SoCalActuary

More likely that you would use the plan's post-retirement actuarial equivalence assumptions, unless your plan has a specific late retirement adjustment factor. If that is a 3-tier rate, those change according to your annuity starting date.

You must protect the actuarial equivalent of the benefits. Further, you have Multiple Annuity Starting Date (MASD) issues to consider. I would absolutely require that the analysis adjust that benefit with interest, but I'm an actuary, so I couldn't even imagine any other method.

Interesting design issue. You have a small risk issue here, but if the benefit is only payable as an annuity benefit, you are probably OK. If a Class A disability is defined to be a high level of disability, you probably have impaired life expectancy as well. So the 110% benefit is offset against the reduced annuity rate. Another option is for the plan to purchase a disability policy on the insured, so you only have the cost of the policy without any additional risk to measure.

My choice was pretty simple. I WILL USE the 11-xxxxx system, and my people preparing items for my signature already know it.

Yes, it is acceptable and the IRS published an example of this fact pattern in one of their rulings. I don't recall where or when, but it goes back at least 4 years.

The IRS can do a "fine" job of making money by just losing a batch of mail and claiming the filings were late. Now they have another trick, change the mailing address. Yes, if you did not follow instructions on the mailing address, you are already wrong. But this is also bad IRS policy that should be addressed by ASPPA.

SoCal - are you saying that for a plan that is effective 1/1/2010, a 2010 AFTAP is not required? I realize that you don't have any restriction issues, but I thought I read somewhere that the AFTAP certification was still required, as pointless as it may be. You understand my assertion correctly. If no aftap is issued, the plan is restricted during the first five years from making lump sum distributions. Oh well, they didn't have any assets to pay them in any event, so no consequences for not issuing it. In addition, common sense says that a new plan signed at the end of the year is not required to complete forms due before the plan was started.

Welcome to the DB forum. "Fundinging" is a curious concept. If the IRS requires a change in method, they can often force the actuary to do things differently. Otherwise, you are probably stuck. However, you can carry the non-deductible amount forward for a later year.

I suspect you are over-reaching here. The DB plan can offer lump sums once the funding is corrected within the next seven years. But it is possible that some participant's lawyer could make this an issue.

No real restriction issues in the first year in any event. 436d restriction applies until the benefit is funded, and then only if you granted prior service credit. So you issue your first aftap cert in 2011 based on the 2010 funding.

Your scenario creates a reasonable expectation that the lump sum will be paid in 5 years, but I personally think your discount rate may be too low. Under these facts, it makes very little difference, since the lump sum is not determined on the 3% rate. Ultimately, you prepare this for the client's financial statement, and the auditor has the responsibility to comment on it. With that in mind, I discuss the rate with the client in advance and let the auditor know what my intent is. Then, they have the ability to push back.

Yes, you should file Form 10.

Nothing odd about it in my mind. Do you know how many people are at the IRS, and how many departments they have? The right hand does not know what the left hand has done. Complain. Kick it up to supervision. Tell ASPPA. Copy your congressional representative.

You should also consider the issues of testing on accrued-to-date method. Discuss this with such experts as Kevin Donovan or Larry Deutsch, or Adrian LaBombarde if he is available.

Inform ASPPA of your facts. Also, make a cc to your congressional rep when you send your protest back to the IRS.

I would ask if you are changing methods retroactively to invalidate a prior AFTAP certification. My basic understanding is that you had a deemed waiver when the employer accepted the aftap cert. That made it permanent. Then you had a voluntary waiver. Once signed by the employer, it was permanent. So you administer the funding accounts using the known information. Then you prepare a current work product, using your current methodology, including asset smoothing. If that forces a new deemed waiver, it is a new action of its own. What am I missing in your question?

You have the mechanical issue of having the insurance company follow the terms of ERISA, so you should deal with a company that understands the need. Basically, you have an annuity contract growing from age 77 to 82, your maximum retirement age, and continuing to age 85 late retirement. Further, you can have 3 year cliff vesting, so no distributions until age 80. The contract would have to provide for annuity payments from age 80 forward. But the effect would still be a substantial deferral of income. The insurer will have a problem with amortizing the acquisition expenses of the policy, because you really have a five year policy, with the option for later payment.

Applying the 415 limits is necessary for plan benefit funding and payout. But it is not directly related to the issue of 133 accrual rule. You can certainly have the benefit accrual pattern you described in a plan that grants past service, whether it is cash balance or traditional formula.

Yes, I believe you can do so. But once you change for 2010, you are expected to follow that method for 2011.

No serious issue under your fact pattern. But you are ignoring the basic rule, published and discussed, that you should be measuring the time-weighted values on a market to market basis, and reflect receivables only as they occur. I doubt you will get an audit of this issue, and as you mention, the rate is applied against a zero balance in any event.

If there are spousal rights to worry about, you should be able to do so.

Quickly, I would look to the FAS 88 rules, and Accounting Standards Codification 715 to find your example.

TH aggregation is not the same as 401(a)(4) aggregation. The PS only needs 3% TH for those who don't participate in the DB plan. Sometimes, this is complicated over last-day requirements in PS plans and 1,000 hour requirements in DB plans. If you are aggregating the two plans for a4 testing, then you also get to add gateway issues.

Choice 1

And don't forget a few other issues: Health insurance premiums are adjusted before the net SE calc in 2010. If the contribution is at or above the net earned income, there is nothing left to compute the 6% rate. In addition, 401(k) deferral can mess things up. See the IRS worksheet in Pub 560 for more on this.