mwyatt

BOY val, prior comp history makes this issue moot.

I have a client that is a sole proprietor w/ a DB plan. Based on the individual aggregate cost method, she had completed funding for IRC 412 purposes by 9/15/2007. She has now come back to me and is wondering if she could put additional funds into the plan for 2006 by her 10/15/2007 filing deadline. Amount she has under consideration would be under the 150% UCL cap. My question is this: clearly these contributions for 412 purposes would be made after the 9/15 deadline so wouldn't show on the 2006 Schedule B (or the EZ); but could she take these deductions for 404 purposes on her 2006 return?

The "teeth gnashing" is due to the fact that before, you completed the form, printed it out, and mailed it to the client for payment. Total time, about 15 minutes and you're done. The "upload" scheme comes about the closest to this type of timing. Importing, then chasing your client down to get them to sign up, talking through the form, etc., adds a fair amount of time to this approach (and around this time of year, when you're busy chasing the usual suspects down, extra time is a luxury).

Yep, you do need the TPA/Actuary to act as filing coordinator. However, in the small plan market trying to get your clients to go through the steps to establish an account is akin to herding cats. I'll take the "liability" (only signing up for signing as actuary and the ability to look at historic records - certainly don't sign up for signing powers) to save boatloads of time.

One nitpick however: you would think that the PBGC's coders could have figured out how to put the EIN, PN, plan year, premium amount, and plan name on the Payment voucher. They at least got the confirm ID on there.

Had been putting this chore off and glad that I ran into this thread before getting too involved. Cranked them all out this afternoon and will mail tomorrow the forms for signing and vouchers. Yes, upload is most definitely the way to go (unless you want to turn what was once a 10 minute chore into an unending travail having your clients set up accounts etc.). Just upload, then send the client the printed form to sign along with the voucher and you're all set w/o wasting a bunch of time (do our clients really want to get involved in all this folderal? and as Andy pointed out, there are still some Luddites out there - not so uncommon when you figure out that small DB plans tend to have older sponsors).

What are the circumstances (ie, plan size, funding level, etc.) WRT the plan in question? Presumably a grossly underfunded plan wouldn't be blithely purchasing retiree annuity contracts.

Technically, a sole prop files an initial extension to 8/15, and then can apply again all the way out to 10/15, so you should be set (but make sure that they file that second extension, which is usually par for the course). Corporations extend out to 9/15. So in essence, since she did file the extension on the personal return, your 5500 isn't late.

Recently established a small DB plan (1 100% owner @ 55, 8 employees, some highly paid, all significantly younger). The reality is that this plan will be in place until the owner reaches age 65 and then be terminated. Definitely would not continue in the future after the owner's retirement. Given small population, not getting involved initially w/ pre-retirement death decrements as death benefit is PVAB and feeling is that death rates would be "false precision" given the small number of participants. However, am thinking of a turnover assumption to reflect the likelihood of plan termination after 10 years. My question is this: for FASB purposes, I'm projecting COLA increase in the salary and 415 limitation to retirement. However, my preliminary numbers, given the fact that many of the younger people are at the limits right now anyway, gives a NPPC twice as high as the regular valuation cost, mainly due to projections to NRD of their salary and 415 limitations. With this approach, the sponsor will be accumulating accrued pension costs each year drastically higher than the actual contributions going into the plan. However, the plan will end in 10 years (if not sooner), where this liability will go poof (to use an actuarial term). Given this situation, what would people think of some sort of turnover assumption being used reflecting the overwhelming probability of the plan not continuing past the owner's expected retirement? Would still reflect future salary and limitation increases over the next 10 years in the PBO and Service Cost, but not beyond that point. Any thoughts?

Just when you finish all of your DC plans by Valentine's Day to satisfy the participant notice requirement, you can then turn to doing all of your vals by April 1 (never mind the fact that contributions made after plan year end now are "alive" for interest purposes, so you literally can't finalize your FSA until all contributions are in for the prior year)... Will note that someone woke up w/ the electronic filing requirement for 5500s recently, which has been pushed off another 3 years. Maybe someone will reflect on the insanity of the timing issues built into PPA. That may be asking too much of politicians though.

But the circular reasoning here is the point. The 30k contribution was probably developed assuming employer paid the expenses. Certainly the "plan" can pay the expenses of operation; of course, that payment should be reflected either by an expense load or a direct addition to the otherwise developed costs of funding. A little different circumstance than a DC plan; if the trust pays those expenses and that isn't built into the model, then assets are that much shorter.

Be interested in this answer, although I bet the correct response after perusing too many contracts to figure out the dreaded "market value adjustment" is an end result around the old adage of heads I win, tails you lose. Actually saw one contract that had been written in such a way that if the underlying rate in the contract was less than market rates of return, that the client got hit (you're talking a short-term investment, and they're paying you less than what is prevalent in the market place, why should you be piled on for poor results; in the freakonomics mode of thinking, one would expect that if you were credited with higher rates than are actually prevailing, you should take a hit for the subsidy). Yet another reason to think about insurance products, then move your head from side to side before picking up a pen. Answer 1 - I'd venture $400k, as the contract didn't terminate (unless the contract is written in such a manner that they nail you for reregistering - stranger things have happened). Answer 2 - $380k. Answer 3 - depends on the contract and what the impact is from the $100k withdrawal. Did the $100k go to the trust and then the IRA, or directly to the participant. Again, look to the terms and length of the contract.

Of course, as previously discussed on these boards in the initial plan year situation, is the non uncommon occurrence where the FSA interest credit on the contribution is larger than the actual earnings of the plan during the year, leading to a negative 412 asset amount (imagine $1,000 being dumped into a plan in December to a checking account)...

Actually Gary the py and fy differ (old insurance agent trick 5/31-5/30).

A little confused here. I take it that your valuation was performed actually as of 4/1/xx, not 3/31/xx+1, with your current liability calculated as of year end using your prior year salary plus SSR (in otherwords, a beginning of year valuation). Unless you have invented a new "hybrid" end of year valuation using salaries for PYE and BOY assets?

Able to change valuation date to beginning of year?

Let's clarify this "earned income" which is being bandied about here, since we have two components that both use these words. If you mean Line 31 Schedule C Income, then the contribution can't exceed this amount. However, if you mean Net Earned Income (which equals Schedule C Income less SET deduction less plan contribution), then contribution could certainly exceed the Net Earned Income.

Looking again at your question, are you asking whether DB cbn can't exceed net earned income (certainly it can), or whether you mean DB cbn exceeds Schedule C Income (which is something different entirely). Assume you are focusing on DB cbn producing negative Net Earned Income. Clarification?

As to your 401k question, I'd use common sense (of course that may completely be the wrong approach with tax law) and compare the same situation to your client if he was incorporated. Your Net Earned Income is $10k, as would be salary if he was incorporated. 415 would limit the deferral to $10k. And to clarify, I think what you are asking is Line 31 Sch C less SET deduction equals $200k, DB cbn of $190k, so Net Earned Income (the analogy to compensation) of $10k for your example.

Obviously a heavy focus on PPA. This of course was muted by the fact that we are still in the stage of blind men trying to describe an elephant given the lack of actual guidance (or for that matter, interest rates) on the full implementation of PPA. Some impressions though: The one size fits all approach to min/max funding begs the question as to whether one can continue running current method valuations to develop a recommended contribution in the middle of what will be some substantially larger spreads in 412/404 costs than we and our clients are used to seeing. Pure minimum funding on an accrued benefit basis (only being able to recognize salary scale for the current year) will lead to some Eiger like curves in normal costs, especially for final average pay plans, so that is no panacea for clients to pursue. Thinking out of the box for ok funded plans there will be substantially more flexibility in contribution ranges than before. Again though, would be helpful to see those interest rates (and mortality tables) to start forecasting impact for clients. Focus has been on the DC disclosure statement timing requirements, but what is eye-opening is the actuarial certification due 120 days after plan year beginning. Any bet on the odds of you having all of your over 100 life vals done 120 days into the new year (especially since contributions are now "live" for interest purposes after plan year end)?

May not be a complete reference, but Relius's checklists allow for rollovers (and rollover account money) only to be distributed at any time. Assume that the IRS has vetted this over the last few cycles...

Just a thought here on the HCE issue and plan amendment. What are thoughts on "automatic" amendments in plans to reflect COLA increase in the 415 and salary limitations. Are we to calculate the CL for these HCEs based upon the limits in effect 2 years prior?

Double checked twice, but was a little surprised, based on the 2007 combined female table, that current liabilities were actually lower than generated using the 83 GAF. Anyone else notice this?

Has anyone actually contemplated the DOL guidance to date, namely that statements on an annual basis have to be issued by 45 days after plan year end? Not quite sure what world the DOL lives in, but how many of your clients can deliver final data AND decision on contributions to you in order for statements to be issued by Valentine's Day?

I wonder if anyone out there has run into this problem with TINs? Back in 1997 we were pretty diligent about obtaining these numbers for all of our clients. Of course many of our small plans have sporadic, if any, distributions over the years. We had one client last year where the IRS had "zapped" their TIN due to lack of usage, and we went through hoops for awhile since they had withholdings that were orphaned. Not sure why the IRS would cancel out numbers, think they're free the last time I checked. BTW, much easier to obtain these numbers now as you can obtain them online. Just remember to eliminate punctuation and parantheses when entering the data. Online application