My 2 cents

One thing that could be happening is that there were receivable contributions for 2008 made after the date the 2008 notice was given out (for a plan with assets in the billions, I am going to assume that there are more than 100 participants, so the notice was due by the end of April 2009). Those contributions would not have been included in the 12/31/08 assets shown on the 2008 notice (which are supposed to include, at most, receivables that had actually been paid by the date the notice is issued), but having been paid prior to the 9/15/09 deadline, they would, after discount, have been included in the 1/1/09 assets. It is certainly confusing. On the liability side, the funded percentage information is based on the calculations for minimum funding and the end of year liability information is based on something not quite the same as the methods used to measure premiums payable to the Pension Benefit Guarantee Corporation. It really is a case of apples and oranges But to think that someone not only reads the notices, but compares them from year to year! Something about that restores my faith in humanity.

Assuming that the amount shown on item 38 of the prior year's Schedule SB was NOT increased to the end of that year, one copies it into this year's 11a, shows the interest for a year on the 11a amount at the prior year's effective interest rate (not the actual rate of return for the year), adds the two for 11c, and then puts into 11d the amount being added by election as of the end of last year (or is it the beginning of this year?). Actually easier to understand if you go by the labels on the form itself. The election itself should make it clear how much is being elected to be added and as of when. The amount elected, as is, should be shown in 11d. Two notes: First, we only work on plans using beginning of year valuations. Second, we interpret the description of item 38 ("interest-adjusted excess contributions") as calling for the actual contributions to be interest-adjusted back to the beginning of the year, not as calling for the excess contributions to be interest-adjusted forward to the end of the plan year (although that is what we would have expected, but item 11a & b implies that 38 should always be as of the start of the prior year, again assuming the valuation date is the first day of the plan year - haven't tried to figure out how these things work using a different valuation date).

Agreed - not seeing anything exempting them (under IRC rules). I don't think I have ever seen a church plan that would have come close to being top heavy though - would probably have to be a very small covered group.

Is there still a 100% excise tax for funding deficiencies? This is the sort of thing for which the IRS used to impose it. Not to mention the fact that "owners" is not a sufficiently exclusive class for benefit waivers. The PBGC would countenance that for a person who is a majority owner and the IRS would grudgingly accept that, but without the PBGC on the scene, I don't think that waivers would be acceptable to the IRS. What about applying priority categories? Please bear in mind that we seldom are involved with ERISA defined benefit plans not covered by the PBGC.

I am somewhat uncertain about the reference above to ongoing defined benefit plans being limited to paying minimum distributions only as an annuity of some type. Most of the plans we see establish a formal annuity starting date as of the date a minimum distribution becomes payable, with all options (assuming no funding issues) being available, including lump sums if present in the plan, with spousal consent obtained if applicable, and treating the election as irrevocable. Owner or not, HCE or not, if the person must start collecting something, they are given the opportunity to elect whatever distribution form they want. The only limitations on making such a distribution (assuming no 415 issues) would be the 25-high restricitons and anything in effect under Section 436. Of course, one must monitor the situation thereafter in case any new accruals would have to be started. My vote on the original question is that one calculates the minimum distribution without regard to the funded status of the plan. The minimum distribution rules for a defined benefit plan are framed in terms of the accrued benefit, not some sort of account balance. The value is what it is, even if there is only half enough money to cover the whole accrued benefit.

Presumably, the plan administrator has established a default IRA provider (I know that if involuntary lump sums above $1,000 are payable under the plan, there must be a default IRA provider established under defined benefit plans, and I assume that this is either a defined benefit plan or the same rule applies to defined contribution plans). You make the rollover to the default IRA provider if the participant cannot be located or won't respond. You only consider making a rollover elsewhere if the participant formally requests it. I don't think that you are allowed to just move the lump sum into another plan maintained by the employer.

Doesn't look like it would meet the elapsed time rules (40000/365 per day emplolyed would). It doesn't look as though proper concern is being given to hours worked. What sort of accrual basis is it expected to meet? Let me guess - the plan does not cover any rank and file employees, does it?

Which is the better use of plan assets - spend a little to make sure that beneficiary designations are coherent, or spend who knows how much when the lawyers have to get involved after someone dies who had allocated 150% of the benefit among a group of beneficiaries?

Is a full cash refund form actually restricted when a plan is between 60% and 80% funded? The present value of the death benefit is well under 50% of the value of the overall benefit, and the payments to be made during the participant's lifetime involve no acceleration whatsoever. So if the only form that is available under the plan that involves any possible acceleration is a full cash refund form (and nobody who had elected such a form dies), would a change in the certified AFTAP from 75% to 83% be material?

Not quite sure about this, but isn't it already too late to elect to put any 2008 contributions into the prefunding balance? Wouldn't that election have to have been made by the deadline to make 2008 contributions? Is it too late to amend the 2008 Schedule SB? Is it too late to amend the 2008 corporate tax filing to deduct the contributions made in 2009 that are to be treated as applicable to 2008? Anyway, this thread is about deduction limits. Aren't the carryover and prefunding balances ignored (i.e., always use gross assets) when calculating deduction limits (unless minimum required amount would be higher)? Treating any of the contributions as applicable to 2008 would only increase the January 1, 2009 assets and lower the amount that could be deducted with respect to 2009.

My understanding is that the key is when it is mailed (and I would aim for this Friday to be sure no issues arise as to whether it was sent by the applicable deadline) and not when it was received by the IRS. Good idea to get delivery confirmation, but proof of mailing date would be the important thing to have, similar to personal tax payments. Mail it by the deadline and you should be all set.

Just guessing here, but wouldn't there be at least the following: 1. Liquidity issues, in the event that minimum distributions became necessary or if it ever became necessary or desirable to terminate the plan 2. Valuation issues - how often would professional assessments of value be needed? This would perhaps fall under 5500 issues And that is assuming that the real estate in question is not going to be used in any way by the participant, which could represent an entirely different can of worms.

I mentioned the full cash refund option because that is the only payment option that could possibly be subject to limitation under the plan. And it is not merely that nobody took a full cash refund form (possibly because they were concerned that their beneficiary might have trouble collecting) but nobody took any form of benefit at all during the period between the 2009 original AFTAP certification that put them into the 50% limitation range and the 2010 range certification that terminated any possible restrictions on distributions. It's a smallish plan with minimal activity. The other plan covered more people and there could have been some activity but that plan was never measured as having fallen below 80%. A revision from something above 80% to something else above 80% is less likely to be treated as material (especially if a range certification was issued prior to the date that the deemed percentage would have become applicable and sufficient quarterly contributions for 2010 have certainly been paid). Do you agree that just because there was a material change in the certified AFTAP does not necessarily create qualification problems?

Granted that the regulations appear to treat the change in the AFTAP as material (at least for the plan that went below 80% and then back above it, for the same period), if the plan administration for the period between the initial AFTAP certification (putting them below 80%) and the subsequent AFTAP certification (putting them back above 80%, retroactively) would have been correct and appropriate and in accordance with plan provisions whether the plan had fallen below 80% or not (because no benefit determinations occurred or because there were no distribution options that would have had to be restricted), would the materiality of the change pose any threat to the plan's qualification status? If the conversion factor to go from a straight life annuity to a full cash refund form is 20% (i.e., a straight life annuity of $1,000 per month could be converted to a full cash refund form of $800 per month), would any restrictions apply with respect to such an election while a plan is between 60% and 80% funded? Presume that all participants receiving benefits under a full cash refund form are cooperative enough not to die while the plan is subject to restriction, whether benefits had commenced during the restricted period or prior. The regulations appear to be clear enough that any restrictions in effect when the participant dies would apply with respect to carrying out the death benefit payout feature of the form without regard to what the plan's status was when the participant's payments had begun.

Is there a materiality issue even if there were no actual benefit determinations during the period in which the plan was considered to have been under the partial restricitions? Nobody unable to take their benefit in the form desired? The only problem (besides the mere fact of the latest certified AFTAP) was that from September 2009 through late in March 2010, the participants may have been on notice that restrictions could come into play (and even then, it is questionable that partial limitations would interfere with the election of the entire benefit payable as a full cash refund annuity, which is paid from the fund, not purchased). Prior to September, they were working under the 2008 AFTAP minus 10% (which was above 80%) and in late March 2010, there was a range certification for 2010 putting them above 80%. Presume that everyone in this smallish plan was properly notified within 30 days of the September 2009 certification and also within 30 days of the March 2010 range certification. Nothing much happened between the two dates. There is a second larger plan which never fell below 80% and which also received a March 2010 range certification. Would there be any possible issues if the 2009 valuation for that plan were now revised to the October 2008 full yield curve, irrespective of any administrative activity?

I didn't check on any of the codes beginning with "2", but for the most part, the "1" codes still there are the same as before and also most of the "3"s. The change is that master and prototype plans now share a code (which also includes volume submitter plans). So what used to be 3D or 3E (or nothing) is now 3D. Besides dropping out some of the prior codes, were there other changes?

Calendar year plan, valuation date on January 1. The 2009 AFTAP was originally certified as 78% in September 2009 (2008 AFTAP had been above 90%, so deemed rate above 80%). Consideration is being given to revising the January 1, 2009 valuation now to use the October 2008 full yield curve (would eliminate need for any further 2009 contributions). Smallish plan with no benefit commencements since before the September 2009 AFTAP certification. The only benefit form possibly subject to Section 436 is a full cash refund form. The revised valuation for 2009 would change the 2009 AFTAP to just over 90%. A range certification for 2010 was issued at the end of March 2010 indicating that the 2010 AFTAP would be between 80% and 100%. Presume that suitable notices were distributed in 2009 after the September AFTAP certification (indicating that restrictions could apply to the full cash refund form) and after the March 2010 range certification (indicating that the restrictions no longer applied). The 2009 Schedule SB has not been prepared yet. Is there any bar now to the sponsor electing to use the October 2008 full yield curve for the January 1, 2009 valuation? They would be doing so expecting to elect to go back to the normal three-tier segment rates as of January 1, 2010. No restrictions are believed to apply with respect to IRS consent, for either election.

I am not involved in any way with plan loans, but if the initial loan transaction was a legitimate, permissible loan, made under the rules of the plan and applicable regulations, how could a later default possibly be considered a prohibited transaction, especially if the person was no longer an employee of the sponsor?

I would not consider it necessary to consult with any document concerning error checks. 2009 filings can use the full yield curve with a lookback. Of this there is no doubt. The government cannot reject a filing due to this, and all software being used to prepare 2009 Schedules SB that treats the combination as being an error should be modified to disable any such error check. The software providers could not need to clear such a change with the government. If the government is rejecting such filings, it is an obvious system error that the government must fix, and quickly.

I haven't encountered the issue, but aren't the restrictions on non-qualified deferred comp plans, when there is a plan at risk, applicable across the entire controlled group? If so, wouldn't the restrictions apply even if the operations qualifed for QSLOB treatment?

When did the plan year begin? If it was for a short year beginning in 2009, they are right and it has to be filed electronically. If it was for a run of the mill 12-month plan year that began in 2008, they are wrong. 2008 forms can be filed on paper. And if they are wrong, how could they get something so straightforward wrong?

I just tested this. Yes, you get an error message. Sometimes you just can't get rid of all of the Relius error messages, and after reading through them (to make sure that you still agree with the entries), you just have to go ahead and print anyway. I do agree that Relius ought to recognize that for 2009 (possibly also for 2008 if the plan year began late in the calendar year and the sponsor elected to use the October 2008 yield curve for, say, a plan year beginning in December 2008), lookbacks are certainly allowed for plans using the full yield curve. They should save this error message for the 2010 and later forms.

If the sole participant happened to die, would the beneficiary, when told that "while the plan is supposed to pay you a $100k lump sum but all the plan has is this velvet painting of poker-playing dogs so here it is", be able to sue the decedent's estate for the participant's violation of fiduciary standards in connection with the imprudent investment? Are one-person plans subject to the usual fiduciary standards? I recall from a few decades ago that one may not invest one's IRA assets in collectibles. Rules may have changed since then, but in any event, using plan assets to buy something one covets as an "investment" would, at the least, be skating pretty close to the edge.

I am not involved with 401(k) plans, but I wonder whether the employer, as plan administrator, has any fiduciary duty to oversee the trustee and/or be considered to have failed to discharge its duties due to the failure of the trustee to properly follow investment directions. I would expect that the trustee would be the party primarily at fault, and that the burden of failing to meet fiduciary obligations should be primarily on the shoulders of the trustee.

I think cessation of accruals on account of attainment of normal retirement age would be a flat-out violation of the age discrimination laws. All plans (certainly all qualified plans) must continue to provide accruals or contributions on the same basis as is done prior to normal retirement age. Limitations not based on age (i.e., 30 year limit on service for accruals) are permissible. The suspension of benefit notices are required if the plan's provisions do not invariably preserve the value of the benefits, such as through actuarial increases when benefits are deferred.