tymesup

Just to make sure I understand this, is the 25,000 deposited on 7/1/08 discounted back to 1/1/08 and then brought forward to 1/1/09, both at the effective rate of 6.00%? Same answer of 25,739, but handles the general case.

We do them. For the small clients, it's a dog. If they aren't done, though, it's an even bigger dog.

2000-40, Section 6 provides "Approval … does not apply to … the following changes … the val date is being changed and the val date was changed in any of the four preceding plan years”. I don't think this solves the problem.

Don't forget to mention that while the maximum lump sum under 415 can be calculated using 5.5%, the final lump sum can not be. If interest rates go up, the plan may already be overfunded.

One solution to this particular pothole would be to prohibit participants from dying.

Suppose a small plan had a beginning of year valuation date for calendar year 2007. The 12/31/07 proposed regs permit a change to an end of year val date for 2008. Can the plan change the val date back to BOY for 2009? 2010? Thanks for any help.

A late thought on the notice for missed quarterlies. The minimum contribution for the current plan year is not determined until the Schedule B/SB is filed, which can be as late as 9 1/2 months after the end of the plan year. Since the quarterly contribution depends on the minimum contribution, it also can't be determined until 9 1/2 months elapse. Since the notice depends on the quarterly contribution, it can't be issued until 9 1/2 months elapse. Heck, by the time the first quarterly for the current plan year rolls around, the prior year Schedule S/SB hasn't necessarily been filed, either. The alternative is to issue a notice which says "We may have missed the quarterly contribution or we may not have missed it. In either case, while we know the maximum it might be [if applicable], we don't know what it is yet, but we're required to keep you informed. Have a nice day."

This is similar to top-heavy language being required, even if it will never apply to a large plan. Even if you were willing to contest this with the feds for this particular plan, are you willing to take the chance you will leave this out of another plan where it does apply? I was hoping you'd post here someday.

If it's a healthy employer and the plan is a long-term financial arrangement, then everyone should get everything that's been promised to them. Not paying the first rats means not honoring the commitment made to them. Further, not paying the first rats may make other rats more inclined to get off the ship, making the problem worse. Nope, we still face a dilemma.

There's a thread at COPA, they don't know anything official, either. Holland supposedly answered this at the COPA conference - use the Target Normal Cost. I don't see it in the 12/31/07 proposed regs on Measurement of Assets and Liabilities.

Suppose a small plan began in 2008. No contributions were made during 2008. The end of year valuation has a Target Normal Cost, there are no assets, the TNC is deductible. The employer makes the deposit 1/1/09 and all is well. Now suppose the employer jumps the gun and makes the deposit on 12/31/08. There are assets. If the un-deducted contributions are not excluded, then there is no deductible contribution, an absurd result. (The minimum under 430 would override for this example, but it shouldn't be too hard to come up with a scenario where 430 doesn't help.) Until we get new 404 regs or the old ones are discarded, it must be reasonable to rely on the old ones. Happy New Year

Perhaps there is a date somewhere in the year that provides the desired deduction without changing the AFTAP range. Good luck administering a middle of the year valuation.

I mentioned the FDL because of the timing issue. They won't get one before 4/1/09, let alone 12/31/08.

Perhaps this is covered in the PBGC instructions and refiling the 5500 is unnecessary? Enjoying the holiday weekend, too?

I was under the impression this wasn't necessary, but can't find it in WRERA. However, if you don't redo, is any harm done? Your minimum will be higher than necessary, your Carryover and Prefunding Balances are lower than necessary, but who has any incentive to care? I suppose you can get into trouble with the combined plan limit if you need the minimum to be deductible. I guess we're fortunate that we're so far behind that we won't have to redo too many valuations.

LB is going to pay a ton of PBGC variable premium unless he sees the light. That will pay for a lot of fertilizer.

We've been allocating contributions by Target Normal +/- (Amortization and Cushion), not that there's a right answer. The owner gets a bigger total deduction if the employee contribution is smaller, unless the owner is already maxing out on comp or benefits. Some software will come up with an allocation between earned income, owner deduction and employee deduction on a minimum basis. I would avoid using the maximum contribution based on this allocation, as you are funding for a compensation/benefit that may not exist.

Since this employee worked for 8 years, she is probably vested already. A partial termination could only hurt her, by increasing the liabilities. If 436 already kicked in, how badly is this plan funded after the 2008 meltdown? The original post attributed the new law to the Senate. Let's give props to the House and the President, too.

David, the 2 person plan wouldn't require bonding but even if it did, only 10% or 100,000. By bonding, do you mean the company may have obtained some other umbrella coverage that would indemnify them in the event of malfeasance? I don't think a fidelity bond covers this type of loss, unless Madoff was a fiduciary in addition to an asset manager: http://symetra.com/client/media/LPS6683.pdf

Our system doesn't provide for different salary scales for TNC and cushion. I think you would have to have the same scale for the first year. I suppose we could have a salary scale array, but that just raises other issues. Are salaries really geometric? Aren't they also a function of age? Service? Compensation? Ownership? Demographic group? Comp history?

I think the benefit for the TNC and the cushion would be limited to the 415 limit of 18,500.

Your sample notice doesn't cover plans with AFTAP's in the following ranges: 59-60% 79-80% 100+%

The sponsor does not want the security blanket of a favorable determination letter?

Rev Proc 2000-40 gave automatic approval to change to a BOY val, under 412©(5)(A). Proposed reg 1.430(g)-1(b)(2)(iv) says the val date is part of the funding method and may only be changed with the consent of the Commissioner. Suppose a small plan was always EOY and wanted to change to BOY for 2009. Does the proposed reg trump the Rev Proc? Suppose a small plan was always BOY and changed to EOY for 2008 pursuant to proposed reg 1.430(g)-1(f)(4). Assuming the Rev Proc is still viable, or the reg is ignored because it is only proposed, does the 2008 change prevent subsequent changes for five years?

Perhaps small plans should cash out at 0%, so there is no 417(e) windfall to rank and file employees when interest rates drop. This wouldn't work for plans with owners near the 415 limits, though.