SoCalActuary

But you should also check the joint life expectancy with his spouse.

From the IRS Code: Sec. 412. Minimum funding standards (a) Requirement to Meet Minimum Funding Standard.-- (1) In general.--A plan to which this section applies shall satisfy the minimum funding standard applicable to the plan for any plan year. (2) Minimum funding standard.--For purposes of paragraph (1), a plan shall be treated as satisfying the minimum funding standard for a plan year if-- (A) in the case of a defined benefit plan which is not a multiemployer plan, the employer makes contributions to or under the plan for the plan year which, in the aggregate, are not less than the minimum required contribution determined under section 430 for the plan for the plan year, (B) in the case of a money purchase plan which is not a multiemployer plan, the employer makes contributions to or under the plan for the plan year which are required under the terms of the plan, and © in the case of a multiemployer plan, the employers make contributions to or under the plan for any plan year which, in the aggregate, are sufficient to ensure that the plan does not have an accumulated funding deficiency under section 431 as of the end of the plan year. (b) Liability for Contributions.-- (1) In general.--Except as provided in paragraph (2), the amount of any contribution required by this section (including any required installments under paragraphs (3) and (4) of section 430(j)) shall be paid by the employer responsible for making contributions to or under the plan. (2) Joint and several liability where employer member of controlled group.--If the employer referred to in paragraph (1) is a member of a controlled group, each member of such group shall be jointly and severally liable for payment of such contributions. (3) Multiemployer plans in critical status.--Paragraph (1) shall not apply in the case of a multiemployer plan for any plan year in which the plan is in critical status pursuant to section 432. This paragraph shall only apply if the plan adopts a rehabilitation plan in accordance with section 432(e) and complies with such rehabilitation plan (and any modifications of the plan). Note that this only applies to multiemployer plans.

Well, there is still an annuity associated with the balance, right? So wouldn't that annuity need to get increased in the traditional way, and compared to the annuity associated with next year's balance? Maybe the pay credit is frozen and the interest credit is very small. Or consider a vested term. I don't know the answer - just finding this to be an interesting question. With a badly drafted document and confused administrative rules, you could be right. But the joy of a properly designed CB plan is that the account grows every year regardless of NRA until the annuity starting date is actually reached.

This subject was well covered in the COPA forums. You had freedom for 2008 and 2009 to make changes in methods, but 2010 is generally intended to lock in your funding method. Part of the confusion was the asset fluctuations of early 2009, part was due to WRERA adding changes, and part was due to extensive examination of PPA intent by the pension community and the govt. The current presumption is that all rules are known now. You pick your method for 2010 and live with it, unless you are willing to file for a change in method (and pay a huge ransom [user fee] at the same time).

I think the heading of the original post used the cash balance reference. That was my clue.

Critical status is only multi-employer. AFTAP notice is used for single employer plan.

I don't get the point. A continuing cash balance plan provides interest credits and service credits for participants. What is the difference between that benefit feature and the one that provides an actuarial increase for late retirement?

I read the Corbel prototype language to allow a fully subsidized 100% J&S form of payment. This creates the legal right for married or unmarried participants to have the survivor protection. Further, the actuary should be making assumptions as to the expected future benefit payments. If this right exists, the actuary has a reason to assume that people will take free money. This does not create the presumption that a lump sum payment must be the actuarial equivalent of the 100% J&S benefit, in my opinion. So a plan that has a history of lump sum payments would have a reasonable fact pattern for the actuary to assume some percentage of retirees will receive a lump sum equivalent of the life annuity form.

Enrolled Actuaries are encouraged to participate in the ASPPA College of Pension Actuaries by joining ASPPA. The discussion on this issue was intense and very technical. Eventually, the argument came down to a contradiction between the wording within the regulation and the intent stated in the preamble. I continue to hold the position that an amendment increasing benefits can be made for the 2010 year during the period 1-1 to 3-15 of 2011. I believe that the technical problems within the regs will need to be resolved within Treasury, and that good people will make the case for this. Naturally, that amendment must comply with 436 funding ratios before it can be effective.

This is generally true when the participant has more than 10-12 years of service, but it must be checked in any event. for late retirees with shorter service, the new accruals are often the most valuable.

In NASCAR, the NBA, the PGA Tour and other fields, the top professionals can do things at the very edge of the allowable physical limits. They have the training and the nerve. They have the responsibility for their actions. In pension consulting, the same analogy holds. If you plan to provide the designs that go to the limit, then you also take responsibility to know how it is done. If you fail, you also take responsibility for the result.

Look at the instructions for the SB. An at-risk plan reports on line 14 using the values from line 4, not line 3. Line 4 is used only for plans that are at-risk, but you report the at-risk items on 3 and the non-at-risk items on 4.

Under IRC 404(a)(6) all contributions are deductable on a cash basis for the tax year in which the contribution is made or for contributions made no later than the date for filing the tax return for the tax year. Rev Rul 76-28. According to Pub 560 the deductible amount cannot exceed the plan's unfunded liability. Excess non deductible contributions can be carried over and deducted in a subsequent tax year but will be subect to the 10% penalty tax on non deductible contributions. Excess contribution tax can be eliminated by withdrawing the excess amounts before the date for filing the tax return or deduction of the excess contributions in a later year. If the client contributes the funds in 2011 the only way they will be deductible in 2012 is if the contrbutions exceed the unfundied liability in 2011 but the excess will be subject to the 10% penaly tax in 2011. See Form 5330. If the client contributes all the funds at the beginning of 2012 the client can deduct the maximum deduction permited for 2011 and the excess can be deducted on the 2012 return without any excess contributions tax. I have two disagreements with your comment. The rules of 404 have changed significantly since 76-28, and your Pub 560 is also obsolete, because 150% of FT is now used. There is also a quirk in PPA that allows an excess contribution to a DB plan without the 10% over-funding excise tax.

But John's example increases benefits. The original post describes a decrease in benefits. Big difference.

WHOA! Did your post imply that you are contributing in 2011 and deducting in 2012? For minimum funding, you can over-contribute in 2011, creating an addition to your Pre-Funding Balance. As AtA noted, you can use the PFB from 2011 to meet 2012 minimum funding requirements, provided you meet the 80% funding test in 2011. But the deduction issue is handled differently. You deduct in 2011 the full contribution, unless it exceeds the maximum allowed. Any amount in excess of 2011 limits gets carried over to 2012 for deduction purposes. There is some difference of opinion - some say you can carry deductions forward indefinitely, others contend that you can only use one year of carryforward. I generally belive that you can carry non-deductible amounts forward into multiple future years, as the IRS indicated under old pre-PPA rules for clients who funded their plan termination liabilities up to 10 future years. Certainly, you can deduct any amount paid in the year to the extent it brings the funding target percentage up to 100%. If you have not amended the benefits for HCE's, you can probably deduct contributions up to 150% of funding target. That's usually a lot of money, unless your plan does not have any eligible past service benefits to use the cushion. There is also a wrinkle in the PPA rules that over-funding a DB plan appears to be exempt from excise tax under specific circumstances. But those are a number of qualifiers to your question. What was your goal?

Why do you say 1-1-2011? The participant reaches two years on 1-10-2011, so the next entry date is 7-1-2011.

Then the gateway applies to this person.

Is the DC plan providing a safe-harbor NEC?

Jay, get the right forms. Using the prior year form is a bad shortcut.

Our forms vendor already has the 2010 SB form ready for completion. Check with your vendor.

Looks like our 412e3 experts are not available.

If the deduction of $300k stays on the 2009 tax return, then there is no point in further discussion. If the return is amended, with the plan sponsor designating the contribution in two years, then follow the prior advice from David.

We have fully insured plans that are meant to meet the requirements of Reg. 1.412(e)(3) Accrued benefits under such plans (other than top heavy benefits) are determined under Corbel Base Docment 5.2 (a)(4). Policy premiums are typically due on the last day of the year and a 31 day grace period is provided, along with an automatic policy loan to pay past due premiums. 1. If plan benefits are declared frozen in the middle of a plan year, must premiums be paid for that year or can the policies just be converted to a paid up status? 2. When a participant meets plan eligibility requirements but terminates before the end of the year so that a policy has not been purchased, is he entitled to anything other than top heavy benefits? 3. If a participant becomes eligible in 2009 and has a policy purchased @12/31/09 and terminates employment in April 2010, is the premium due 12/31/10 payable? If he has an increase in projected benefits as of 1/1/10, must a new policy be purchased @ 12/31/10? 4. For a standardized prototype plan with 500 hour accrual rules, do I treat the answer differently for participants who have less than 500 hours before the plan termination?

So the trust applied under 501(c )(9) and got a PLR indicating they are an exempt trust. Then they violated the rules and lost their exemption. Am I missing something in your comment, mbozek?

You need to be more specific in your question. What is an OPEB trust? What benefits does it provide? Who are the employers? Other Post Employment Benefits - like retiree health, long term care, etc. The trust is used for holding the advance funding of the lifetime benefits. For example, union-guaranteed life-time health coverage for fat-cat govt workers.