SoCalActuary

Consider seriously the option of web posting this information. It would show a good-faith attempt to make the information available. Of course, you should also keep a record of your attempts to contact the missing ones.

Start with PPA Section 116, modifying 409A.

I count my blessings. Our software vendor gave us the product and input forms last week. We are now working on collecting a few last items to put some AFNs into our clients' hands.

Pension plan sponsors never planned for lump sum payments at interest rates below 4% either. Don't forget that this capital market is terribly skewed toward safety of capital, so Treasuries are way over-priced for their expected returns. Don't try to make me feel bad for the participants here. They are already getting a much better deal than anyone expected by having the forced transition rules in 417(e).

Yes, that is a restricted option and cannot be paid since the Plan is < 60%. Unless you use the option for specified employer payments or post a proper bond/escrow.

I disagree. If you use the full yield curve for your 2009 valuation, it determines the funding target for 430 purposes. But the same FT is used for the AFTAP. If elected, it is used for PBGC premiums.

Sure, for $300 per hour, plus travel expenses, you can come to my office and listen to me tell you this slowly for two hours.

You should also review the rules for frozen DB plans that apply to 401(a)(26). You will probably pass this test for the next few years, depending on your employee turnover. High turnover means fewer years before you fail. If your HCEs are not part of the plan, or if your plan is perpetually underfunded, this issue will be less of a problem

Expect a more intensive relationship, with issues on financial economics, HR policy, responsiveness to client, constant training of client personnel due to their turnover. Audit issues are more intense. Responsibility for decisions shifts within the plan sponsor's politics. HR will try to assert authority, but the CFO will have more power. Every decision will need to be better researched and documented. Assume every decision will have to be explained to legal counsel at some point. And bill by the hour.

Just read the rules....No, you don't drop out of coverage under 25, but yes if there are no non-owners with benefits under the plan.

Yes to your last question. However, you could also have a comparable DC plan covering one of the NHCEs, assuming you get proper results from the Average Benefits Percentage Test.

Jay - in your scenario, the result for 2008 is unchanged. You get 150% on 12/07 benefits, and the TNC is not part of the cushion in any event. However, for 2009, the FT is the AB of 12/31/08, but the cushion is on the AB of 12/31/07. Then you also add the TNC. For 2010, the FT is the AB of 12/31/09, but the cushion is on the AB of 12/31/07, still. Finally in 2011, the FT is the AB of 12/31/10, and so is the cushion (assuming you don't mess with the formula in the meantime.)

Your approach appears to be fine. DB + deferral + 6%

The late contribution interest is reflected in the SB as a lower value for the discounted contributions for the year. This reflects an additional 5% applied to the contribution discount above the effective interest rate, applied to the period that the contribution is late.

I assume you are kidding us.

I hope this actuary is not with my E/O carrier. This screams "fiduciary action", and denies the rights of those employers who want to change their benefit program.

OK you win the award for longest title of a posting. If a participant has been fully paid out, I don't see how they could potentially become eligible for a future benefit payment. Now if they were paid out a partially vested account, there could be a potential for restoration of their non-vested account. Otherwise, the 1099 should be their final communication from the plan.

If you already have a 2008 Schedule B, then it appears there. Otherwise, you don't know. Ask your actuary as well.

For example, my brother-in-law retired under a GM hourly plan. From age 50 to 62, he gets an extra payment which is a Social Security supplement. Once he reaches 62, the payment automatically reduces, under the regular terms of the plan. My other brother-in-law retired with a life annuity benefit at age 60. If he had elected, he could have had an extra $1,000 monthly pension from 60 to 65, and reduced his life annuity at age 65 by the actuarial equivalent of the extra payment. That is not a Social Security supplement.

No contradiction. The IRS collects excise tax for failure to meet minimum funding standards. Pay benefits to the extent funded upon liquidation of the plan. Show a funding deficiency, because the required costs were not paid. Pay excise taxes. The IRS is perfectly consistent here, and totally protecting their own interests.

The analysis makes sense for the dollar limit adjustments to 415 benefits. But the salary limit to 415 is based on years of employment service. So an employee who works after the freeze of benefits continues to get years of service, but not years of participation. But back to the original issue: If an employee has an accrued benefit payable at age 58 that would turn into a larger benefit at a later age, would that larger benefit exceed their 415 salary limit? If so, you are faced with two choices. When the benefit exceeds the salary limit, then you must either pay benefits or issue a suspension of benefits notice. Further, I believe it is an unreasonable actuarial assumption that participants will voluntarily forfeit a future benefit. Take an extreme example. Participant has average pay of $2,000 per month, with 6 years of service. Max monthly benefit is $1,200 as 415 salary limit. Accrued benefit payable at age 55 is $800. By age 60, the actuarial equivalent of 800 at 55 is 1200 at 60. It is unreasonable to assume that the 1200 will be payable at age 65, because that assumes the participant gave up 5 years of payments from 60 to 65. Bel's argument is that the person will have more years of service by that date, so the maximum benefit might be $2,000. But that argument relies on future service which has not yet happened. The net result of this scenario is that the participant has not yet given up any rights to a benefit at 55 of 800. But the funding calculation purposely understates the liability if it assumes 1200 at age 65. This is just a clever scheme to get around the PPA funding rules.

The form due by April 30 is for medium and large plans. Small plans have the notice due with the 5500 filing. The April deadline applies to plans that were required to perform a beginning of year valuation as of 1-1-2008. The information from the old Schedule B appears to apply only for determining a prior AFTAP value. For the filing year, the new value is drawn from the 1-1-08 valuation. Now the challenge is to determine an estimated end of year value for those 1-1-08 valuations. Since you are stuck with a different interest rate, it looks like you need another valuation. See the extensive discussion in the ACOPA forum as well.

If your plan has this rule, then the excluded participants did not earn a benefit under the terms of the plan. Now the consequences are that you have some excluded employees who must be covered in the testing. So you have 410(b) and 401(a)(4) issues. But much more important are the 411 rules for accrual of benefits. You do have the ability to choose "elapsed time" rules for credited service, and those rules are similar in concept to the last-day rules. Frankly, I just would not touch this issue. 1,000 hours = year of accrual seems like the logical choice to me.

Also note that some of the document vendors will be coming out with sample good-faith language soon. Consult with your vendor for timing.

In your example, an accrued benefit payable at age 58 is $6,000. But the plan limited the accrued benefit to $4,500, presumably because of the 100% salary limit. But in the earlier discussion, you discussed an accrued benefit payable at age 58, which is then converted into an equivalent benefit payable at age 62. Please clarify which fact pattern you are using. Also, remember that future years of service have not been earned yet. Until the year has elapsed, the service does not count.