tymesup

If it's old DB money, you've got Code Section 415 issues, as the old and the new combined can't exceed the limitations. Since the old money was paid in the past and the new money hasn't been paid yet, you've got multiple annuity starting dates. There are several schools of thought on how to do the calculations, but all agree it's a mess.

Congratulations, illegitamati non carborundum.

I dropped him a line.

We have to calculate the minimum required contribution. As a practical matter, we also have to calculate the maximum deductible contribution. There is no reason you can't do a third calculation for a recommended contribution. If you wanted to use individual aggregate and the 30 year treasury rate, nobody's stopping you, so long as it falls between the minimum and the maximum. Note that this third calculation could project 415 and 401(a)(17) limits.

Why not simply terminate the plan? To keep it open on the if-come that the client may later want to reopen it will require the client to continue to bear legal and actuarial costs without the benefit of significant current tax deduction. Is there any other reason why the plan needs to be maintained? One possible reason to keep the plan around is to avoid multiple annuity starting dates for 415 purposes. Dante is chuckling, somewhere. Maybe this employee won't be employed by the end of the year.

Pre-PPA 404 did not address interest adjustments. 1.404(a)-14(f)(3) provided for interest to the earlier of the end of the plan year or fiscal year. Post-PPA 404 still does not address interest adjustments and -14 has not been rescinded. Therefore, I would assume interest adjustment is still allowed. However, at the recent ASPPA conference, there were at least two sessions that did not provide for interest adjustment. There was no squealing from the audience. If there is no interest adjustment, then we are left with the anomaly that EOY vals get a bigger deduction than BOY vals. Given the 150% limit, an interest adjustment may be overkill and lead some clients/practitioners into trouble. If one were to add interest, what rate should be used? The effective rate and the first segment are plausible, just for starters. The feds don't seem to be in a hurry to issue guidance. Given some of their interpretations, we may be better off with ambiguity.

Can we look forward to schools of hyperoptical brinesters? Can we cross them with the Barry clan to get superior peripheral vision and better point guards? Would they still taste like chicken?

Would not a third eye for a truly deep-water fish be a waste of resources? For that matter, would it be able to blink or would it need a permanent cover to protect the relatively fragile eyes?

Assuming this isn't old DB money, it won't affect the valuation.

I thought this plan was frozen, per post 1. On a deterministic basis, if you're at 103%, there won't be any future contributions to be reduced. On another board, the notion of puts and calls was suggested for a different situation. It might be appropriate here, to hedge against the likely bad year and subsequent required contribution.

It was a while ago that this came up, so I'm a bit hazy on the details. IIRC, if the disability benefit is the accrued benefit payable immediately, with or without actuarial reduction, with or without immediate vesting, it's an ancillary benefit and not protected. By paying an immediate 60% of pay, on the other hand, which has otherwise not yet been accrued, the plan has created a 60% accrued benefit. It's not clear to me why a death benefit of 100x is OK, but this is not. A plan and consultant tried this. The sponsor liked the notion of self-insuring the disability benefit, but wanted stop-loss insurance in case things got out of hand. The consultant was getting puzzled looks from insurance companies that had never seen this arrangement before. The second lawyer who looked at this said the accrued benefit issue was the problem. The first lawyer who OK'd the design went to the end of the bench and was let go in the off-season.

If the employer wants to pay out this terminated HCE, wouldn't it be cheaper for the employer to terminate the plan (no contribution necessary) than to pony up to 110% (something around than 7% of the Funding Target, less the eventual reversion). Does the terminated HCE have any leverage to force the employer to make the contribution and make the distribution?

The thread had branched off and mentioned guarantees to DC plan participants.

Congratulations on your now overfunded plan. If all your assumptions are realized and the yield curve is correct, the employer just put in money that wasn't necessary.

One thing you do not want to do is put a disability benefit (60% of pay, for instance) inside a defined benefit plan. It creates an immediate accrued benefit of 60% of pay (although 415 might limit some of the damage). A guy I knew had a friend who overheard a couple of guys talking about a fellow who remembered someone who did this.

Yes, indeedy. I am a bummer. Paradoxically, your avatar appears quite cheerful.

There are vehicles that will guarantee a minimum simple return, over a long period of time. I don't know whether these are available to qualified plans. GICs and the successor Stable Value funds guarantee a return. Before 404( c ) hit the radar, participants had the option of suing sponsors for not making the best possible investment. If only lawyers were able to advertise back then, this tragedy wouldn't have occurred.

Note that a participant can be vested without a benefit liability. For example, a participant whose gross DB accrued benefit is completely offset by a profit sharing account balance would not be counted for flat premium purposes.

The plan may have a discrimination issue here. This ought to be considered before A) filing for a favorable determination letter or B) risking a plan audit. There may not be much that can be done, now. On the plus side, the insurance agent got some commissions when the policy was sold.

This was my understanding from a few years back. I don't see how you would be compelled to do a complete new valuation in order to make a distribution. The one line I wouldn't cross would be to use different methods for different participants for the same plan. Perhaps 110% was used to recognize that calculations would generally not be current. This does raise the issue that the sponsor is encouraged to overfund the plan and may incur a reversion tax later on. For example, suppose the plan is frozen and a restricted ee leaves. If the sponsor ponies up to get to 110%, the excess may never be used up.

Since the plan has to go to the PBGC, it sounds like there are other employees besides the owner. They have insurance, also? The option to swap the policies has been offered to them?

A nose count of 100 triggers the "liquidity" contribution, a different animal than the "quarterly" contribution, although from the same genus/genius.

OK, Scylla.

Which is not to say that it's wise to fund for a benefit that can't be paid.

yes, it's 9/30