RLR

Is there anything in the regs that specify at what age (age last, near or completed yrs. and mos.) that must be used in 415 calculations for ages below 62 and above 65?

We have a husband and wife DB plan that terminated 12/31/09. They have not distributed assets because of illiquidity, but are ready to distribute now. Assets now exceed PVAB so we are going to allocate the excess. The $ limit does not apply but the 100% of comp limit does. Is there any problem with counting service for 2010 - 2012 toward the 10 year requirement?

Thank you - I appreciate these answers.

For a 1/1/11 valuation with a PFB, what is the deadline to make a written election to use the PFB toward the MRC for 2011? Last year's funded ratio was greater than 80%.

Thank you everyone for your comments. We're still negotiating with the auditor - it may very well end up in "review".

You did verify that the plan document provides for an allocation of assets? (I'm skeptical, because I've seen it done without proper documentation.) Yes, it's an option in the AA to have an excess revert to the employer or allocated to the participants. The BPD states that the excess, if so elected, will be allocated based on PVAB unless integrated and then on a nondiscriminatory basis.

Yes, I have a hard time understanding how administratively you can pay everyone on the same day in a plan termination. You can provide the numbers to the employer but there may be reasons or not why the checks are not issued all on the same day. Just seems that there should be some administrative grace period or something to complete the distributions. I would think that since ther was an excess allocated, that that would have some bearing on this particular case as well.

We have a small plan that terminated and is now being audited by the PBGC. The plan terminated in late 2010. A valuation was run 1/1/11 to get the current interest rates. The valuation system uses age near. The document defines Age as age near but there is no reference to Age for LS calculations. PVAB is defined in the doc as "the AE LS amt. of a Participant's AB at date of valuation". In practice, when a participant terminates we calculate the PV of the AB at the age near retirement age and discount that to the current age using yrs. and mos. There is no pre-ret mortality. We indicated on the PBGC checklist that the age for LS calcs was "Near". There was a large excess in the plan which was allocated to the participants based on the PVABs from the 1/1/11 valuation. The distributions were made beginning 4/1/11 - most were made in May 2011 and the last piece of the owner's benefit was paid in August 2011. The auditor wants us to recalcuate the PVAB as of the date of distribution since some particpipants age near would have changed which would have in turn changed the basis for allocating the excess. We feel that this is unreasonable given that everyone received more than the value of their benefit. If we follow his guidance, everyone would have to be paid twice. The first time for just the PVAB of the AB at the date of THEIR distribution and and a second time for their share of the excess. That would be an administrative nightmare. I've searched this forum, but have not found anything helpful. I would appreciate any comments or guidance as the auditor is wanting to submit the case for review - whatever that means.

Does PPA require lump sum calculations for 417(e) to use age as completed years and months at the date of distribution or is that just for 415 calculations?

Yes, this is helpful and thank you for taking the time to prepare the example. This is how I normally do the calculation, but in the final 415 regs, it looks like you only use the statutory assumptions to reduce the $ limit if "The plan does NOT have an immediately commencing straight life annuity payable at both age 62 and the age of benefit commencement." If the plan HAS an immediately commencing straight life annuity . . ." then the calculation is performed as you illustrated above. I don't know what that immediately commencing annuity wording means. Do they mean if the plan offers an annuity as an optional form at the early commencement date? The specific part of the regs is in my original post.

Thanks for the copy of the regs - I already have that - just somewhat confused on how to apply them. Thanks also for the flowchart.

This is a very complicated calculation, and it is in part specific to the plan document. The first question is whether you are calculating an annuity benefit or a lump sum. The two calculation methods are different. But in general you are right - there are at least two calculations, and you take the lesser result. I'm just trying to calculate the $ limit prior to 62. Once I have that, I will convert it to a lump sum using 5.5% and the app mort table or the plan's act equiv - whichever produces the lesser amount. The plan's AE is 5.5% pre and post and GAM83U post only. Normal form is LO and there is no forfeiture at death. Wouldn't the $ limit caculation be the same whether you're calculating an annuity benefit or a lump sum since it's only upon coversion of the annuity benefit that the assumptions change?

When adjusting the 415 $ limit for benefits commencing before age 62, do you use the 417(e) mortality table and 5% or do you use the plan's actuarial equivalence assumptions and the limit is the lesser of the two? 1.415(b)-1(d)(1)(i) states in part "However, if the plan has an immediately commencing straight life annuity payable both at age 62 and the age of benefit commencement, . . ." What does that mean and does it affect the 415 calculation?

A plan was terminated 12/31/10. The employer contributed an amount that was between the min and max. The accountant missed part of the contribution that was made in April 2011 and did not deduct what was reported the SB - Plan Yr and Corp Yr are the same. Can the accountant deduct the amount he missed on the 2011 return?

The plan amendment adds a fully subsidized benefit so if someone retires at 55 they receive an unreduced benefit. The 415 problem, as I see it, would arise when someone (the owner) retires before age 55 or the plan terminates before the owner reaches 55. Then the benefits would be reduced for commencement before RA 62. So what? It already applies. The 415 limit at 55 is smaller, both in monthly benefit and lump sum than a payment at 62. But they are sort of actuarial equivalents. The benefit at 55 would be about $11,000 monthly, while the benefit at 62 would be $16,250. What's your point? If the owner retires at age 55 and his mo. benefit is w/in the 415 limit, his PV would be calculated using age 55 factors because there would be no reduction for ER. If he retires at 49 he is not eligible for the unreduced ER benefit so his PV would be calculated using age 62 factors. At least this is how I see it. This could potentially cause an excess in the plan.

The plan amendment adds a fully subsidized benefit so if someone retires at 55 they receive an unreduced benefit. The 415 problem, as I see it, would arise when someone (the owner) retires before age 55 or the plan terminates before the owner reaches 55. Then the benefits would be reduced for commencement before RA 62.

Sorry I wasn't totally clear. Accrued benefits at the time of the amendment were preserved and available at age 55. By having an ER benefit fully subsidized at 55 there really is no differnece in what's payable at tne new ER verses the old NR (we modified the benefit formula so that the accruals each year are the same as before the amendment).

We have a small DB plan that had RA of 55 and we changed to RA 62 with a fully subsidized ER benefit at 55. The owner is at the 415 limit. My concern is that should the plan terminate when the owner is under 55, we could have a overfunding problem. We use the Corbel DB prototype and my interpretation is that distributions made prior to ER would be calculated using age 62 factors. Is this pretty much standard? Anything we can do to prevent this problem?