chc93

and if no election is made, no excess contributions go toward creating or increasing the PFB. this is different than Pre-PPA where the FSCOB was automatically credited with excess contributions and no election was necessary. jmrodrig - the excess contributions don't really 'go' anywhere if no election is made to add to the PFB. If there is no PFB and no FSCOB, there are no reductions to the Assets for purposes of determining the AFTAP, FTAP, funding shortfall, determining whether quarterlies are due the next year, etc. In this case the AFTAP = FTAP if there are no annuity purchases. In a sense, excess contributions "go" into assets, if no election is made to reduce the PFB. I see this as an advantage for AFTAP, FTAP, etc. However, there will not be any "credit balance" to offset required contributions or quarterly contributions, and maybe then a disadvantage. For a "stable" company (stable income), I think no PFB (or FSCOB) is good for this reason, as the company will probably not need to offset a required contribution because of shortage for contributions. However, for a highly volatile income situation, it has to be on case-by-case, and probably careful analysis.

Here's our situation. We are currently working with a DC plan for a company that went bankrupt in early 2008 (no employees, no company). The bankruptcy court has assigned a bankruptcy estate trustee (I think that's what he's called), who I think is now the plan administrator (with authority to sign all documents and approve any and all payments from the plan). We are still in contact with the former company HR, who is also in contact with the plan's ERISA attorney, in addition to the outside attorney representing the union. I understand that 2008 must still be filed normally, in addition to 2009, since assets have not yet been fully distributed. We are currently working with the independent plan auditors for the audit report, and we are preparing the 2008 Form 5500 as normal. In addition, the plan was filed with the IRS for plan termination DL in late 2008, and distributions will not occur until the DL is received. One other situation that occurred back in 2001 was a DB plan for a company that went bankrupt and was taken over by the PBGC. In this case, the PBGC informed us that the DB plan's filing requirements (including audit report) ended when PBGC took over trusteeship of the plan.

I just got this from the Sungard Relius technical updates... http://www.relius.net/News/TechnicalUpdates.aspx?ID=468 ************** Short 2009 plan years. The 2008 Form 5500 instructions indicate that plans with a 2009 short plan year which have a 5500 filing deadline before January 1, 2010, may file a paper 5500 using the 2008 forms or are eligible for an automatic extension of 90 days following the date electronic filing becomes available. The result of this policy is that plans with short years having a deadline after December 31, 2009 (e.g., plans which terminate after May 31, 2009) have no option but to wait for electronic filing. DOL and IRS officials seemed surprised by this result and indicated that the DOL will not reject a paper filing for any plan with a short 2009 plan year, regardless of its deadline. ************** Looks like the 2008 Form 5500 paper filing will be accepted... in all cases regardless of the deadline/due date. (amazing that DOL was surprised, when they are pretty explicit on their website summary)

I got this link from belgarath's post above... http://www.dol.gov/ebsa/regs/fedreg/notices/20071116.pdf Look on page 64733, middle column, about half-way down. "The Agencies expect that, in some cases, filings for 2009 short plan years and DFE filings for 2009 reporting years (e.g., if the DFE year differs from the 2009 calendar year) may be due during 2009 and before the January 1, 2010, date on which the new EFAST2 wholly electronic filing system is expected to become operational for return/report filing purposes. Plans filing for 2009 short plan years and DFEs filing for 2009 reporting years will have the option of using the 2008 Form 5500 Annual Return/Report forms and filing for 2009 under the current EFAST filing system if they file before the date the new EFAST2 electronic filing system becomes operational. Alternatively, plans whose due date for their 2009 short plan year filing and DFEs whose due date for their 2009 reporting year filing falls before the new EFAST2 system becomes operational but who want to file electronically under the new EFAST2 system will be granted an automatic extension until after the EFAST2 system becomes operational in which to file." The federal register doesn't quite sound as clear as the dol website you posted, which is why I asked the question. The 1st and 3rd sentences appear to reference the "due date", but the 2nd sentence doesn't reference the "due date"... in fact, taken by itself, the 2nd sentence appears to allow any 2009 short year to use the 2008 Form 5500. We have a few of these situations, and were hoping to be able to use the 2008 Form 5500 before Dec 31, 2009... get it done now, and avoid EFAST2.

in the second line above..."2009 Short Plan year filers whose DUE DATE is before January 1, 2010..." (emphasis mine). So, if your due date is after Jan 1, 2010 and EFAST2 is available, it appears that paper filing using 2008 forms are not possible. That is, if your due date is before Jan 1, 2010, but it is a Jan 1, 2009 plan year (short year), the 2009 Form 5500 cannot be filed on time without this exception to use the 2008 forms (or the 90-day extension after EFAST2 is available). But if your due date is after Jan 1, 2010, you will be able to file using EFAST2 within your due date, and this exception will not apply. Make sense?

After reading the Federal Register again, it appears that the option to use the 2008 Form 5500 is available only if the DUE DATE of the 2009 Form 5500 is prior to EFAST2 becoming operational. That is, if all assets are distributed in Oct 2009, the due date is not until May 2010, and if EFAST2 is operational by then (expected to be on 1/1/2010), then a 2008 Form 5500 cannot be filed, say in Nov 2009. Am I reading too much into this?

This is how we've read this too... that the SAR was only deleted for DB plans subject to PBGC coverage, and the annual funding notice is now required for DB plans subject to PBGC. So, DB plans not subject to PBGC still have the SAR required.

We have heard that "instructing the timing of the AFTAP certification" *may* result in a fiduciary responsibility.

I don't think there's any prescribed method to "make it right", but I would compute the payment that he should have gotten by 4/1/08 and pay it asap. Subsequent payments should be made by 4/1 of each year. That's the best you can do, IMO. We've also added interest from the date due (4/1/08 in this case) to the actual payment date. We used the 30-year Treasury rate for the appropriate plan year. We did this a few years ago, and I thought we read about this somewhere (can't recall).

that is correct. Does the plan need to be amended for the 2009 calendar year to suspend minimum distributions? Or can we simply rely on the law and ignore the plan provisions.

Good point. Thank you very much.

Thanks for all of your replies. I had another thought on this... Can component plans be used and tested under (a)(4). Assume that a sufficient amount is "contributed" for the first 3 tiers in one component plan. This component should satisfy (a)(4) as an integrated plan. Then, the additional contribution that is "contributed" in the 4th tier becomes another component plan with a cross-tested contribution, and tested under (a)(4). All participants will receive contributions in each component plan, so coverage in each component is not an issue. Can this be done? Thanks again...

I have a 4-tier integration for contribution, in addition to a 3% 401(k) safe harbor. I understand that the 3% safe harbor cannot be part of the 1st tier 3% for integration. The 1st, 2nd, and 3rd tiers are the standard integration. The standard 4th tier is usually pro-rata to compensation (that is, uniform percentage). Then the entire contribution passes 401(a)(4). But, we have a provision that the 4th tier is cross-tested (Groups A, B, etc). If we do the 4th tier with different percentages to different groups, do we do the 401(a)(4) test on the 4th tier allocation only, or the entire contribution. We're looking at this since the demographics in some years may not allow a standard cross-test to pass 401(a)(4) at all, and the 4-tier integration will at least give some separation between the principals and the staff (given their respective compensation), even if the 4th tier is limited to a straight pro-rata (same percentage to all groups).

Thank you very much...

Thanks for your reply. I previously read that 5500 instruction on page 2 and thought it only apply to Schedule B (SB, MB for 2008), that is, a 2007 Schedule B cannot be used for the 2008 filing. However, I now noticed that Schedule R is also changed for 2008, which is what I also require. Note that this is a profit sharing plan, which is why I asked. I guess I'll just have to wait... at least I've got 90 days after the forms are released. Also, I tried searching other threads, but I didn't find any information (my problem with searching, I guess). Thanks again...

A terminated plan distributed all assets in Sept 2008. I'd like to use the 2007 Form 5500 and enter the appropriate dates (01/01/2008 to 09/30/2008), but with the changes to the Form 5500 beginning with 2008, I'm not sure I can do this. We've done this in the past, for example, using the 2006 Form 5500 and entering 2007 dates, without any problems (so far). Do I have to wait until the 2008 Form 5500 is released? Thanks....

Well... to continue this saga, the auditor of one of our plans asked that we change the end of year market values on Schedules D and H to their "current market value", which I assume is very recent, and definitely not the "end of the plan year" (or Dec 31, 2007). There action violates the IRS instructions. This means the SAR would have to be fictionalized as well. If this plan is covered by the PBGC, then assets reported on the 5500 and PBGC filings would disagree. Also, your assets for 430 would not agree. And, would the auditor have requested this change had assets appreciated by 20% since close of year? Survey says, number one answer, nada. If an auditor demanded this change, I would refuse and explain to the client why and instruct that the client or auditor or some other service provider would have to prepare. This would also mean preparing the next year because I wouldn't want to misstate beginning assets as well. What section of ERISA would you cite to an IRS auditor to support this work of fiction. At very least -- suppose I'm dead wrong -- I would press the auditor to cite in writing the appropriate reference which supports his treatment. To quote Dean Wormer, "I hate those guys." As a "good" end to my saga... the auditor said that in their "preliminary discussion", the engagement partner agreed with my position that assets as of Dec 31, 2007 must be used on Schedules D and H, and that no changes should be made. They will disclose the difference between the Form 5500 assets as of Dec 31, 2007 and their financial statement in a footnote. For my interest, I also asked the date of their "current market value"... response was Oct 8, 2008...

Well... to continue this saga, the auditor of one of our plans asked that we change the end of year market values on Schedules D and H to their "current market value", which I assume is very recent, and definitely not the "end of the plan year" (or Dec 31, 2007).

Thank you. This is what we thought the process should be.

A question came up today regarding the electronic signature. The Form 5500 says the person signing the form "under penalties of perjury" declares that he has examined the return/report, as well as the electronic version of the return/report, and believes it to be true, correct, and complete. How does he sign the EFAST-1 before he has a chance to review the Form 5500. Does this mean that we first get him to sign the EFAST-1, then send him the Form 5500 when completed to get his approval, and then we can file electronically? Obviously the big concern is those clients that wait to the very last minute. We're interested to know how others are handling this. Thanks...

The 404 cushion amount in PPA is currently 50% of the funding target. I thought I heard that this should have been 50% of the funding target AND 50% of the target normal cost... and that adding 50% of the target normal cost to the cushion amount would be in technical corrections. As far as I know, the tech corrections bill now in Congress doesn't have this item. Can someone update this information? Thanks...

Thanks Andy... We'll at least change it in our files, and probably send a copy to the client... just to keep everything straight Hopefully, the "new" Schedule SB will have something for this...

Thanks for the responses. 1. The only information provided in the AFTAP certification were as shown at the beginning of this thread. I guess the "final" COB would be implied as the COB less the amount burned. I used the sample provided in Levinrad/Gucciardi webcast in Feb 2008. 2. I agree that the receivable 2007 contribution of $100K has to be included in the final COB... but will be immediately burned as you indicate. However, since the 2008 AFTAP does not need to include the extra $100K, and the original 2008 AFTAP certification did not include it, does the 2008 AFTAP need to be re-issued, if only for the fact that the "final" COB as implied in the certification will be the correct COB.

Thanks for your reply. We did a "final" 2008 AFTAP certification, and not a range certification. So, I it sounds like we should re-issue the "final" 2008 AFTAP... but only if we decided to include the 2007 plan year contribution of $100K paid after 12/31/07... to reflect the correct COB?

Calendar year plan. Company normally funds plan year contribution during the plan year, such that contribution is fully paid by Dec 31. For 1/1/08 AFTAP, I have the following: --funding target: 10,000,000 --assets: 8,500,000 --carryover balance: 650,000 --assets less caryover: 7,850,000 --AFTAP: 78.5% --burn carryover balance: 150,000 --adjuste4d AFTAP: 80% --AFTAP certification in April 2008 Now in May 2008, we find the company paid an additional $100,000 contribution for the 2007 plan year. I think we are "allowed" to consider receivable 2007 contributions paid after 12/31/07 for the 1/1/08 AFTAP, but I don't think we have to. If we don't consider the receivable, the AFTAP is as shown above. If we do consider the receivable, the AFTAP is: --funding target: 10,000,000 --assets: 8,600,000 --carryover balance: 750,000 --assets less caryover: 7,850,000 --AFTAP: 78.5% --burn carryover balance: 150,000 --adjusted AFTAP: 80% The 2007 Schedule B will show a credit balance of 750,000. If we don't change the 2008 AFTAP, is the remaining carryover balance still $500,000 or is it now $600,000. If $600,000, do we need to change the 2008 AFTAP. Or, is this addressed in the "new" 2008 Sch SB.