SoCalActuary

On Page 11 of your IRS letter, they noted that you do not have a uniform retirement age because the two plans had a different NRA. This does not prevent age 62 as a uniform retirement age, assuming both plans had the same definition. So testing at age 65 would be required only if the two plans had different rules. This is determined by the plan documents, which are presumably under the plan sponsor's control, and the actuary has the ability to influence this issue.

1. yes and yes 2. yes, there is a restriction on distribution under 436d. But so what? The plan doesn't have any money to pay the benefit.

Andy, that is currently the word on the subject. But George Taylor told us of 300 pages of new regs to be issued this summer. There is a promise that the elections will be more flexible in timing, if the rumors from the Boston session turn out to be true. I'm not betting on this horse race yet!

http://form5500help.com/

What makes the age 62 retirement a non-uniform testing age? Do you have some extra issues like a service requirement above 5 years? On the use of mortality, do you have a minimal death benefit? I would be curious if any of the actuaries from the large firms are using the value of the death benefit in their normalization?

I suggest you visit Janice Wegesin's website for more comments. If you are thinking about EFAST 1, you should probably wait until the next generation EFAST 2.

So the plan provides a person with a projected $10,000 monthly benefit, at a cost of $50,000 per year. Now you reduce the projected plan formula to $8,000 per month. This produces a funding target that is 80% of the old formula. The insurance company will project the current policy cash values to NRA and determine the annual premium that produces the new lower target. The premium goes down accordingly. To do so, you need a plan amendment, 204(h) notice, and new calculations from the insurer. Note that you cannot do so retroactively, but you must still pay the premium due for last year, since that occurred and was earned before you made the amendment.

For any 2008 amounts before enactment of WRERA, you did use the 94 GAR, because the law did not reference 415 for mortality changes. With WRERA, the table is conformed to 417. For 2008, therefore, you still had a gray area, and I recall that you were allowed to keep the 94 GAR for that year.

In the prior recession, Govt Motors contributed stock in EDS to their pension plan. But they had attorneys & politicians to back it up.

I could argue for a TNC if the actuary believes there is any possibility of restoring the non-vested benefit. (E.g., potential partial termination of the plan, or participant re-hired before the valuation) Otherwise, no, these facts suggest that the EOY benefit does not exceed the BOY benefit.

FT = 72 is my answer. TNC = 0. 28 is actuarial gain from turnover.

I would use a 5% discount from 62 to 55. Then 7% from 55 to 45.

No, I think you are safe to use 5% from age 55 to 62. That is the intent of the plan. From 55 back, you would adjust at your 7% assumption for younger ages.

If I understand your fact pattern correctly, the DB plan provides a TH minimum at 2% per year of benefit. But any participant who is also benefiting under the DC plan, including the ability to defer, gets a 5% allocation in the PS plan portion. The participants in the DB plan who do not benefit in the PS plan allocation will get their TH benefit solely from the DB plan. Now, any participants in the DC plan who are not eligible for the DB plan will only have a 3% required TH allocation. You did not mention the allocation method for the DC plan, so I assume it has rate-group testing. In that case, you must consider both the DB & DC plans for 410(b) avg benefits percentage test. The DC plan can still pass 401(a)(4) on its own. Further, you have to look to the combined plan deduction limits unless the DB plan is covered by the PBGC.

You did not mention that the PS /401(k) plan also meets a safe-harbor design for 401(a)(4) or that it passes the tests separately. You must follow the terms of each document to determine how TH benefits are provided. You have no discretion on this issue.

The lesser of the age 55 equivalent using the 5% UP84 equivalent or the 5% equivalent on the appropriate applicable mortality table for the limitation year of the payment.

The projected benefit in the Datair illustration is appropriate for some purposes, especially for life insurance based on projected benefit. Note that the projected benefit is not the same as the projected funding benefit under projected costs methods, of which FAS 87 is the only one still important since PPA.

You might be over-playing this. You make an assumption of the expected expenses. You can choose to use the prior history as that assumption. Sort of like assuming that last year's salary increase is your future salary scale. But you can change your assumption if it no longer looks reasonable. That does not make it an actuarial cost method.

So for 2008, the UVB date is 1/1/2008 for BOY vals and 12/31/2008 for EOY vals (same date as valuation for calculating the minimum contribution). So, do cash balance plans (and, I suppose, any other DB plans) that use EOY valuations get a raw deal from the PBGC? For example, for a 1/1/2008 BOY valuation, the 2008 accruals don't come into the equation; but, for a 12/31/2008 EOY valuation, the 2008 accruals are counted in the UVB. Should plans that use an EOY valuation be making contributions prior to the EOY to reduce PBGC premiums? Dig deeper into your instructions. The 2008 contributions and benefit accruals are not part of this calculation, and must be backed out of the assets and UVB.

I think the distinction between FT and TNC is divided differently than this. You need to consider that the life insurance benefit is not related to the length of past service or current service. The life policy is issued and the death benefit is provided effectively at the time of purchase until it is modified. Now don't ask me to agree that the treatment I am about to describe is reasonable or even logical, but that entire death benefit goes into the TNC in the year it is issued, and in all future years it is a part of the FT. The FT should show the present value of all future death benefit payments expected in the plan for benefits already earned. The life insurance benefit is usually similar to 100x projected benefit, and does not depend on new service each year, so it is earned as soon as it is issued. You would look at the life insurance net death benefit payable above the PVAB for each future year, determine the probability of the death benefit being paid, and then discount those future payments at the tiered interest rates in your valuation. This is similar in insurance terminology to a decreasing term life policy that expires at NRA. But the current cost is the single sum value of that entire policy for the entire period. If a policy has to be increased under the terms of the plan, or a new policy issued, then you do the same analysis of future death benefits arising from that new benefit accrual. Those future death benefits arose in the current year, and are attributed to the TNC.

Was that the president of the Philadelphia Fire Dept, the post office, or the printing company?

Problem with common law employees might be the benefits cost of providing unreduced benefits at age 55. Don't forget the issue of discrimination testing. The Most Valuable Benefit determination for 401(a)(4) needs to consider the potential benefit payable at 55. Also, define the actuarial equivalent benefit for termination of employment before age 55. Is it the actuarial equivalent of the age 55 or the age 62 benefit? How will lump sum rules work?

Start with the determination that the DC contribution does not exceed 6% of eligible payroll for the DC plan. If that is true, ignore the entire DC contribution, and proceed on the DB funding as if it stood alone.

Choice 1 is your answer. It was in the Solomon letter in summer of 2007 and WRERA finalized it.

Look to your document language. The DB document should have the EGTRRA language for no TH accruals when plan is frozen. The DC document should have language that only invokes the 5% rule (or some similar approach for combo plans) when the DB plan provides an accrual. Funding of the DB plan is not relevant to this determination; only benefit accrual should matter.