Andy the Actuary

Does 2000-14 cover the situation where the plan's actuarial cost method is changed to the PUC method (in particular, for frozen plans) under Approval 3.01 if (Assets - CB) exceed AL at time of change? Of course, I believe we would establish a charge base equal to the CB so the balance equation balanced (i.e., we would force UAL to $0) because ya can't have a negative unfunded. It looks like you can but I added the $0 UAL part.

The owner's contention is synonymous to certifying no unfunded vested benefits to the PBGC because assets exceed the present value of guaranteed benefits (but not vested benefits). Similary, why not ignore the "accrual" component of the PBGC variable rate premium under the alternative calculation method when benefits are frozen. Unfortunately, our path is littered with rules that don't make sense in application but nonetheless must be followed. Sorry.

Agree with Mr. Preston but note a few generally easy-to-jump-through hoops that must be satisfied. See DOL Reg. 2520.104-46.

From CCH Pension and Employee Benefits, Paragraph 11,700, Act Sec. 1114(b)(7) which modifies 401(a)(4) is effective for tax years beginning after 12/31/1988. Hope this helps.

If you use an annual factor to determine the 415 limit, just to be safe you may wish to ensure your plan provides for an election of annual payments.

The attached Rev. Rule 77-2 is clear about this situation. It does not say use common sense and act in a reasonable manner. It simply states that if the freeze amendment is adopted as of the valuation date, you must prorate costs and if the freeze amendment is adopted after the valuation date, you may prorate costs or optionally defer recognition until the subsequent Plan Year. IRS_Rev._Rul._77_2.PDF

So, question arises what is professional responsibility as EA to plan participants if client intentionally (how can you tell) delays providing information so that certification is untimely and lump sum payouts are restricted? I still have a couple January 1 valuations that will not be completed until after September 15 deadline for contributing for 2006. The April 1 certification date was most certainly lobbied for by someone who had no concept of how the world operates. The real question, which depends upon staffing, work load, and the date of the EA meeting, how soon after December 31 must a client provide you information to ensure you make the April 1 certification? For some Plans, we don't get asset statements until 5-6 weeks after the close of the Plan Year. Does anyone know in what manner and form EAs must make the certification? I wonder if the form will be provided by April 1? The only work I'm counting on having completed by April 1 is my 69 page digest of the 133 page proposed reg.

Rae, thank you. (1) From where did this understanding come? Is there a printed source?: "It is my understanding that if an outside party (e.g. a TPA) uploads a filing onto the PBGC's website, that party is only certifying that they are authorized by the plan administrator to submit the filing. The actual plan administrator is still the one who actually certifies (on the paper copy of the filing) that the information is correct." The PBGC instructions define the "Plan Administrator" as: "a. the person specifically so designated by the terms of the instrument under which the plan is operated; or b. if an administrator is not so designated, the plan sponsor." (2) What paper copy? If you file electronically, there is no paper copy. PBGC premium payment Instruction books do not contain forms.

To file the PBGC forms electronically, it appears that either (a) the Plan Administrator must give his electronic authorization or (b) the File Coordinator must assume the Plan Administrator role. I have a number of clients who if a gun were held to their head could not handle the "digital signing" as Plan Administrator. Consequently, the viable alternative is for me to submit the form. However, I surmise that doing so would place me in the role of Plan Administrator which takes on a role that I eschew. Consequently, it would seem that there should be some sort of waiver I should get the client to execute to permit me to file the form without assuming the responsibility (and liability) of Plan Administrator. Has anyone crossed this path or am I concerned about woodpeckers in the woodpile?

I have yet to find a client who can issue a timely suspension of benefits notice, let alone administer the provision correctly. Just remember, the SPD must explain in easy to understand English how this provision would operate. Bifurcation is an interesting word -- no one understands what it means; likewise, no one will understand a bifurcated process. Can't help thinking you're looking for trouble.

There will be corrective lens for 3-eyed fish before that happens!!!!!!!!!!!

The PBGC premium payment process can be completed without an actuarial certification in most circumstances if the alternate variable premium calculation method is used. In such case, I wouldn't feel obligated to provde this service unless it was according to the engagement agreement included in the fees the client has already paid.

Not sure whether or not you are legally required to do so, and will not research this. HOWEVER The client has paid you for completing the actuarial valuation. If you refuse to prepare the Schedule B -- even though you may have requested payment and they refuse -- the client would be required to obtain and pay for a replacement actuarial valuation for another actuary to certify the schedule B. Depending upon the circumstances, there may not be time to do so, and so the client would be put in a late-filing position and be subjected to penalties and interest. Your next correspondence may be from the former client's attorney. I would suggest a 4 step approach: (1) Look to your engagement agreement; (2) Check with your E&O carrier; (3) Check with your legal counsel; and (4) Ignore (1), (2), and (3) whatever the findings and prepare the Schedule B. With software, it takes hardly any time. In short, ignore whatever ill feelings you may have and prepare the $%#!*)^ Schedule B; else, you're looking for trouble.

In Flosfur's step 1, isn't the accrued benefit the formula benefit as limited by Sec 415? So, for example, if a Plan provided a straight life annuity at a Normal Retirement Age of 55 and the Participant had six years of participation and the Plan actuarial equivalence was 94GAR, 5%, then wouldn't the accrued benefit be limited to: 180,000 x [a62 / 1.05^7 / a55] x 6/10 Assumming this exceeded the formula accrued benefit, then this is would be the benefit used to determine the lump sum. Any comments?

They have more important issues to fret over than floor offset plans, such as whether or not to use generational mortality tables for one-person plans!

These rules generally will be satisfied if appears to state a condition of satisfaction but not necessarily imply a condition of dissatisfaction.

Unless the PS plan money is invested by a trustee, you would be giving participants a "risk free" investment by the floor plan design. Is there some rationale to offering participant's investment discretion that is being overlooked?

Wouldn't it be cleaner to set up the profit sharing plan with everyone getting 5% in their "A" account and only some getting the additional 3% in their "B" account. Then, the DB Plan would be written to offset only by the "A" account? Otherwise, it could become messy, in particular if someday the 5% or 8% rates were modified.

I'm out of town and don't have the reg in front of me (i.e., I'm copping out), but wouldn't the maximum benefit be the lesser of the benefits determined using (a) the plan rates (pre and post) or (b) 5%?

Is the situation such that you can remove the provision from the plan, or at least modify the provision to apply only to shareholders, and go for a determination letter? For example, is the Plan sponsor a not-for-profit? You may be able to argue that the provision is not discriminatory since you may not be talking about owner employees.

"An honest man is the noblest work of God" -- Alexander Pope Actually, these "grists" appear to be for Mercer clients primarily. However, if you call Mercer, they may be willing to include you as a "friend."

Carol, thank you for taking me down memory lane when life was not plagued with a morass of predominantly irrational laws and a brick of Velveeta cost $1.19. As I understand, each year Effen computed the funding standard account entries in accordance with the Plan, participant data, actuarial assumptions, and actuarial cost method -- just like with any other plan. The credits to the Plan included a credit balance which offset the charges. Since the deficit reduction contribution did not appy, minimum funding standards appear to have been satisfied. Certainly, there would be no concern if the Plan had lots of assets but credits exceeded the charges and no contribution was made. Under pre-PPA2006 law there is no requirement that small Plans maintain a certain funding level. This is one of those situations that at first doesn't feel good and yet there appear to be no violations.

Not that this is your question, but you may want to check IRS Reg. 1.401(a)(26)-3© because the Plan will have to pass 401(a)(26) in respect to its prior benefit structure (which your plan may or may not do). I.e., the IRS doesn't want a plan to stay frozen forever. This is in the regs. only and not in the code. Surprise!

Though this is a payment to a party-in-interest, apparently the DOL allows it so long a (preferably written) agreement exists to do so. It is cautioned not to let too much time pass between the employer's receipt of the 3rd party invoice and the Plan's reimbursement. Never having done this, I have no thoughts on how you would record this payment on Schedules H and C.

It is distressing that the regs speak of the industry and not the facts and circumstances of the situation. One interpretation would be that industry refers to the North American Industry Classification System -- i.e., the 6 digit code. It seems that frequently you have to struggle to classify a business (e.g., how would you classify "pooper scooper" service). It looks like normal retirement ages 55 to 61 might be a wink whereas under 55 requires a demonstration. One decision seems clear: Unless your adopting age 62 or later as NRA, it's best to obtain a "D" letter in respect of the amendment. "Typical retirement age" is an interesting notion. Suppose an industry (e.g., anesthesiology) publishes retirement information and it fits a bell curve with 45-50 and 65-70 being the head and tail and the mean being 57. So is the typical retirement age 57 so that normal retirement age must be no earlier than 57? You could contrive an example where 1/2 leave at age 60 and 1/2 at 65. So are both 60 and 65 typical or is age 62 typical? This is simply another example of loose drafting creating more issues and diverting the IRS's attention from the critical issue of addressing PPA2006. This never would have happened during the IRA Cohen regime.