SoCalActuary

I disagree. You still have all the prudence issues - including risks that the corporation will fold up, that there are party-in-interest problems, capitalization ratios, diversification of corporate assets.

With or without other employees? If you have no 401(a)(4) issues, then you might be OK. If you have employees, then how do you intend to comply with the 110% CL ratio issue? You have not presented a fact pattern that would comply.

If a life insurance policy is involved, and PS58 taxable amounts were recognized, you should be clear about the pre-tax and after-tax portions of the death benefit.

How will the assets be subject to US Court jurisdiction? You may have missed the point here. US Tax law needs to allow the IRS a remedy if a plan violates the law. Foreign stock that is marketable on a US exchange has a reasonable chance of the IRS claiming jurisdiction. How does foreign land allow this? I am not saying that these are bad investments, just that they need to follow US tax law.

How will the assets be subject to US Court jurisdiction?

For a normal plan that makes sense, but not the fully insured plan. Remember that the accrued benefit is the cash value. By using a policy that buys too much benefit, you have an incorrect accrued benefit. The provider of the work in the first plan year is responsible for this failure, IMO, and they should review their E/O coverage.

The type of policy matters here. If you are buying UL or a term policy, then the life policy gets only 1/4 of the total. If you are buying an endowment at NRA, or possibly a whole life policy, then your example has some play - done carefully.

Ignore the special mortality, etc. Just define your benefit as a 2 year certain only benefit. Then your example is not even twisted at all. Any, by the way, nice job of isolating the issue. I also go with the $1299 value.

Like a deferred annuity plan? Or maybe a fully-insured plan? Been tried, still being sold sometimes. But the overhead costs and the deferred capture of sales expenses are still the problem. How would your idea work?

No deemed election. You must choose to make a voluntary reduction, subject to approval of the plan administrator.

I assume you are discussing a church plan that has elected ERISA coverage. Otherwise, your answer is easy. 414(e) specifies the sections of the IRC that apply to electing church plans. I don't see 401(a)(4) on that list. Maybe I'm wrong, but I don't see where the 110% rule under 1.401(a)(4)-5 is ever applicable to church plans. I still don't see in either section exempting church plans from 110% test. I"m not sure why they would be exempt. Thanks for the input. First, is your client plan electing coverage under 414(e)? If not, why does ERISA even apply? Second, if your client elects coverage, then you look at the IRS sections that would apply to it. 401(a)(4) is not on that list.

I assume you are discussing a church plan that has elected ERISA coverage. Otherwise, your answer is easy. 414(e) specifies the sections of the IRC that apply to electing church plans. I don't see 401(a)(4) on that list. Maybe I'm wrong, but I don't see where the 110% rule under 1.401(a)(4)-5 is ever applicable to church plans.

But you can look at the standards set by Academy committees, and find that Congress did not see it that way. So it does not matter that the old rules required funding for a benefit which has not yet been earned. The sole proprietor earned income factor now requires a more linear equation approach than in the past, optimizing the earned income so that it justifies a deduction range that surrounds the actual deposit made. Said another way, you find the contribution desired, compute the earned income that results, and determine if that earned income justifies the deduction desired. If you fall outside that range of deductible amounts, then you must modify the contribution and redo the process.

None in the under 100 life plans. No credible expected death probability for this size group.

I don't use the table on any new plans. but we still have existing plans based on this table, typically using the female table value. The effect is much less valuable than previously, mostly because 415 regulations limit the maximum distribution to the current published table for 417(e). So a table producing more valuable actuarial equivalence is really just a form of reverse discrimination, since the participant at 415 limit does not get to use the table, while all others get to use it.

I agree with this post.

Unless you choose to submit off-cycle.

Unless you have an Individually drafted plan, and you don't want to wait for the EGTRRA cycle.

I am not sure which issue you are discussing, so here's a few questions. 1. Are you using a lesser of two values approach? 2. Are you valuing the probability of a lump sum payment? 3. How does your example change if the segments are 6.0, 6.5, 6.6? My understanding is that the maximum lump sum is a known quantity at each future age where the plan has a fixed AE definition. If you are using a dynamic mortality table for valuation, I would have to think this trhough a little more. You determine the current 415 unisex mortality table value at 5.5% for each age where a potential lump sum is payable. You determine the maximum benefit available at that age, presumably the lesser of the age-adjusted dollar limit or the 100% of pay limit. If a prior benefit has been paid, then you must adjust for the value of prior benefits, apparently in a separate manner for 100% of lay benefits vs dollar limit benefits. Now you have a known quantity for a maximum lump sum at each age. For valuation, you determine the probability of a lump sum payment at each age, and discount those payments back using your segment rates. You also determine the probability that an annuity payment (limited to 415) commences at each age and determine the future annuitized payments resulting from that event. Those are separately discounted back using your segment rates. What am I missing in your question?

Mostly, I think it is very expensive to disagree with the court. That is the purpose of appeals, and it is not cheap. In addition, I find that the rules before 2006 were: that whipsaw was the manner of applying the 417(e) rules in effect at that time.

How important is it for a participant to get an updated amount? If the price is $350, that seems reasonable for the amount of detail, potential liability, and complexity of many defined benefit plans. Otherwise, they can make plans based on last year's information.

One of my past engagements was similar to this. I went in to takeover the plan, and noted that the prior two B's did not match, so I warned them that this plan cound be audited. Less than a week later, they did indeed receive the audit letter, so we had to go back and revise 4 years of back administration. It was a big job, involving crossed investments, discrimination, loans to the company that were unpaid, a falsified Schedule B, etc. But the client knew they had a problem even before the audit letter arrived, and after we presented all the work, they did pay for all the work we did.

I have been on both sides of this issue, based on facts & circumstances. If the prior actuary could legitimately defend their position, then I don't usually advise the client to redo the work. On the other hand, if I believe that the prior work was not defendable, then I advise the client of the audit risk. This includes any situation where I have found the work was forged or fraudulent, or based on a complete failure to follow existing law.

PPA & WRERA made further changes so you should discuss the delays with your document provider.

"I'm More Humble Outdoors" The southern and midwest actuaries say "It's More Humid Outdoors."