SoCalActuary

From the hints offered by the OP, this appears to be a recovery of a past overpayment of benefits. The Plan Administrator has already stated what the benefit amounts should be. The bank just overpaid them in the past. Now the bank is responsible for recover, because they have already indemnified the plan for the overpayment. Is this the correct scenario?

Only Enrolled Actuaries may become members of ACOPA, and their discussion forum is for members only. But it shares a lot of common membership with BenefitsLink discussion.

The IRS position on this works if you meet all the conditions on time. But the client did not get the data timely, no range certification was completed, and the AFTAP is presumptively under 60%. The measurement and the 436 contribution do not occur until after 10-15. Since you did not meet the conditions, VCP/EPCRS is your only other choice.

Well, it is now 2010. So make the amendment now, with your new certification before 4/1/10. Make it retroactive to 1-1-09 or 08, as a correction. Submit for VCP. The cost is due to the client's failure to give timely data.

I'm not a fan of your idea. It insults the intelligence and individual needs of your participants.

What testing do you need? The DB is frozen, so there is no increase in benefits to any HCE, meaning no top-heavy minimums nor a4 testing. You will need to confirm that 401(a)(26) was met, but that should be no problem. Of course, you missed the chance to sell a profit sharing plan with age-wgt, integration or general testing features. The SEP requires essentially uniform allocations, including amounts to people who work less than 100 hours.

I don't have the link handy, but look for Mike Preston's extensive treatment of this issue earlier this month.

Sure it was. 1/2 of the total benefit is valued at his life annuity rate. 1/2 of the total benefit is valued at her life annuity rate. When one dies, their life annuity ends. When the other dies, their life annuity ends. Sorry Andy, but it is that simple. Don't understand your post. I certainly knew how to value it. I just don't recall having ever seen it discussed. I have seen this benefit provided in the past, but not in private pension plans recently. After all, Social Security uses the 2/3 survivor benefit as its normal form. 150% PIA while both alive, dropping to 100% PIA on death of first person. I was only commenting on your Jordan reference. This benefit did not require any multi-life calculations. Now the 2/3 J&S is more interesting. It needs the joint life value.

Sure it was. 1/2 of the total benefit is valued at his life annuity rate. 1/2 of the total benefit is valued at her life annuity rate. When one dies, their life annuity ends. When the other dies, their life annuity ends. Sorry Andy, but it is that simple.

SoCal, I know I am going way back, but what did you mean by this? Let say my lump sum from a contributory db plan is $100,000. Of this $20,000 is the sum of my post tax employee contributions (no interest, just the amount I put in). If I elect to take $20,000 in cash and rollover the other $80,000 into an IRA do I owe any tax on the $20K? I'm thinking 80% of the 20K is still taxable, but I can't find anything that states this clearly. Is IRS Section 72(e)(8) my best site? I was pretty confident until I read this old post and now you have me wondering if I am correct? Part of the issue is the subtle distinction on trustee accounting. If the trustee will not accept after-tax funds because they do not intend to account for them separately, then the non-taxable portion cannot be rolled. This is a relatively undocumented issue that directly affects your client's plans. If the trustee can accept after-tax funds with proper accounting, then you have more of a fight on your hands, because the IRS expects you to pro-rate the accounts. Good luck on that.

If I understand your question correctly, your 12-31-09 PFB was the 2008 excess contribution, adjusted for the actual return on assets during 2009, using the second column calculations on page two of the 2009 SB. So in your example, both the two items are adjusted to the beginning of 2010 as the addition of the two parts. That new balance at the beginning of 2010 is adjusted forward at the 2010 EIR.

Where is your actual return on plan assets? The COB and the prior year PFB are both adjusted for actual return. Follow the math on the SB.

When I worked in life insurance, we designed policies to pay the full value of the death benefit when the insured reached the end of the mortality table designed in the plan. Given this person's age, that might have been age 100 based on the 58 CSO table. Some policies were designed as endowment at 90, 95, etc. The same facts hold true in these policies. The insurer has raised the cash value of the policy in such cases to cover the full face amount of the policy. But the policy maturing is not actually a pension issue. The insurer usually has a conversion option to allow the funds to stay at the insurer, paying whatever insulting and pitiful interest rate they must pay (like 3%) until the insured requests the funds. So the financial advisor may be trying to get the money moved into a current investment that pays a more competitive rate. On the other hand, this may have become an opportunity to earn a commission.

The OP has a number of areas of confusion. Five years is the period of time before certain restrictions apply to plans under IRC 436 b, c or e. Annual valuations are required for single employer plans. 8 1/2 months is 8 full months plus 1/2, meaning the end of August plus 15 days for a calendar year plan, giving 9/15. Costs for the 2008 year are determined in time for a 9/15/2009 final funding deadline. Those contributions funded after the end of the 2008 year will have an influence on the level of contribution for the 2009 year, so the 2008 year work must be completed before a firm cost is made for 2009. These facts are true regardless of the valuation date. Hope this helps clear up some misunderstanding.

My experience is that the offset is not always able to offset even a 0.5% accrual, since some employees are in their late 50's or early 60's. This is made worse when the DC assets take a 30% dump. This makes for some surprised clients when they find out that there is an accrual, and PBGC coverage, because someone went over the DC offset value. As to the testing, I see Andy's point, where you are only testing the current accrual. The value of the prior year benefits (including any change in their investments) is ignored for current year testing. I am curious if the detailed language mentioned by EM is used to define the current year accruals for testing purposes.

If you do not pro-rate the integration level, this only hurts the higher-paid group, but not necessarily the HCEs. It should cause no trouble for testing purposes. If your document defined a pattern of accrual with monthly accruals, then you could argue for a prorating of the integration level.

We do both. But we rarely use the floor-offset since the offset can fluctuate in an unpredictable way.

Did the event occur before the effective date of the new reg?

I suggest that BRF testing is different from testing the amount of benefit. 401(a)(4) general tests look at amount, of which zero benefit is a part. BRF is more like 410(b) testing. What percent of HCEs are eligible for a particular benefit - right- feature, vs the availability to NHCEs. For example, if HCEs get permanent insurance with cash values but NHCEs get term insurance, then the HCEs get a benefit by being able to buy the policy from the plan.

To the OP, don't forget that those stocks are assets of the employer. If you sell the assets, creating cash/checking balances, then you have something to contribute to the retirement plan. Otherwise, you have a potential party-in-interest transaction if you just transfer the assets by re-titled registration.

This has been the practice for beginning of year valuations for as long as I can remember: the actuary makes their best estimate of the benefit to be earned, including an assumption of the compensation to be used in determining that benefit. You only get in trouble if your estimate is judged to be unreasonable at a later time.

If you are amending to a higher NRA, but keeping the protected subsidized early retirement, how have you amended to increase benefits?

I do not know if the PBGC covers this plan. But the answer would change your analysis. To the OP, what is PBGC's role?

You have a difficult educational challenge. It was a good start to quote the reg's. But the math is best illustrated using some of the educational materials available in the actuarial community. SOA study materials could help. The Larry Deutsch seminar also has an extensive set of worksheets and spreadsheets to illustrate the concepts. Another option is to appeal to "authority" by having the client get the exact same answer from other actuarial firms.

A plan sponsor wants to start a qualified DB plan for 2009. If we provide a prototype document containing the required eligibility and benefit language by year end, must we also provide an add-on amendment for all post-GUST items at the same time? Can those add-ons be attached to the basic document without requiring an added signature? Can we include in the adoption resolution that all required amendments are incorporated automatically without separate signature? For background purposes, we are using Corbel prototype standardized documents sponsored by our own firm.