SoCalActuary

This problem has been discussed with senior IRS actuaries. Your common sense opinion is not accepted. If you have a prior base and no authority to make an offsetting negative base, that's just too bad. Pay on the prior base as part of your MRC. The IRS actuaries just don't care that this is inconsistent.

If that is what your plan document says, then it should comply with the TH rules.

Maybe you can tell me why the new DB plan is not going to have PBGC coverage. What type of employer with Davis Bacon employees will be exempt from PBGC?

If you go to a major law firm who knows what they are doing, expect a legal fee of $10,000 to $40,000 for their work. Maybe you can find someone to blame it on, and you can sue for negligence. Or, you could just go to the DOL and ask for a plan audit. Ultimately, the plan sponsor is responsible for getting it right.

Try Legalbitstream.com Your suggestion was great. I am adding them to my bookmarks. Thanks.

There is a difference between term and ordinary life policies. See this wording in 74-307: Section 1.401-1(b)(1)(i) of the regulations states that a qualified pen­sion plan may provide for the pay­ment of incidental death benefits through insurance or otherwise. Rev. Rul. 61-164, 1961-2 C.B. 99, and Rev. Rul. 66-143, 1966-1 C.B. 79, state that a 50 percent contribution used to pay premiums on ordinary life insurance policies is equivalent to a 25 percent pure insurance cost since only approximately one-half of the premiums paid for such policies are for pure insurance protection. Ordinary life or term life were the only choices when this rule was issued. Ordinary life really meant whole life policies or endowment policies that matured at some age with the full cash value equal to the face amount. In the period before ERISA, this was the primary product sold by insurance agents for retirement savings. Some of us remember that Universal Life policies were not even available in 1974. My first exposure was in about 1981. Once the IRS understood them clearly, UL policies were subjected to the same rules as term policies, essentially the 25% premium method.

You need to be very clear - ordinary life insurance has a specific meaning. It is level payment cash value life insurance. Universal life policies are not subject to the 50% rule. Variable life policies are not.

If you averaged the assumed retirement ages of the population in your plan, you would arrive at something between 62 and 65. So that goes onto the form. The attachment would state that you used "the average of the assumed retirement ages". The request does not match your perfectly valid approach, so ignore the instructions.

Manny???? Don't let him go. We got him in LA, and we want to keep him!

If you are amending a formula retroactively to 7-1-09 under a 412(d) election, then you can consider it for funding. There may be some room for applying the reduction to the majority stockholder who has dual legal roles as a business owner and an employee, but I have never seen a good legal analysis of the issue. I don't see any way to reduce benefits retroactively for the participants who are not "makers" of the contract. If the owner is married and you contemplate a retroactive reduction in his benefit by this amendment, then you might have an issue of spousal rights as well.

Your actuary needs to consult the Society of Actuaries. In particular, look at the XTbML project for older tables and their projections.

Consider a participant with a deferred vested benefit and the option for a lump sum payment. If the payment is made now, the greater of the plan actuarial equivalent or the 417(e) actuarial equivalent lump sum is the payment to be made. The plan actuarial equivalent might be based on a low interest rate, such as 4 to 5 percent. Or it might be a high rate such as 7 to 8 percent. The differences are important, because a low interest rate might be more valuable than the 417(e) rate, but the high interest rate will generally be irrelevant bacause the 417(e) rate will be more valuable. But, in either case (low or high interest rates), the plan actuarial equivalent lump sum will grow with interest every year. If a lump sum under plan rules was $10,000 this year, then next year it might be $10,400 at 4% interest or $10,800 at 8% rate. Will an annuity contract grow faster than the plan interest rate? Probably not in today's interest market. In addition, the 417(e) rates for converting a benefit to a lump sum also grow as the participant gets older, but not in a smoothly predictable manner. They are based on market interest rates published each month. The rate for a participant will fluctuate with new mortality tables and new interest rates. For example, the interest rates for lump sums in 2004 thru 2007 were based on 30 year treasury rates that were relatively stable between 4.29% and 5.42%, but that still leaves a lot of fluctuation for a younger participant. With PPA, the interest rates have ranged from 3.57% up to 5.83% on the third tier interest rates. So the lump sum payable each year has been subject to wide swings in pricing. I do not expect that the annuity contract offered by the broker will do anything to eliminate this very real economic risk.

Does his annuity proposal deal with the issues of deferring the benefit payment? If interest rates drop, the plan's liability increases. Does the market value of the annuity? Liabilities are interest bearing. Does the annuity contract provide a larger interest crediting rate than the plan's actuarial equivalence rate?

Maybe I just misunderstood. Is the question strictly about the 4/15/2010 quarterly contribution? If so, then the solution is to try raising the deductible amount or getting the refund. You could consider using asset averaging to blunt the effect of the asset gain.

If your funding method was measuring costs at the beginning of the year, you would have determined the maximum deduction at that time, which would have considered the quarterly requirements. It appears that your decision to value the plan at end of year is getting in the way.

Your use of terms is ambiguous here. What is your funding target, actuarial value of assets, COB and PFB? If Asset / FT (the "raw" funding percent) is above 94%, that is not your AFTAP unless it is also above 100%.

Please make sure to pass this info along to the ASPPA GAC.

For the 412(e) plans that we serve, we follow the same guidelines you describe. If a face amount death benefit is provided, 74-307 incidental benefit rules apply. We expect to see individual policy purchases, each to be paid within a short time after the premium statement date. If the premiums are unpaid, we advise the client that they are no longer exempt from other 412 rules. We expect that every new policy purchased will be on the same policy form each year, based on the current product offered by the carrier. If a policy form has been replaced, then the old policies continue as originally issued, and the new policies follow the closest similar approach. We discourage any face amount life insurance product within the plan.

The IRS can make money just by losing the mail. If they say that they did not receive it, the presumption is that the mailer did not send it.

It seems to me that Company B should buy the assets for what they perceive their worth to be. Company A has the liability, and needs to assure that the plan is properly wrapped up from the proceeds of the sale or their other capital sources. If Company A walks away from their pension liability, then those stakeholders are solely responsible for the promises they made and for any PBGC consequences. But, I am not a lawyer, and my opinion is worth the price you just paid for it.

This states that the default preretirement survivor annuity is based onthe 50% J&S conversion factor. If a participant has elected an alternate approved QJSA form of payment because they were eligible for benefit payment, but then died, the plan would have to honor the elected form of payment.

When I worked as a sole proprietor, it was very helpful to have an office-sharing arrangement with a tax practice. Their cash flow was good in the first part of the year, while mine was good in the second half, and we managed our expenses accordingly.

I would name the predecessor employer in the document. I would also consider granting past service credit for benefit purposes.

If the plan chooses to do so, it can limit compensation to the adopting employer only, not other members of the controlled group. Further, it can exclude compensation before the effective date of the plan. These choices also allow the opposite options, to count comp before the effective date, and if so, to count comp of other members of the controlled group. The answer is more complex if the prior business is not a continuation of the same business.

You will have the OPPORTUNITY to recertify it. If you don't need to, or it causes no change, then don't.