mwyatt

Thanks for your replies. Owner would like to grab all of the excess assets (the son will get this eventually when he passes). There were never any NHCEs in the Plan, but is covered by PBGC so will be doing the notification. Will have written memorandum prepared on excess assets stating allocation basis.

Have a Cash Balance Plan terminating, projected to have small amount of excess assets at time of distribution (no 415 issues, etc.). The plan document just specifies that excess assets will be distributed "in a nondiscriminatory manner". In this situation, the Plan only covers the 100% Owner and his son, so both are HCEs and Key Employees. Typically have either allocated on the basis for a regular DB Plan based on present value of 1% of Average Salary times years of participation (maximum 5); in Cash Balance scenario have done same manner where say take 1% of compensation in last 5 years (so hypothetical additional Cash Balance) and allocated on that basis. However, the language "in a nondiscriminatory manner" where only dealing with HCEs looks like we could do anything we wanted and comply, so say ALL excess assets could go the Owner, or ALL to the son, or however the client wanted to apportion. Any thoughts?

Thanks for the recommendation, will check that out.

First, was sorry to hear of Mike Preston's passing. I had been using his PPA Present Values software for checking purposes for a number of years, and with his passing is no longer supported for interest and mortality updates. Any other standalone software alternatives that are recommended?

Yes, ASC has 4.96%, Mike Preston's PPA Pro has 4.87%.

Confused here, IRS notices 2023-66, -72, -76, and 2024-04 showed 2024 ARPA Segment rates as 4.75%, 4.87%, and 5.59%. Now IR Notice 2024-21 has 2024 ARPA Segment rates as 4.75%, 4.96% (instead of 4.87%), and 5.59%. Note that they show the January 2024 segment rates as 4.37%, 4.96%, and 4.95%. Did just leave a voice message with the IRS to figure out if they have a typo on 2024-21. Holding off on doing 2024 valuations for now.

Just took a look at IRN 2023-73 in order to input the new Qx factors into Excel, and notice this year that unlike all prior years, the Qx factors are to 5, not 6, decimal places? Am I missing something here? IR Notice 2023-73 2024 Mortality Tables.pdf

Noted that DOL/IRS have eliminated filing a form 5500EZ as Form 5500-SF (One Man) electronically. Going forward you can now file Form 5500EZ electronically. Just checked ASC/DGEM this morning and see that one of the first questions on EZ screen is whether efiling or paper. That is all well and good, but have filed several final 5500-SF (One Man) filings that had short final plan years in 2020 due to termination already (filed using 2019 series of forms as usual for short final plan years). Question is what to do about those filings given this late sea change in eliminating 5500-SF (One Man)?

Just received email from CCA on 2021 EA meeting. Something seems to be afoot between AAA and CCA. "Due to current uncertainty related to the availability of the Marriott Wardman Park as well as uncertainty about the requirements that Washington DC will impose on large gatherings, the format and specific dates of CCA's Enrolled Actuaries Conference have not yet been determined. The CCA and the American Academy of Actuaries (Academy) have had fundamental differences that we have been unable to resolve regarding the manner in which the Enrolled Actuaries Meeting should be run in the future. As a result, there will no longer be a jointly sponsored Enrolled Actuaries Meeting, and we thank the Academy for their partnership with the CCA in the past."

Actually since everyone has presumably been paid out, unless you want your client having to deal with a plethora of inquires down the road your final 8955-SSA should be reporting under Code D any previously reported Code A's due a benefit.

Not sure if others have run across this recently, but have had a couple clients receiving letters acknowledging that the Comprehensive Premium Filing has been transmitted, but that their records indicate that a premium balance is owed. In most recent case, we uploaded XML file 5/31/2018 and sent in paper check with voucher on the same date. Letter is dated 6/10/2018, but when I look on Account History premium has been credited (with 5/31/2018 date, so can't actually tell when posted). Have to waste time dealing with client's obvious concern that premium hasn't been received, when the PBGC system shows is all settled. I can see sending this letter out if a month has transpired, but 10 days seems to be generating needless worry.

Calendar year client. Let's say profit sharing contribution for 2017 is $190,000 which they will deposit to the Plan in 2018. Similar deposit to be made for the 2018 plan year. Issue is that while they want to make the actual deposit of $190,000 for 2017, they do NOT want to deduct on the 2017 corporate tax return, but rather deduct the 2017 and 2018 on the 2018 return. They did put the 2017 corporate return on extension, so the thinking of they made it within the ordinary time but filed the return before depositing doesn't work. What are the issues here (would combined 2017 and 2018 amounts be subject to the 2018 404 25% limit solely on 2018 compensation for example).

Had an eagle-eyed client bring this to my attention, which was issued today. http://www.irs.gov/pub/irs-drop/n-15-53.pdf which IRS issued in IRS GuideWire dated today (inexplicably the 7/31/2015 IRS Employee Plan News doesn't have this in the issue). Entered 417 rates for 2016 and just ran and looks like fairly trivial impact. From cursory reading of 2015-53, looks like punting the generational tables (and presumably big impact on liabilities) to 2017 (post-election).

Does at least look like the IRS will have these questions incorporated in the 5500/5500-SF (hopefully anyways) looking at language on the IRS page showing the 5500-SUP http://www.irs.gov/Retirement-Plans/Draft-Paper-Form-5500-SUP-for-Plan-Year-2015 From the page: "The IRS anticipates that the Form 5500-SUP will contain the same IRS compliance questions that the IRS intends to add to the Form 5500 and the Form 5500-SF. The Form 5500-SUP will give filers who are not required to file electronically the option to answer these questions on paper." From a real life scenario though, would have to really have a reason to not put these on the 5500 though since the first thing on the 5500-SUP is the EFAST ACK code (which means you would have to e-file, then prepare the 5500-SUP, get to the client for signature, and then mail to the IRS - good luck with that on October 14th). As an aside though, still trying to figure out how many plan sponsors (not TPAs) file over 250 5500 filings annually?

Yes, went through every response on our PDF version and also what was shown on the EFAST search site. Nothing that would indicate that anything but first year for 2013. Given past track record with IRS sending out bogus notices on "late" non-late filings etc., wondering if this is yet another glitchy fishing expedition on the part of the IRS with bad database queries. Interested to see if anyone else starts getting any of these clearly erroneous notices.

Not sure how this one happened, but have a new plan established in 2013. Have already filed the 2013 initial 5500-SF filing, see no errors in filing (checked as initial filing, effective date 1/1/2013, assets beginning of year all $0). Plan sponsor received letter from IRS asking for information on the 2012 filing for plan #002 (number assigned to new plan). Did check to see on DOL EFAST search to see if plan sponsor had some prior plan 002, don't see any prior 002 filings (our firm has had plan 001 forever, 001 2012 filing in place). Wrote response to IRS to check their records as erroneous notice. Given past experience with IRS sending out wrong notices on plan filings, just wanted to put this one out there in case anyone else starts seeing bogus notices on missing filings for years prior to the establishment of the plan.

Don't deal too much with union plans recently, but looking at a plan right now and just wanted to brush up on one point under PPA funding. Plan is collectively bargained with a single employer (not a multiemployer plan). Benefits are dollar based; in this situation looks like scheduled rate improvements only impact future service (so any scheduled increases aren't affecting prior accruals, only future accruals). Under pre-PPA funding, when a contract was settled and we were funding on projected benefits, for 412 and 404 we recognized the full increase under the life of the contract in the year of signing (so if a contract had the benefit multiple increasing say a dollar a year for 5 years, we would establish an amendment amortization base with the highest multiple covered under the contract, rather than a year by year increase). For Current Liability purposes would just value the benefit in effect at the valuation date. Under PPA, not really seeing anything that covers this situation (and now that I think about it, since PPA is pure unit credit, maybe why it doesn't). Given that in this situation where bargained benefit increases here only affect future, not accrued to date, benefits, Funding Target isn't affected in any event here. The improvements in benefits paid would only affect current and future Target Normal Costs under the Plan so maybe nothing to deal with under PPA? For 404 and cushions, again the Funding Target isn't going anywhere in the future either since no history of increasing past service benefits; any improvements are in the Target Normal Cost, so no cushion for future benefit increases either (although given this is a Union plan, maximum deductible contribution is probably an academic exercise anyways). Anything I'm missing?

Yes, in both states (MA and NC) mandatory withholding if Federal tax withholding is required. Here's a good summary from Mass Mutual I found on the web: http://wwwrs.massmutual.com/retire/pdffolder/forms/rs07262.pdf Of course it doesn't answer the question on who gets the tax revenue. I know in this situation MA would want the money since he was a resident for part of 2013 and more importantly the benefits were earned while a MA resident working for a MA company.

Employee was a participant in a pension plan located in Massachusetts and also was a resident of Mass. Participant terminated employment in March of 2013 and has moved to North Carolina (so was a resident of MA beginning of year, now resident of NC). Has requested payment of his lump sum (not rolling over). Question is whose state tax do we withhold: MA (where he worked and where the benefit was derived from) or NC (where he is now a current resident)?

Although the owner may consider himself retired, believe the "common sense" approach of the IRS is that in a one-person plan, the owner is essentially active until the plan terminates, regardless of how he chooses to characterize himself. Also, if he truly is retired, how is he funding the plan (must be some income being generated by the plan sponsor to deduct against - otherwise your guy is just converting after tax money into pre tax which doesn't make too much sense).

Understood; just wanted to make sure that there isn't a cutback issue on the converted annuity benefit year to year.

So no "protection" on the amount of annuity converted benefit then (which guess makes sense since in a traditional DB plan, nothing protected year by year when 417 rates ultimately return to normal rates and lump sums actually decrease in the future). And for determination of Funding Target, nothing inherently wrong in readjusting the prior year accrual derived from the beginning account balance to reflect current year interest schema.

Thanks for the response. So in essence, the protected benefit really is the hypothetical account balance; there really is nothing protected about the conversion to SLA at any given point?

Have a takeover cash balance pension plan where actuarial equivalence is defined as 417 mortality and interest rates; interest crediting rate is defined as third segment rate for September of plan year (calendar year plan). As of 12/31/2011, have my end of year hypothetical account balance; this is converted to a monthly benefit for funding using the interest crediting rate for 2011 and 2011 417. So I get a monthly benefit as of 12/31/2011 using the 2011 basis. We now come to 2012. As we all know, 417 interest rates have nose dived. When I now compute the accrued benefit from the 12/31/2012 hypothetical balance, I'm now applying the 12/31/2012 417 basis; resulting accrued benefits (as expected) are much lower than 2011 basis due to effective higher annuity purchase rates. If I just stick with the 12/31/2011 prior accrued benefit for funding target, I'm getting trivial target normal cost in relation to allocation; for those with lower allocations, the 12/31/2012 accrued benefit is actually lower than the 12/31/2011 accrued benefit. Approaches for determining FT and TNC? 1) Use numbers as they fall, don't let 12/31/2012 accrued benefit be lower than the 12/31/2011 accrued benefit for determining FT and TNC. Results don't appear to make sense (trivial or no TNC). 2) Use 12/31/2011 accrued benefit for FT; calculate 2012 accrual based on hypothetical allocation alone. Get reasonable TNC, but now my PVAB is higher than the ending account balance, which doesn't appear to make sense either. 3) Recompute the 12/31/2011 accrued benefit based upon 2012 basis before determining FT and TNC. Most plans we have designed have gone with static interest rates for actuarial equivalence (typically 5% pre, 5.5% post with post-retirement mortality only) and a 5% crediting rate. Thanks for any input.

Assuming that the effective date is indeed 12/19/2012 and not 1/1/2012 and a calendar year, there is a far larger problem looming: 415 limit. An effective date of 12/19/2012 and year end of 12/31/2012 gives a 13 day year, so you're operating with a dollar limit of $50,000 * 13 / 366 = $1,766. Oops.