanged?

So, does this mean that when you complete Schedule B, you credit a full year's interest on the 12/31/2001 credit balance (which includes the two $50,000 accrued contributions) or that the interest reported on Schedule B is the sum of the interest segments up until the quarterly contributions are due. Would the answer be the same if instead of accrued contributions, the $100,000 was made on 12/31/2001?

Is there a reason you would prefer not to issue a simple one paragraph letter (well, two if you count the circular 230 crud) that certifies the 2007 AFTAP?

Can anyone point to where the government has issued pro-forma notices related to AFTAP certification, restriction of lump sum, annual report, etc.?

Mr. R's point leads to an interesting question: Given that now there is one and only one bonafide cost method, is the enrolled actuary still bound by the take-over provisions of 2000-40? I.e., is the actuary required to reproduce the prior year's results? What happens if you can't? In the past, I've usually been able to reproduce the prior actuary's results to a reasonable degree or explain why I can't. With the computational complexities introduced by PPA, I'm unsure how I would explain why I can't.

Would you please cite what IRS guidance led you to this understanding. Perhaps I'm just being obtuse, but I am unable to extrapolate the defnition of prohibited payment to cover subsidized benefits. The code and regs refer to single life annuity, not the single life annuity which is the actuarial equivalent of the accrued benefit payable at normal retirement date. Thank you, andy t.a.

2004 IRS Gray Book, question 20. Gray Books are distributed at the annual Enrolled Acutary's Meeting. IRS states emphatically that frozen plans are required to change to PUC method. (Note, use the PUC method, and not the UC method. The automatic approval of Rev. Proc 2000-40 is for the PUC method. Results should be the same unless the Plan formula is compensation based and freeze is soft and allows average comp in respect of service as of the freeze to increase.) Of course, this is the gray book and represents thinking of IRS participants in "think" session and does not represent official guidance.

Would agree with your interpretation. This is tantamount to not having to perform an environmental assessment and clean-up of your contaminated land until you sell it. As long as you own it, you can continue to pollute the watertable. Other than the law permits, what is the rational basis for potentially making a plan more underfunded when you know it can't meet the safe-harbor criteria?

Mr. Mwyatt, you suggest a point more interesting than my hypothetical. Under traditional UC, TNC will increase with age and possibly dramatically if benefits are compensation based. Consequently, one might propose smoothing by recommending a contribution that is EAN based. I believe this strategy was affectionately known as advance funding future accruals which was one of the tenants of ERISA. In short, don't push funding too far into the future. However, the possibility looms under PPA that by contributing more than the minimum, you might be creating a credit balance you may not be able to use, or at least may not be able to use when you want to. So, PPA discourages advance funding by putting this possibility on the table. Perhaps some day Congress will offer a technical correction to this by rescinding PPA. Of course, we'll all be retired.

(Ain't my funding method !) IRS Rev. Proc. 2000-40 comes closest to defining the PUC actuarial cost method and it refers to "credited service." Perhaps, the projected benefit should get limited by 415 before the proration rather than prorating the full benefit and then applying 415?

A new plan grants past service and assume benefits limited by 415(b). Assume Plan effective 1/1/2007 and that formula accrued benefit is $50,000 on PUC basis. So, 415(b) as 1/1/2007 is $18,000 (zero years of participation but count 1/10 of $180,000) and 415(b) as 12/31/2007 is also $18,000 (still 1/10 of $180,000). So, accrued liability is based upon a benefit of $18,000 and there is no normal cost. Charges to FSA are 30 year amortization of AL so at end of year one the Plan is potentially grossly underfunded unless employer contributes larger amount (up to 150% of CL). If Plan didn't grant past service, then PUC would be the same number as the AL and there would be a whopping minimum. Does this make sense or is something very basic being overlooked?

What you contend makes sense, since the unit credit normal cost is the actuarial present value of benefit accrued during the year. More important, it is presumed that you, and not your software company, will sign the Schedule B. Have them provide you with their explanation and follow your best judgment before signing Schedule B.

Since we're potentially modifying plans, it is worth reiterating that the suspension of benefit rules is one of the most practically difficult provisions to administer and agree with Mr. Rigby that plans that contain such provision sooner or later have an accident. Consequently, avoid. Generally, the actuarial value of benefits paid would exceed the additional benefits that would be accrued.