ScottR

That's what I've been doing. And I've been using the same percentage as the official AFTAP for the following PY. .. Scott

Hi all, We're planning to Fed Ex a large batch of 5558's to the govt. Should we use the regular Ogden mailing address, or is there a separate one for a private delivery service? What phone number should we fill in on the Fed Ex airbill? TIA, Scott

As others have suggested: he's talking about immediate compensation for himself. Otherwise, nonsense. If there's enough money in the plan to purchase annuities covering all benefits, why not just close out the plan now. And if that's not the case, how do you avoid minimum funding requirements WRT the benefits not purchased? Also, if the plan is too much underfunded, I believe PPA imposes restrictions on the ability to purchase annuities. Finally, the employer should consider amending the plan to provide lump sum payouts (in lieu of annuity purchases). I believe lump sums are already cheaper in many cases, and they could become more so as the new 417e segment rates are phased over to corp bond rates. Recommend that you do a study to find out. A LS option is also likely to be popular among the participants. .. Scott

The Relius DB prototype permits withdrawals from rollover account at any time. I think it's permissible, subject to income taxes and (if applicable) premature distrib penalties. ... Scott

Just to add my 2 cents: Before "selling" the policy to the participant, the plan could borrow the maximum against it. That would reduce the net value of the policy, and therefore reduce the amount that the participant has to cough up in cash. Granted, he'd be getting a policy with a loan against it, but it might still make sense if cash flow is an issue. ... Scott

Lump sum payouts are likely to be a whole lot cheaper than annuity purchases, so they may want to re-think that decision. Why not give the participants an extra option, especially if it's going to save the employer money. WRT the PBGC filing: I'd be inclined to fill in the current number of participants on the Form 500. When you file Form 501, show all the annuities that were purchased. This will fit in better with the standard termination procedures, and will make the PBGC happy. I believe participants must be given at least 45 days' advance notice of the insurer from whom annuities will be purchased, and that may very well push the purchase date beyond the plan term date. ... Scott

I agree that a qualified replacement plan would be the way to go, provided that the DB document doesn't require that surplus go to participants. If it DOES say that, amend it immediately... there's a 5-year waiting period, after which the surplus assets may go back to employer or to QRP. .. Scott

We received a letter from EBSA saying that they didn't receive a 2007 Form 5500 for one of our clients. The client insists it was timely filed, so we responded to EBSA to that effect and sent a copy of the filing. Our mailing was returned not once, but twice, with a note saying that 5500's for 2009 and thereafter must be e-filed. We spoke with an EBSA official, who said that any returns filed for 2007 and prior must now be e-filed. He indicated that this would include the one that our client filed in a timely fashion, but that they (apparently) didn't receive. I can almost understand the need to e-file past returns that were never filed. But all we're doing here is responding to an EBSA letter by sending them a copy of what WAS filed on time. Any comments or advice? TIA, Scott

Hi all, What's the current thinking on allocating assets among participants in an underfunded, non-PBGC-covered DB plan? May we simply allocate the available assets among all participants in proportion to their PVABs? Or must we pay certain classes of participants in full? If so, which participants must be paid in full? e.g. NHCEs? Non-owners? Non-50% owners? etc. TIA. .. Scott

JBY, With the existing 401k plan, each owner can do a $16,500 deferral and get a PS contrib of 25% of $35k = $8750. Right? If you add a DBP, the PS contribution would have to drop to 6% of $35k = $2100. So the DBP would have to generate an annual contrib of about $12,650 per owner to get the desired overall result. I think this would be feasible with a benefit formula of 10% of AMC per year of participation. NRA 62, with fully subsidized early retirement benefit (i.e. no early retirement reduction) at 55. .. Scott

What he said. Exactly right. .. Scott

The surplus could also be transferred directly to a qualified replacement DC plan, where it would be allocated like employer contributions over a period of 7 years or less. There would be no excise tax or ordinary income tax on the transfer. .. Scott

I agree with pretty much everything that's been said. It's legally permissible for the plan administrator to offer retirees a lump sum option, but it's not required, and you certainly can't force lump sums upon retirees. If a retiree elects a lump sum, spousal consent should definitely be obtained. .. Scott

Possibly. (g) I think it's true WRT post-1986 voluntaries. (not 100% sure about the year). I seem to recall that pre-1986 voluntaries may be refunded on a FIFO basis. i.e. basis is refunded first, without tax. .. Scott

Everything sounds good to me. I believe we have blanket permission to change the val date in 2009, even though the plan is terminating (unlike the pre-PPA rules). The only question I have is whether a deposit made on 12/30 will clear in time for you to totally liquidate the investment account on 12/31. I would move the dates of deposit and liquidation up a few weeks. .. Scott

Has there been any guidance that the 110% test is now based on PPA funding liabilities? In the past, we had based it on RPA current liabilities, but those generally are no longer calculated. .. Scott

It's not very difficult. Just amend the plan document as needed, and start doing annual vals/Sch. SB's. I'm not aware of any written guidance, but there may be some. .. Scott

Hi all, How are you planning to handle things when an AFTAP freeze ends (i.e. when the AFTAP rises above 60% after an automatic freeze had occurred)? Will your document language provide for the automatic reinstatement of accruals that would have occurred during the freeze period? Or will such reinstatement require a special amendment signed by the employer? I'm leaning toward the latter approach (assuming it's permissible). My thinking is that sponsors of severely underfunded plans may adopt "hard freeze" plan amendments sometime after the automatic freeze kicks in, and will not want to automatically reinstate benefits that would otherwise have accrued between the automatic freeze and the hard freeze dates. What do you think? TIA, Scott

Don't think so. 404(n) applies to paragraphs 3, 5, and 7 of 404(a). The limit of deductions for self-employed individuals is contained in 404(a)(8). .. S

I agree with Effen. DB lump sums always had to be valued as of the distribution date. You're probably thinking of the old DC balance forward plans, where payout was equal to account balance on last val date. That was okay. But not for DB's. .. Scott

Their DEDUCTION is limited to $100k. So there would be no point in depositing a "salary deferral" of more than $10k. .. Scott

Thank you all for your replies. I'm starting a list to be presented to ASPPA, and with their help, to govt officials. I honestly feel the IRS/DOL will be receptive to simplification, as they are really struggling with the current mess (as we are). As you come up with other ideas, please post them and I'll add them to the "list". Thx, Scott

The contribution may be allocated among the participating entities in any reasonable manner. There are no hard and fast rules, as far as I know. IMO, allocating costs based on PVABs would be eminently reasonable. .. Scott

As I sat thru various sessions at the ASPPA Conference, it occurred to me that the PPA funding rules are fundamentally sound. i.e. min contrib is based on the value of current year's accrual, plus amortization of any existing shortfall. But things went awry in the details, and we're left with a stunningly confusing and unworkable system. I get the sense that the IRS and other govt officials are as confused and frustrated as many of us are. I'm thinking we should take a proactive approach, and draft a comprehensive proposal to simplify the system. Just a few ideas off the top.... - Trash the Effective Interest Rate concept, and substitute the middle segment rate. - Trash the adjustment of COB/PFB for actual investment earnings, and use the middle segment rate. - Trash the concept of 1/2 lump sums for 60%-80% AFTAP. Switch to no LS's if < x%, and full LS's if > x%. - Simplify or trash the Annual Funding Notice, which gives a ridiculous amount of useless info to the participants. - Trash the concept of deemed AFTAPs on 4/1 and 10/1 each year, and the associated notices to participants. etc. etc. Any thoughts? .. Scott