SoCalActuary

That should not require an amendment. Lump sums are already an acceptable option.

We have both DB & DC plans together, and are cross-testing to prove compliance. The VP document for the DC plan provides a Gateway language with a 5% rate built-in. But we need something more. When a DB is involved, the amount may go to 7.5%. Or we may find that some employees need a higher contribution than others, possibly because some are not covered in the DB plan. For the participants with no DB benefits, I would like to have one gateway amount. When the participants also have DB, I would like to use a different amount, based on the average DB contribution rate for all NHCEs. Does Corbel's document have this option? Does anyone else have any suggestions?

No. also, no sympathy. The plan can be changed for any future participant, but nothing is taken away for any existing ones. The RMD issues should have been discussed before the person became eligible. Paying taxes is a burden that could have been delayed only until 3 years of service in any event, since this is clearly a top-heavy plan. But with good consulting, the taxable amount could be less than 4% of the benefit accrued.

The two participants worked 1000 hours, and received an accrual of benefits at least 0.5%. Sounds OK to me. I'd count them. The vesting of benefits is not directly part of this compliance issue, and makes it look confusing, since the participants end up with a higher accrued benefit but only part vested. Ignore this.

Sounds like a traditional cash balance plan with quarterly interest updates. I am curious, though. How is the contribution determined? Does each participant make an election or does the negotiating unit determine the amount? Is this supplemental to a traditional DB formula? Also, if the participant takes the funds, do they give up any other benefits? I still have a problem giving faster access to the funds, because you will get a big increase in short-term participants, who will take the penalty and treat the account like an unemployment benefit.

Yes. Now its not a pension plan, it is an unemployment benefit

Sorry, I don't think so. If you use the trustee services provided by the broker, you have to have a service agreement with them. They don't do that for free.

The SS4 should indicate that the new entity is a Trust. The tax ID of the trust will be used to report any investment activity and payments made from the trust. This number is disclosed on the 5500 Schedule P. The trust is a separate legal entity from the plan sponsor, and it needs a different tax ID from the party who is filing the SS4, presumably the plan sponsor.

mingblue - the issues of accountant opinion and bonding become much more important in the small self-trusteed plans. If any assets of the plan are not held in the "favored" types of assets, then you need an accountant's opinion, or you must have bonding to cover the value assigned to those assets. But the practice remains common, nonetheless, because many plan sponsors are offended by the high cost of a corporate trustee.

mingblue: what you are describing sounds like the normal course of business for the majority of small plans. The trustee assumes investment management control, and has to use a brokerage account to execute their investment decisions.

The PBGC even acknowledges the change in their instructions. So they have already given permission to use the 100% corporate rate since the IRS mandated the new mortality table for CL. But I would like to see them publicly say so, and also correct their interest rate table for plan years beginning in 2007/

1. Will the IRS re-publish the table each year or will the actuary have to figure it out? 2. Since it isn't "the same table," won't that be a change in actuarial assumptions? 3. "To be determined" - by who and when? 1. I expect the IRS to republish each year, but the principles involved are well known to the actuarial community, so we should be able to create the table without the IRS. 2. The IRS did consider the change in assumptions, and it is looking for a new base for 2007 if the funding method establishes bases. In 2008, this won't matter. 3. My reading of 2008 is that the IRS has not yet finalized their position and won't commit yet.

And don't overlook that the 150% CL rules for 2006-7 are not identical to the 150% rules for PPA in 2008. 2006 and 7 will allow 150% of the current year accrual, while 2008+ will not.

To be determined, but probably the same rules as 2007 for mortality. Some of the IRS actuaries appear to want the separate tables for retirees vs all others. Small plans will probably be able to keep the unified table. Don't forget, the table will have another year of projection for 2008, so it won't be "the same table"

You might ask the actuary you use. Or you could post the table here and ask for help.

Maybe the reality is that their health forced them to retire, and the govt finally noticed.

Nothing wrong with that. 417(e)/415 mandated mortality has not changed for 2007. However, for 2008, PPA does change the rules.

We got the news today. Use the proposed rates as of December 2005, where you use the RP 2000 table separately for males & females. All plans will now have the option to use the blended table or the separate tables for annuitants and non-annuitants. This is based on the projection of mortality improvements. Annuitants have projected improvements to 2014, and non-annuitants have projected improvements to 2022.

Does the target plan document actually show the APR factors? Can you do some reverse engineering on the table to find the underlying qx values? I suspect it was simply mis-labeled. But it might be helpful to ask the firm that created the document.

Don - I am deeply concerned. I just do not have any great answers. Balancing the Social Security cash flows is difficult already. We currently over-tax on a payments basis and use the excess to "loan the govt" for other spending. Here are some of the ideas worth considering: 1. Raise the interest rate that SSA charges for lending the funds. 2. Raise taxes more. 3. Push back the normal retirement age again. 4. Change the indexing to match CPI, not wage growth. Here are some added ones: 5. Pay doctors and other medical practitioners a lot less money. 6. Charge emergency room patients the true costs. 7. Only allow tax deduction for the health care costs, not the living expenses. This would apply to room costs and meals at hospitals, long-term care housing and meals, and other ways to reduce expenses. 8. Allow more competition for health services and less liability for being imperfect. But we are indulging in political discussion in the DB forum, and that is not what this was intended for. Where can I learn more about FASAB? Does anyone in gov't actually listen to it? When did Congress actually use its results in any legislation?

We are getting off the track of the question, but I can't resist. 1. Was FASAB a typo? Did you mean FASB? 2. Many actuaries and plan sponsors objected to the FASB final ruling on FAS 158. It is not the proper measure of liabilities. ABO is much more appropriate than PBO. 3. Actuaries have looked at the Social Security and Medicare liabilities from many different viewpoints, including methods of EANC, projected unit credit, accrued benefit (traditional) unit credit. None of those views really matter, because the liability is simply an off-the-book balancing item for an organization (US Govt) that does not do business on a balance sheet basis. If the underfunding of Social Security is measured, what does Congress do about it? Do they raise more taxes now to improve their debt ratio, so they can borrow more later? Do they invest in private securities or do they reduce the current national debt? Does the economy benefit if the gov't has more tax revenue and less borrowing for the national debt, thereby taking more funds from the working economy and less from the banking and savings portion? Don't think for a second that these issues have been ignored! A much more important issue is that gov't mandated health benefits with lawyer-enforced minimum standards of care is taking an ever increasing percentage of the economy. Where's the competition in health care to drive down costs to match inflation? Manufacturing has competitive pressures from Asia. Even much of the service economy has a lower cost provider in India. All fun speculation, to no useful end, I'm sure.

Don, maybe Congress is smart enough to know the FASB standard is artificial and biased against DB plans.

My read of the rules is that you must comply June 30, 2007. To quote from a memo posted by CCA Strategies, " Balance sheet recognition for employers with publicly-traded equity securities is required for the fiscal year ending after December 15, 2006." It further states: "Other employers may delay recognition of the actual funded status on the balance sheet until the end of the fiscal year ending after June 15, 2007" Since you are adopting a fiscal year ending June 30, 2007, that becomes the date you must post a funded status on your balance sheet.

You need a funding method that provides a reasonable allocation of costs between past service and future service. Based on these facts, all benefits are for past service. So my answer is to fund on unit credit method and establish a base that reflects a change in funding method. You should consider a letter to the former actuary, explaining why you believe the prior work was in error. Give them a chance to respond, so they can fix their work if needed. If they won't respond, then you may be forced to ask for more formal review by the ABCD. If it were me, I would also revise the prior year work and recommend to the client that they accept my calculations as a substitute for the prior work.

401(a)(17) is not the issue, but 415 and discrimination under 401a4 are important. If the lucky individual makes more than $220,000 in each group, then use it for each plan, since the compensation used in determining plan benefits reflects pay for that group. I know of no requirement to offset compensation limits because you received compensation in another group. However, for a controlled group, remember you have a single 415 limit for all DB plans, and separately a single 415 limit for all DC plans. You might have to aggregate the two plans for testing, so you would need the benefits of both plans added together to demonstrate 401a4 compliance.