mwyatt

Given that the correlation between freezing and underfunded seem to be pretty high (and just wait until you crank out the 2009 numbers), seems a dim hope under PPA that you will end up with $0 minimum funding. Have yet to see an example when the 100% vesting kicks in on freeze situation, since usually the freeze is a result of things not doing so well, to say the least. Stand your ground with the attorney.

For that matter, (know this isn't explicitly DB related), but 2007 Schedule As do not carry forward. Think I will wait until SP1 (at the least) before scurrying around the office updating everyone.

Thanks Andy!

Think I've got myself confused here with the revisions et al. Consider a Plan as of 10/1/2008 (first year of PPA funding). Benefits were previously frozen so no Target Normal Cost. Funding Target = $467,345 Plan Assets (w/o reduction) = $459,050 FSA Credit Balance (now Carryover Balance) @ 10/31/2008 = $52,677 Applicable Threshold in play for 2008 is 92% FTAP originally is (459,050 - 52,677) / 467,345 = 87.0% No annuity purchases so AFTAP = FTAP. However, I read that since the FTAP computed w/o reduction for credit balances is 459,050 / 467,345 = 98.2%, which is above the 92% threshold for 2008, so my final AFTAP that I certify is 98.2%. One, is this adjustment correct or what should I certify for AFTAP for 2008 87% or 98.2%? Second, appears that recent change to law means that when setting up the SAC, I only take 92% of Funding Target into account. The brain cramp comes in: a) do I get a free pass (i.e., no Shortfall Amortization Charge set up for 2008) since my AFTAP is over 92%? or b) Does my FSA for 2008 look like this instead: Shortfall Amortization Base = 92% of 467,345 - (459,050 - 52,677) = 23,584 for sake of argument, say TAF = 5.93816 so Shortfall Amortization Charge = 23,584 / 5.93816 = 3,972. I then can offset this 3,972 by my COB of $52,677 (allowed since AFTAP over 80%) so no minimum required contribution.

Freshman missteps (I hope). Of course, this premise of getting into a trade war with China in the midst of issuing $2 trillion in new treasury debt does make one wonder if the new gurus ever googled Smoot-Hawley in their research on the Great Depression. Cumberland Advisors on Geithner and China PBGC may be the least of our problems.

Actually, I'd go along with the Jim Holland exception (dating back to new plan Current Liability percentages on the Schedule B) to mathematical principles that 0/0 in the eyes of the IRS is 100%.

Of course, the reality for 2008 is going to be actual investment return of -20-40%. Guess that this makes sense in some sort of way, but hard to explain why someone dumping in additional funds in December 2008 after the damage was already done gets the additional funds lopped off due to prior investment losses. Great that we all get to figure out PPA in the midst of extraordinary financial times for sure.

I wouldn't see why there would be an exemption; premium checks can end up in someone's pocket (theft). From a practical standpoint, don't see any basis for a pure insurance plan to not have a bond.

Was wondering about this myself. Although for FSA purposes (since contributions are now "alive" until actually deposited) does appear that the receivable for 2008 is an unknown until the client actually makes the deposit finishing off the 2008 contribution. For the FSA, all is the same, but the dollar receivable is obviously different dependent on deposit date. Will have to look, but is MV @ 12/31/2008 adjusted also to reflect interest adjustments, or do we literally have to wait until actual deposit before doing 2009 vals?

As an aside, the post reply option screen seems to be overrun with smilies. Think the issue here is timing. Getting a deduction only to give it up in a year or two generally doesn't make a tremendous amount of sense, although guess you have to defer to the accountant on that issue.

If these guys are post NRA, probably winding down (so the successor PS plan w/ the excess transfer route may not entirely work), I wouldn't want to be the one two years from now explaining that their deduction at best faces a 20% excise tax (plus tax on reversions) or worst case 50% excise tax. I'd check my E&O before proceeding (unless they place the money with Bernie Madoff's kids).

For some reason I can only report myself for abuse rather than edit the post. In your situation, you have h/w past NRA looking to contribute $1.3m past the 415 limit. Not sure that is doable, since you have to have the transfer allocated after 7 years (and they may not have future income). Certainly couldn't move the full $1.3 and allocate, so think the 20% excise tax that would result would most likely negate the tax deduction in the first place.

Is certainly an option, but only problem is that it only brings the excess down; also when you have older owner participants, remember that you're going to need income in future years to draw down (although the EGTRRA 100% switch certainly helps that case) the allocated funds.

Report the number, but then also report what number can be put w/o exceeding the 415 limits, coupled with an analysis of excise taxes due on reversion. The 50% excise tax usually would dissuade them from short-term deferral of taxes.

You do have to take into account the 2-year (actually 3) lookback on amendments including COLA, but the simple answer is that you do indeed have the ability to deduct the $500k. Of course you may want to consider that this is money down the tubes if you're creating overfunding over the 415 limit (but after 2008 we're probably not looking at too many overfunded plans).

Looking through the proposed regs on assets and liabilities, appears that what we exclude from FT is the benefit guaranteed by the insurance solely based upon premiums paid prior to the valuation date (and assuming no further payments). Let's just say you're starting a plain jane DB plan partially funded through whole life insurance. Appears minimum contribution would still just be the TNC with no special provision for the insurance (i.e., side fund would be TNC less premium paid). Assume that 2nd year would be especially underfunded since your CSV would be close to $0. What I'm getting at: how does insurance funding work in DB plans post PPA? Just saw a 2008 proposal that made no sense to me (loaded with insurance) wherein their 2008 side fund and premiums were approximately double what the TNC would be on their porported end of year accrued benefit. Any consensus out there how insurance will work in '08 and beyond?

Do you really want an answer? I can see submitting proposed EGTRRA/PPA amendments on termination unsigned (let the IRS fret about verbiage on that amendment so your client only has to sign once), but I'd look REALLY hard to find those signed amendments... We just had a takeover law firm client who decided on their own to file a DL app. $15k penalty later, I'd make sure that somewhere, somehow, your ducks are in a row before submitting to the IRS.

And to clarify that, there is an "s" on the end of participants; letting the first few rats off of the ship, even though they are participants, doesn't count.

When presented with illogical results, even IRS/Treasury will concede the sensible (sometimes).

Asked Harlan that question last spring at the EA Meeting (the cute answer of 0% EIR because FT was $0 circulating around didn't make sense, plus if I factor correctly, any rate times $0 is still $0). He seconded the opinion of basing on TNC in that situation for the first year.

No regulation, but if the employee has an accrued benefit for Funding Target purposes, would think it logical (albeit a little convoluted to accurately apportion given length of time participating) that any credit or base would be attributed to them as well as the principal.

So in essence (given the 2 person scenario here), anything in excess of the 430 minimum cost for the spouse (her target normal cost plus her allocated share of SB payment/reduction) is attributed to the owner?

Well, having received a phone call yesterday morning from a client with a DB and PS plan that unbeknownst to him, had a combined total of $3.5m invested in Madoff through another fund manager (about 95% of assets), guidance would be appreciated besides bedside manner instructions to talk him off of the ledge.

Not sure of the answer, but the common sense (of course you can get in trouble applying that philosophy) answer would be the AB limited by 415, since he never had the right to receive the original benefit. Could argue the other way too, but the reality (if anyone has bothered to look at any of those monthly asset statements coming in) is that this probably an academic argument since the plan is probably down 30-40% for the year in any event. Anyone have any pull with the EA meeting planners? Perhaps a good "professional development" seminar would be for a funeral director to coach us in how to present the '09 results...

Would expect this statement shortly after the DOL releases the DC statement promised a year and a half ago...