SoCalActuary

What do you mean "daily rates" when the 3-tier rates are published monthly? I get the info from IRS, sometimes from the Datair site, and sometimes get a hint from the Federal Reserve hr15 page.

Why the second zero in formula a? You have two years, so the average is $50,000 annually and the benefit is 20% x $50,000.

JB, you can't really have it both ways. Figure your desired contribution in the first year. Determine the benefit that provides 2/3 of the desired contribution. Grant that benefit as a past service amount, subject to the cushion. If this provides a 415 limited amount, then you have accrued the entire benefit on day one, and no new accrual during the first full plan year. Otherwise, you might have a new accrual during the first year, so plan accordingly with the proper benefit level to keep the plan fully funded at the end of year one.

Well, then every participant has the same policy items. Further, no NHCE was discriminated against.

Happens to us all the time. First, the 2011 PBGC premium is based on the benefit on 1-1-2011. So you can perform the 12-31-2011 valuation for the known 1-1-11 benefit, subject to any distributions made during the 2011 year. But you can't file anyway if you don't have the assets. For plans of 25 or less, you can use the small plan cap. At first, the PBGC said they would not enforce penalties for filing after 4-30-12 if the facts are reasonable. But that was a lie. They will change interest and penalty if the client filing is late. You must use that PBGC position to explain why you need valid trust accounting in time to complete the task, and that you are not responsible for late premiums.

I believe that the last election signed is binding on the other plan. However, this still smells like legal malpractice. Someone did not take responsibility to do an accurate document.

If you are performing a beginning of year valuation for 2010, then it should be no trouble to create the related aftap. If you are performing an end of year valuation for 2010, then the 12/31/09 result would be used.

JB, you did not state the plan termination date (PTD). Was it in 2009, and payout in 2010, or was the PTD in in 2010? If 2009, then you do not maintain a 430 balance or file an SB for 2010. Otherwise, you do a 2010 val and aftap.

This is a glowing endorsement for cash balance plan design. No retroactive adjustments benefiting liars.....

You also have common law issues of employment. The person gave false documents during employment, such as drivers license, passport, employment application, etc. Now, the burden of proof is on the lying employee to explain why they lied before and are now telling the truth. The health insurer was also given false census information for rate keeping. That is why many employers used the approach that the benefit provided is based on the original documentation.

Option B is normally the answer. But document language can get in the way, imposing the 415 limit at NRA, then the reductions based on it. Further, you need the secondary interest calculations, using the 5%/plan rate issue for the monthly benefit, along with the 5.5%/plan rate issues for lump sums.

You have a fact-driven issue that deserves the attention of ERISA Counsel. This forum may not be your best solution. That said, you must deal with the anti-cutback issues if you attempt to eliminate an option. If the employee is covered under a plan that states benefits are provided once the employee has met the conditions, and the employee then meets those conditions, that seems like a protected benefit. Good luck.

This sounds like another of those fake union scams. Beware of IRS determination that this is an abusive tax shelter. If you look at the rules for unions and collective bargaining, ask your PEO how they comply.

From what you describe, this employee is not in an eligible class to enter the plan as of the entry date.

Tom, the 401(a)(26) issue has no reference to NHCE. The explanation given for this code section is that it avoids the situation where the owner only cares about their own plan while neglecting other participants' plans. This is not the case here. This rule eliminated the old practice during the 1980's when each principal in a firm had their own DB plan.

You did indicate that you were interpolating annuity rates. The factors at the integral ages are also the result of the ratio of two annuity tables with slightly different slopes. My personal preference is to use the full 1440 monthly lx factors for each participant (120 year table with 12 monthly interpolations). You can then determine a more exact result. Don't forget that the final answer is a benefit payment to an individual, and that the plan administratory is responsible for taking reasonable action to interpret the rules. Your improved accuracy on the modeling method you chose may be an act of masturbation. The PA has the final word.

Sad that the IRS is doing their traditional mission-creep to tell us to do more than the law requires. This plan is not designed to preserve. It has ongoing accruals. Further, it provides meaningful benefits in combination with the DC plan. You need to fight this one.

I was responding to Andy, expressing my preference that the third-wheel HCE be excluded. If excluded, then you don't have to give them a top-heavy minimum benefit, which can be very expensive. My review of TH min in a DB plan is that the cost can be 15% of pay for an older non-key.

Provided that you give at least the top-heavy minimum. Easier to just exclude the 3rd wheel HCE.

Why would you want to use it? Commercial software is relatively inexpensive, includes lots of useful features, and prints like it should.

You have an additional problem: The distribution was limited to the 415 lump sum, under the terms of the plan. The excess assets above 415 are not distributable. Further, there is an additional tax for excess distributions to HCE's. See reg 1.72-17(e). If the excess assets were transferred to a qualified replacement plan instead of the IRA, you would have time to fix this.

By your hard freeze of the benefit, test it against 415 limit for funding and for payout. Don't issue a statement to the participant for any benefit that would exceed their 415 limit for benefit payable at normal retirement age. If an election is made to take a distribution, you test the distribution using the two or three assumption sets needed to determine compliance. But the IRS does not expect to see any increase in the plan benefit under a hard freeze, nor do you add cola's to the limit, pay increases, nor increased service. Otherwise, you have continuing benefit accrual and required compliance testing, top-heavy, etc. Now a lump sum benefit can vary year by year as 417 rates move. And any particular lump sum available at any time might be constrained by the IRS 5.5% interest rate limit.

Since it is a compliance test, I always measure it on the year that just ended. If I am designing a new formula, I project to the end of the first year to make the determinaiton.

Since the 412e3 benefit is the cash value of the policy, this statement is that the cash value is larger than the normal benefit would be by following the terms of the plan. This usually occurs when the projected benefit formula is lowered, either by lower pay or by plan amendment. It may also occur if the dividends in the policy have exceeded the normal plan accumulation, such that the excess cash value covers the required premiums.

Ask the document providers.