mwyatt

Perhaps (and I say this with my tongue firmly in cheek) it can be found next to the model notice that the DOL was supposed to provide last August for DC plans. Anyone seen that one yet?

Mike, I'll admit that I've attempted to read through the morass that is the Technical Corrections Bill, and find it particularly fiendish to understand the context at times. Do you, or anyone else out there more versed in parsing edits out of context, see anything in either the House or Senate bills dealing with the extension of the Cushion Amount to cover the Target Normal Cost also?

How's that working out for you folks now? Yes, you can invest in real estate. Of course, you can't leverage your investment (which is really how you make money in real estate), nor do you get to deduct your expenses, nor do you get capital gains treatment on your gains. So think before you jump at a seminar brochure...

One other point on the substitution of the (unisex) 417 mortality tables for post-retirement v. sex distinct if you're contemplating lump sum payments. If you stick w/ the regular sex distinct table and have a predominately male population (or 100% in a small plan), going to be underfunded at the end due to the approximate 3 year setback; or in the situation of a one-female maxed out plan, calling for required contributions under IRC 430 that are in excess of what can be recouped due to the age set forward. One "silver lining" of this market collapse: has taken a few overfunded plans I had in the last year out of that situation.

Also wonder about that point. Conceptually, what the segment rates are trying to get at is the yield curve reflecting current interest rates paid on bonds with varying levels of maturity. Hence, for example, the current rate 30 years out isn't a reflection of what the short term rate would be 30 years from now, rather what a 30-year bond right now would be crediting. Given that in the lump sum world, you're trying to model what would be in effect at retirement, I wouldn't think that using the 3rd segment rate for someone with 20 or more years out is an accurate guess as to what you would be looking at that time. Not sure if I'm explaining this thinking too clearly, but I'd be more inclined to your second interpretation than the first (using 3rd segment rate for lump sums 20 or more years down the road to determine the amount of lump sum payout).

Bump, these are some good questions (albeit with no real guidance, especially the supercedence of 436 over the early termination restrictions). Anyone?

Know in a prior thread that someone (think Mike Preston) had alluded that the Technical Corrections Bill was possibly going to fix the problem w/ the cushion amount not applying to the Target Normal Cost, only the Funding Target. Anyone have any update or know of source of this observation? Have been holding off on any 2008 valuations until this is fixed/not fixed, as obviously has a significant impact on maximum funding levels.

We've pulled back on purchasing anything w/ Vista for the last year due to concerns arising from our pension software vendors (let's face it: we're in a pretty small niche world here - Relius/Datair et al have fewer licenses sold per year than the big boys do in a day). We've fixed existing or turned to a local white box shop rather than buying anything precanned w/ Vista. That being said, MS did provide the MS Virtual Machine software for free. I did have a post earlier on this program (which also runs on XP) MS Virtual machine Problem w/ running older DOS programs on Vista/XP machines is some of them will want to load specific drivers in CONFIG.SYS or AUTOEXEC.BAT (remember those) which don't exist. I had an old copy of Windows 98 lying around and w/ the Virtual Machine was able to access an old pension system for archival data that we couldn't load on XP either. That being said, in our little world w/ little software vendors, make sure that you check w/ their requirements before proceeding w/ Vista to avoid problems. Anyone else not surprised that MS, Intel, AMD et al sucking wind over the last year due to hesitant business new purchases?

That would be great Mike. Seemed like a bizarre oversight to me in the first place.

Was kind of thinking about this approach wrt the "cushion amount". Cushion amount as far as I can tell is only based on the accrual as of beginning of year for 50%, future compensation increases et al. Current accrual in plan year "is what it is" (which doesn't make a heckuva lot of sense when you look at how accruals increase in future years).

PBGC works in odd ways sometimes. I remember a plan that terminated in the TRA '86 restatement period in 1993. Prior doc had PBGC rates floating monthly, while the GUST restatement had them fixed for the plan year. PBGC on audit (there were other problems - a takeover case) stated that we had to use the monthly rates instead of fixed for the year rate. Nonsensical thing was that participants in this situation would have received higher lump sums under the fixed rate scenario rather than the rate at distribution. Oh well... Is PBGC mandating 417 calced using 30-year rates and the 94GAR (RP 2001-62) table for these calcs. Not inconceivable given the improved 2008 mortality table and dampening of impact of 3 tiered rates, that PPA would provide a higher lump sum.

SoCal, what software package are you using? Current software we use does fine w/ the computation of ABO, PBO, etc., just looking for something to handle the new calculations. Thanks for any input.

Way back in the day, we had the worksheets from Mercer-Meidinger to guide us in the preparation of the FAS 87/88 calculations. Anyone know of any updated worksheets reflecting the FAS 158 changes?

My understanding of the upper cap on the maximum deductible limit is the greater of: Funding Target (representing the BOY accrued benefit valued using the 430 assumptions), plus Target Normal Cost (representing amount of benefit accruing during the year using 430 assumptions), plus the "Cushion Amount", equal to 50% of Funding Target plus amount of increase in Funding Target if calculated using projected, rather than current, average salary; all reduced by fair value of assets, and the 430 minimum deductible contribution. Am I correct that if I have a new plan in 2008 w/ no past service benefit, that the minimum and maximum would be identical (since cushion amount does not reference the benefit accruing during the year). This seems a little anomolous to me. What if I had a benefit formula wherein I had a past service benefit equal to 1/10th of the 415 limit which immediately credits on effective date. So Funding Target equals 1/10th of limit, Target Normal Cost is $0. So in effect I could have a maximum deductible contribution equal to 150% of the Funding Target. Contrast this with a benefit that just provides 1/10th of 415 limit during 1st year. Now my maximum deductible is just the Target Normal Cost (which equals the Funding Target). Do I have this straight? Have seen the recent 430 proposed regs released on 12/31/2007, but don't see anything out yet on 404 based on the IRS PPA website dealing with the 404 calc (other than RR 2007-67). Anyone else know of guidance on the max deductible contribution in the works?

It is an open question. I remember back in 1997 we made a concerted effort to obtain Trust EINs for our clients. Most of our clients are small, with sporadic distribution patterns. What we found several years down the road when they reported a distribution using the Trust EIN is that it would bounce back from the IRS. Turns out that the IRS was unilaterally cancelling out numbers that they thought were dormant (not sure why, as reusing numbers is a freaking nightmare). Anyone else ever had that experience?

Presuming that 1) Accruals were subject to a hard freeze (i.e., no adjustments due to comp increases), and 2) When plan terminated in 2007 and paid out, no excess assets, then I would say they were eligible for the deductible IRA contribution for 2007. Fact that employer had to make additional contributions to plan post 2005 is not surprising as many frozen plans were underfunded (hence one reason for freezing). Contribution by employer not adding anything to what participant will receive.

Not trying at all to get more, just concerned about the prior plan and the offset. Given the ramifications of violating 415, I'm leaning heavily at "worst casing" this whole scenario w/o ruining the holidays. As far as figuring out the prior plan and its history, was thinking to put my End of the DB World hat back on and think out what possible accrued benefit he could have had w/ that payout in the TEFRA/TRA world and probable lump sum payouts at that time. My natural inclination is to be as negative as possible as to the prior plan (w/ the only data point being the rollover amount which is a known quantity). My real point is to confirm that I can add the prior plan's years of participation into the reduction on the dollar limit. Would like to keep the funded benefit at the dollar limit prorated by 5, as that contribution is more than satisfactory to the client. Just wanted to make sure that the extra years less the offset is the proper approach for the ultimate limit.

Thanks for the input Doug, although here the only piece of data that I'm being provided is the lump sum received (no info on what the accrued benefit amount was or the NRD of the prior plan). What I was also focusing on was the fact that under the original scenario, I was contemplating only 5 Years of Participation between entry date and retirement date in the new plan, hence the 5/10 proration of the dollar limitation. However, with the old plan being in existence that the years of participation in the old plan could be added to the 5 Years in the new plan for proration, then offset of resulting max ben by prior distribution. Appears that we actually would end up w/ a larger, not smaller, max benefit than originally contemplated (although how I can accurately determine the exact amount of offset is a little confusing, given sketchy info at this point on the prior plan).

Potentail client contacted us interested in establishing a one-man DB plan. Currently age 60, would run for five years w/ NRA of age 65. Salary and past salary well over max limits, more than 10 Years of past service. Originally ran a proposal w/ the following 415 limits: Lesser of $180,000 x 5/10 participation, $225,000 High 3 limit (over 10 Yos) so no proration. Client was interested; in further discussions as to prior plans etc., admitted that had a DB plan in the past back in the 80s. No hope of locating specifics other than a LS payout of $140k at the end of '88. Went through the 415 final regs for guidance (multiple annuity starting dates). W/O guidance, considered figuring benefit equivalent of payout using 94GAR @ 5.5%, payable at age 65 for offset. Also checked against 1983 IAM @ 5.0% (common assumptions during 80s). Seemed that 94GAR @ 5.5% provided higher offset, so would go with that amount. Benefit came out to a little under $3000/mo at age 65. However, just realized now that there was participation under prior plan. Client said plan had been in effect for 5 years in past. So now think that the limit should be: Lesser of $180,000 x 10/10 - $3,000 x 12 offset, and $225,000 - $3,000 x 12 offset, which actually results in a higher allowable benefit than originally contemplated under initial proposal. Any comments or anything I'm missing? Have basically no hope of getting prior plan document, but I thought "worst casing" the offset seemed to be in line with the final 415 regs (although I know that the MASD stuff got pulled).

Andy, I'm thinking of continuing my current methodology as well for the client, at least as a benchmark for a reasonable contribution figure. Hard to forget that not so long ago, the IRS proclaimed that Unit Credit for a salary-based plan was not a reasonable funding method.

When you go the EA meeting website from the e-mail sent out, they also link over to the JBEA site, with the same link to the obsolete form. My only thought here is the proposed fee increase is holding this up (I mean, how long would it take to edit a PDF file to create the new form and slap it on the website)?

Andy, they did mention this at the ASPPA meeting at one of the sessions. That was the extent of the notification as far as I know. Not sure why they're prominently featuring the obsolete renewal notice on their website; think they could at least put some notice up (I'll bet for sure they get a bunch of the old forms w/ crossouts for processing). Suppose the proposed fee increase probably had something to do w/ the lateness of the revised form.

Went over to the JBEAs website to get the reenrollment form, and discovered that the Form 5434-A for download still references the prior cycle. Sent an e-mail to the board and they had the following response: The new form is not ready yet. It will be posted on the website in January. Renewal forms for the upcoming renewal cycle will not be mailed. Please do not use the the renewal form currently on the website. Heads up that they will not be mailing the forms out for renewal this time around; must download them yourself.

Also, consider that an amendment away from a Year of Service to 6 months of service effectively brings in all part-timers, if that is a concern.

Thanks SoCal, but I know about the 417 mortality tables (or maybe the consequence of 9 consecutive days of packing and moving w/ 2 small children and a puppy are getting to my head). Was really inquiring about the male and female tables to be used for 2008 funding calculations.