SoCalActuary

It's nice to see some things stay the same, even with big changes. It still appears that mjb is rooting against cb plans, while Harry O is rooting for them.

Is the trustee a professional trustee, based on education and prior experience? Does the trust document permit trustee compensation? Are the fees reasonable for the service provided? Does the trustee exempt themselves from voting on this issue to avoid conflict of interest? Is this transaction intended to benefit the union? Can the union show that the trustee has caused to to incur extra expense to replace the duties not performed by the trustee while working on the plan? Just wondering.

I started from the perspective that EBSA is the point of collection for this info. I agree that SSA sent the info, but they are done, since they have already notified the participants. SSA should be given the correct info, but I don't know how they will get it unless EBSA sends corrections. I am also sure that IRS does not care.

The true 412i plan provides the benefits as the proceeds of the policies. Can you explain why the policy proceeds could be reverted? Can you explain why the participants would forfeit interest for the two months (or more) while they wait for their distribution? Are the participants at 415 limits and prohibited from taking more funds? Unless you have a compelling reason, I don't see any possible argument for reversion.

This is an interesting issue, one that EBSA should hear about. I suggest you notify the local EBSA office of DOL, and send a copy to ASPPA of the facts (but without the details of name & tax id's). ASPPA has a good relationship with the agencies, and cares about the integrity of the process.

Carol points out the short-quick answer. However, the true answer is that you follow the terms of the plans, in which the method of compliance with TH rules is elected by the plan sponsor. This might be all DB minimums, or a combination of two, or comparable plan minimums. 5% might be the right solution, but only if the documents say so.

If I understand this correctly, Plan A benefits are used to determine part of the benefits payable under Plan B. The combined total of both plans is subject to all limitations, non-discrimination in benefits, benefits/rights/features tests. It seems fine, so long as the eventual benefit is drafted correctly to be definitely determinable, and that the operation of the benefits comparison can be made timely. In a multi-employer plan I administered, we determined the plan benefits as the excess of the plan formula over benefits provided in the prior plan, which was not administered by us.

goldtpa: the plan is under the general test for 401a4. If the db is tested as a dc, then it used the cross-testing method of passing 401a4. If it was tested as a db accrual, then it is not cross-tested. Re: top heavy. If the employees with zero benefit are excluded, then they have no th benefit because they are not eligible for the plan. If they are not excluded, but the benefit formula is zero, then they end up getting the th benefit. So, are NHCE1 and HCE2 & 3 participants or excluded?

You can indeed state a different benefit by employee, whether it be a DC plan, DB plan or cash-balance DB plan. You just have to deal with the consequences, namely - this is not a safe-harbor design, so you must pass 401(a)(4) by the general test. You are testing coverage by name, although I wonder if this is good drafting, since the plan may be top-heavy and you appear to include participants but with zero benefit formula. Better to have them excluded by name and tested with a zero benefit amount.

The pension trade press reported that the FASB has concluded their deliberations. PBO will win the disclosure battle.

The new standards include much more than the change from ABO minimum liability to PBO liability. The impact on Comprehensive Other Income is important. The change to direct balance sheet recognition is important. The effect of assumptions and valuation date are still controversial. In addition, the COPA conference is already filled, almost to capacity.

For actuaries in the Los Angeles area, the EA workshop on Monday Aug 7 will feature a discussion on the proposed new FAS disclosures. Location - Price Raffel Brown - Century City. Time 5 PM to 7 PM A session will also be held at the COPA annual conference on August 18-19 in Chicago. (Typing too fast is embarrassing! I said May) For more info: www.collegeofpensionactuaries.org

Did the plan administrator illustrate a lump sum for April payment? If so, the plan is probably cheating the participant to pay on the cheaper May rate. They should have paid on the earlier rates, but I question whether anyone will force them.

Gary, you don't know about "permitted disparity", so I think you are swimming in water too deep. Go get help from people who have done this before.

Now if we could only get the pension plan for the SEC people restated on PBO. (Oh, but that's the Fed's and they don't have to comply.) Look for a similar crisis in gov't plans when they start complying with GASB, or defense contractors on CASB standards. Seriously, the securities people (including Mark Warshasky (sp) at Treasury) think this will only be a minor disruption in the stock market. It will result in serious differences between proposed pension funding rules and financial disclosure rules, but that's fine with Treasury. As has been said above. this will also encourage pension sponsors to go career accumulation on plan benefits. In addition, it will create opportunities for stock market predators to gut a company's pension plan to produce quick earnings. I believe the only people who could change this are the Congress. Will they? Only if we start lobbying.

I agree w Andy. The excluded associates must be part of your rate group testing, along with any other employees in the affiliated service group, by the way.

You did not disclose the ability of the two plans to stand on their own. If each passes without the other, then you are not required to aggregate then to pass non-discrimination. Are any HCE's in the Associates plan? If so, does it pass the 410(b) coverage test? If this fails, then the Associates plan would only pass if combined witht the regular plan, so you have permissive aggregation. Similarly, if the regular plan fails 410b, then you need the associates plan and must use permissive aggregation.

The IRS has given clear (if informal) guidance here. You chose in the past to provide the TH min's in the DB plan, and put it in the plan language. Now, the DB plan is frozen. You need to amend your documents, otherwise you are not complying with TH rules. If the DB will continue providing TH min's, then the plan is not really frozen, but you can continue to have the benefits there. Otherwise, you must also amend your 401(k) document, and provide the minimums there.

For the majority of the small plans I handled last year, End Of Year Valuation For the majority of the larger plans, Beg Year Valuation. For the pre-retirement interest rate, I practice on the basis that the selected pre-retirement rate applies for the entire year. Even if we get stuck with the graded rates of proposed pension reform, there will still be a single interest rate for maintenance of bases, FSA and reconciliation accts.

SRM - yes, your change in the scenario would work. This assumes that Gary's client has two separate businesses with their own Sch C incomes to report. However, my intuition says he has one Sch C, and is looking for ways to juice up the current contribution.

3-I assumes the business was in practice 5 years ago. If no ownership 5 years ago, then no attribution. Still, I question your ability to attribute that stock to a person no longer a minor child. That appears to be a new wrinkle on the attribution of stock. Any citations or examples where the IRS made that determination?

"The situation I referred to was for a plan that was in its first plan and the client apparently wanted to take a carryover from the first year and offset a prior year's earned income (when there was no plan)." It might not be obvious, but I will try to make the point again. A prior year's income cannot be reduced for a sole-proprietor, when the plan did not exist in that prior year. If the sole proprietor had other expenses that should have been taken in the prior year, but were moved to a later year, that is a tax question. The pension is not one of those items.

I don't see that you get the result you want. We requested a waiver of coverage in a similar situation, and the PBGC refused to drop coverage when the child had exactly 10% stock ownership. When we went to 10.1%, then the PBGC granted the release.

Either the spouse is an employee (w-2 wages, deduction on 1040 schedule C for pension), or the spouse is a partner (should have 1065 return and K-1's) or the spouse is not an eligible participant. How would you determine spouse's earned income? Is it a formula on the total net income, or a guaranteed payment in a partnership? or wages? I do not find any authority to arbitrarily divide the Sch C income between the spouses, just so you can maximize the pension deduction. I look forward to dissenting opinions, but this is the approach I hear from knowledgable tax preparers.

After reading your question more carefully, I agree with Belg. The plan must be in existance in the fiscal year before the deduction is allowable. I would not support any retroactive deduction. Further, you must determine the deductible amount in reference to the earned income of the participants. If $50k of earned income produces $150k of contribution, fine, so long as you had $200k +SS taxes to work with. Instead you have $150k to work with, so you must adjust your earned income down and recompute your maximum deduction. On the other hand, if you design the plan to provide $100k deduction on $50k earnings, then you have spent your allowable amount.