Andy the Actuary

Just received the 2008 EA Meeting booklet and schedule. In it, the JBEA was stated as they were mailing out reenrollment forms in Oct 2007. I have not yet received such mailing.

If you freeze a DB Plan and there would be an opportunity for a reversion if the plan were terminated, then all active employees would need to be fully vested. If you later reopened the plan, such employees could not be "unvested." If you later reopen the plan, you would need to watch for possible discrimination regarding grants of past service to HCEs.

Top-heavy is of issue only if you are confused, which I admit I was. I had remembered some pre-tax reform law (TEFRA?) that had limited compensation to $200,000 but after I asked the question and hit the return key, I realized I was dazed that this was a 415 issue. Worse, I was so dazed I failed to withdraw the question. Since you bit, I hope you didn't find this too difficult to swallow.

On December 3, the PBGC issued technical advice stipulating in particular that PPA interest and mortality provisions "(regardless of whether they were added to the plan before, or on or after, the plan’s termination date are not effective for a plan with a termination date before the beginning of its 2008 plan year, even if the distribution date is after the 2007 plan year." This is in contrast to the position they took when GATT was introduced (See ASPPA asap NO. 06-38; November 15, 2006) See this important link: http://www.pbgc.gov/practitioners/law-regu...nt/tu16272.html

And this plan was not top-heavy? Correct?

Under the present morass, plans that have terminated are no longer subject to 412. So, if a plan terminated 12/31/2006, we would not file a schedule B for 2007. Has anyone traced the thread to conclude the 430 funding standards no longer apply after the plan is terminated? We could have the scenardio where a plan is 79% funded in 2008 and terminates 12/31/2008 in a nondistress scenario with the Plan sponsor agreeing to make the plan fully funded at point of distribution. So, the question is can we pay unrestricted lump sums in 2009 while the plan is in limbo with its 5310 filing?

It means I'd be happy to email you the beta-stage Lotus 1-2-3 spreadsheet I created. Send me your email address in a personal mesage by clicking on "Andy The Actuary." The spreadsheet would be sent as a professional courtesy at no charge [i'm not selling software] with the understanding that it is being provided solely for purpose of comparing values with any systems you might use to determine lump sums and would not be intended or warranted for you to copy in whole or part or use for determining lump sum values in behalf of your clients or for any other purpose.

No, no. This isn't a thumb-wrestling contest. This was simply about the scope and impact of a D-Letter. I had already forgotten about the situation that prompted all this discussion. We'd be lucky to get the 53001 filed by 12/31. Andy T. A. 1Is that the right form?

Oh, you're the guy that voted for AUH2O in '64. Thanks for letting me know I could do what I didn't think I could do!!!

Thank you. I have reread 1.401(a)-5(b) and pardon me for being obtuse, but am unable to see the conclusion you just stated. In particular, this section provides "This paragraph (b) does not apply if the Commissioner determines that such provisions are not necessary to prevent the prohibited discrimination that may occur in the event of an early termination of the plan." Doesn't this mean that if the plan is amended to remove the provisions and the IRS issues a D-letter that the Commissioner has so determined?

We will never agree. Get two actuaries in the room and you get three opinions! That's why the blog was entitled "sanity check." I never anticipated my numbers would be replicated. I was hoping others would come close which they did and which was sufficient to comfort moi that my methodology was on target.

Back in 1978, the IRS issued proposed benefit statement regulations that addressed benefit statements that DB plan administrators were to provide. The intention was clear -- the regulations were promoting disclosure. However, the regulations had no default effective date or reliance provisions. In short, irrespective of the intentions, there was no legal impetus to comply until PPA came out with some similar requirements. While I agree with the spirit of MWYATT, it's not really a matter of what the printed word intends but what the words say. Note, I've seen plans where the "restriction" provisions have been removed and the IRS issued a favorable D-Letter. As my Dad used to tell me when I was pursuing a major league baseball career in the little leagues, "Don't be your own umpire." The advice to seek a legal opinion is always sound.

Naah, that would be Dx. This was supposed to mean Lx - L(x+1) but I'm unsure how to show subscript/superscript on the bulletin board. In any event, dx meant the number dying during the year. Also, lx just doesn't look right, so I used Lx. Lx is number living during the year and not that arcane Lx that appeared in one of Jordan's most confusing chapters on demography. Best, Andy T. A.

My first principles spreadsheet does the old L(x+t/12)*v^(t/12), where L(x+t/12)=Lx-(t/12)*dx so will yield a different result from the 11/24 approximation. I ask, "Does it really matter?" Given that the law makes no specification, isn't either calculation method appropriate? Also, how do you apply the 11/24 th approximation when the benefit changes mid year? Answer: With the utmost of difficulty.

IRS Reg. 1.414(q)-1T Q&A 4 supports your definition of Former HCE provided employee provides services for employer during the determination year.

Flosfur wrote, "So Andy, for the segment rates APR, we differ by the 0.07 which is too great to be acceptable to the actuaries." I ask, "Who says so?" The .07 relative to your 143.51 is .05% which hardly wants to make one cry foul. Going back to an earlier discussion, this means the use of commutation columns instead of first principles is unacceptable. I suspect you and I will have to agree to disagree on this one. Thanks, Andy T. A.

Without knowing all the facts and circumstances, I offer the following: Can the Plan be amended to allow for in-service retirement? Then, person could take an unrestricted lump distribution as an NHCE and actually retire later. Would this resolve your issues? Also, Plan could be amended to remove the restriction language. If you obtained a D-Letter on amended plan, then there would be no issue.

For immediate life annuity at 65 using 4.85%, 5.02%, and 5.09%, I get 143.44. Using 4.85% (and my old Fortran program), I get 145.61; using 5.09%, I get 142.66. Hope this helps. Andy T. A.

Dear FGC: Thank you for such a thoughtful response. While I understand where this case is headed, I still can't get past that no basis for establised for filing a law suit to begin with. I.e., Where are the facts to support that there was any nonfeasance? Happy holidays, Andy T. A.

Dear Flosfur: Looks like now we are either both sane or both insane! The calculation is, indeed, a mess and as stated before, so totally unnecessary when you could be using stale interest rates. But, the arcane methodology now allows Congress to stand proudly and boast how they have acted to protect workers' pensions, at least for the short term while there are still DB plans. I never thought at my age that I would become a computer programmer! Andy T. A. P.S. At 65->65, I compute 148.99. I await with great joy the auditor who argues that his/her 149.03 is correct and my 148.99 is incorrect.

Thank you. Those are the documents I had perused. I guess I was looking for Mr. LaRue duly submitted change request on signed and dated Plan form to the Plan administrator. . . Having once administered 401(k) plans, I'm well aware that it's not unusual for participants to call attention to "mishaps" long after the fact, but with the amount of $ at stake, one would have assumed Mr. LaRue would have been more thoughtful about verifying the transaction. One would have thought he would have been looking for confirmation of his transaction or at least reviewing his account statement to see if the transaction were effected. Oh, well.

The Washington Post carried a news story about James LaRue who claims his employer failed to implement investment changes he requested and subsequently lost $150,000 as a result of the employer's failure to act: http://www.washingtonpost.com/wp-dyn/conte...7112500356.html I read the article and persused the plaintiff's brief and nowhere do I find any discussion pertaining to how Mr. LaRue requested investment changes and whether or not such requests were in accordance with the Plan docuement. It almost sounds as if he simply verbally asked someone to make changes and they didn't. Does anyone have any background information on the entire transaction?

Jay, thank you. I've toyed with your suggestion and vascillate between "I certify the AFTAP for the Potrazebie Pension Plan as of 1/1/2007 is . . ." kind of statement to reissuing the 2007 actuarial report and adding this statement so there is no question as to what exactly is being certified and the basis on which such certification is being made.

Dear Flosfur: I get 61->65: 118.81 62->65: 125.59 55->65: 86.32 using 2008 mortality table and interest Rates are 4.85%, 5.02%, and 5.09%. Note, using an old fortran program (11/24 approximation), the new mortality table, and constant interest rate of 4.85%, I get for 55->65 a factor of 89.57 and using a constant interest rate of 5.09%, a factor of 85.78. My result of 86.32 falls between these boundaries as one would expect. Suggest you use your time-tested lump sum calculation system (whatever it is) to see if your getting an answer that fits within reasonable boundaries. If so, then one of us is off kilter somewhere. I'll be happy to email you my spreadsheet if that will help. Thanks and regards, Andy T. A.

Has anyone seen a pro forma format that illustrates the content to be included in the 2007 AFTAP? Is there specific wording that has been proposed or at least discussed?