carrots

Why would 1.404(a)-14© only apply to plans described in 404(a)(1)(A)(i), (ii), and (iii), and not also to single employer plans? 1.404(a)-14(a) says that the purpose of the section is to provide rules for determining the deductible limit under section 404(a)(1)(A). That would be rules for all plans regardless of whether or not they are single employer plans. 404(o), itself, starts with the statement - "For the purpose of subsection (a)(1)(A)." That would be 404(a)(1)(A). I don't think that there has been any change in the rules, and that the three options under 1.404(a)-14© still apply to all plans whether single employer or multiemployer.

Thanks, Mike. I found the provision in WRERA that authorized the treasury to issue regs on interest adjustments for late quarterlies in plans with end of year valuation dates. So I agree that it is probably prudent to increase the required contribution by 5%, at an annual rate, from the due date of the quarterly to the end of the plan year (since the contribution was not paid until after the end of the year). The other side of the coin, of course, is what happens if the regs on this, when issued, are not retroactive!

Aw, shucks!

Proposed reg 1.430(j)-1©(iii)(B) says that the modified interest rate (5% increase) only applies to quarterlies due on or after the valuation date.

SoCal, that would appear to fall under IRC430(j)(3)(E)(iii), but I'm not finding a reg for that. The technique you describe makes sense, but do you know if there is a reg or proposed reg for this?

Please excuse the cryptic topic title! Assume: Cash Balance Plan Year 1/1/2009-12/31/2009 Valuation Date 12/31/2009 Valuation Assets $300,000 Funding Target $300,000 Target Normal Cost $80,000 Minimum Required Quarterly Installments $10,000 4/15/2009, 7/15/2009, 10/15/2009, 1/15/2010 Actual Contribution 3/15/2010 $100,000 Effective Rate 6% 2009 Schedule SB lines 19a and 19b are $0 What should be the entry on the 2009 Schedule SB line 19c? How about 100,000 / {(1.11 ^ (2 /12)) * (1.06 ^ (.5 / 12))} = $98,037? That seems to follow the Schedule SB instructions, but totally ignores the late MRQs from 2009!

If a business consists of a younger owner, say age 45, and several older employees, say ages 55-60, can they have a Cash Balance plan with a uniform contribution credit of, say 25% of pay, in addition to a profit sharing plan? Does this pass discrimination testing? A traditional DB plan, with similar funding requirements, would almost certainly be discriminatory.

As a start, a) get the paperwork in place asap to freeze benefits and terminate the plan, b) consider assuming a higher retirement age in the calculation of the FT and TNC, c) look at PRA 2010 to use interest only on shortfall amortization for 2009 and 2010.

A 6 person plan has filed for a standard termination with the PBGC. The owner is going to waive benefits to the extent necessary. The owner does not want to wait 60 days before distributing benefits, but would like to do so immediately. While the PBGC Form 500 Schedule EA-S requires a proposed distribution date not earlier than the 61st day after filing the Form 500, is there any restriction on the earliest date that benefits can actually be distributed?

If you file a 5310 and the IRS finds a problem with the documents (missed amendment, say), do they just tell you to add the amendment or do they say, "Gotcha! You are disqualified!"

If the crediting rate is variable, tied to an index, I would think that you should use your best estimate of what that variable rate will be in the future. Presumably you could use a single rate for all future years, or even use a different rate for each future year.

Thanks, David. I thought I had seen that somewhere. I don't agree with the IRS's position but, as that great man, Ed Burrows, once said, "It's their ballgame!"

What is the current IRS position on decreases in accrued benefits due to increases in covered compensation? Is that allowed? If the accrued benefit at 12/31/2009 = (5% x AMC x YOP) + (.5% x (AMC - 2009CC) x YOP), can the accrued benefit at 3/15/2010 = (5% x AMC x YOP) + (.5% x (AMC - 2010CC) x YOP)? AMC and YOP are the same, but the 2010CC exceeds the 2009CC, thereby producing a lower AB. Does the 12/31/2009 AB have to be protected?

Under 430(a)(2), basically, if the assets exceed the funding target, the target normal cost is reduced by that excess. So, basically, yes.

For many Consulting Actuaries the Hewlett Packard HP 12C has been a mainstay pocket calculator for over 25 years. How about Smartphones? Is there any consensus on a really good Smartphone for the Consulting Actuary? What Smartphone, if any, do you use? What about phone service contracts for Smartphones? What company do you use for phone service? What does it cost? Thanks!

Andy: Thanks, I was able to find similar wording in the final regulations (1.430(d)-1(f)(4)(iii)(B)). However, don't the regulations actually say that "the valuation interest rates under section 430(h)(2)" are to be used "as opposed to the interest rates under section 417(e)(3)"? If I read that correctly, it seems to say that the special actuarial assumptions are actually the regular assumptions! What?!

Plan's actuarial equivalence is 8% pre and post, 83GAMU post only. 417(e) uses September rates, the fourth month prior to January 1, the start of one year stability period.

Please forgive me if this already has a thread (or if I have previously raised the topic!) Valuation Date: 1/1/2010 Benefit is considerably less than 415 limits. Regular funding segment rates for a monthly life annuity are 4.92%, 6.71%, and 6.80% (October 2009). There is "100% probability" of the benefit being paid as a lump sum, on 1/1/2020 (10 years from valuation date). The current 417(e) segment rates are 3.31%, 5.05%, and 5.32% (September 2009). Questions: 1. Under 430(h)(4), is the actuary required to use any of the above segment rates in calculating the FT for this benefit? 2. If not, and the actuary uses "reasonable assumptions," how is line 21 of the SB completed?

Andy, thanks! I presume, however, that the same averaging of segment rates is not permissable for funding purposes under 430. Do you agree?

For 417(e) purposes, can a plan use the average of the segment rates for the 2nd, 3rd, and 4th months prior to stability period?

This guy can't follow instructions?

A couple of our clients are asking about the relative advantages of rolling DB distributions into Roth versus regular IRAs. Is there a good resource on that topic?

At one time, the IRS wanted everyone paid out in the previous 5 years to now become 100% vested. Now, I believe, they only apply that to participants paid out in the current plan year. So, if someone was paid a partially vested benefit earlier in the year, they would be required to become fully vested at plan termination. If the plan termination is delayed until after the end of the plan year, those former participants don't need to become 100% vested.

We will probably charge about the same; maybe a little bit less.

Aaaaaarrrrrrrggggghhhhh!