AndyH

A plan was unfrozen in 2011 and benefits increased as a result. The plan covers only HCES. Per 404(o)(4), the increase in the liability must be ignored for 2 years from the later of the adoption or effective date. Assuming a calendar year, how does this timing affect in the 2013 year?

Thanks for the link Lou and the cite Kevin. I (and others) spent a lot of time on this issue before. My conclusion is and was that a last day provision was not permitted. For what it's worth, I believe that in 2008 the Cash Balance Answer Book stated that a last day provision was ok in a CB plan. It now says that such a provision would seem to be precluded by Code Section 411(b)(4) and ERISA Section 204(b)(4)

Oh good, a disagreement! Arbitrators?

No, but I have seen similar language. I think that may be intended to address when interest starts getting credited, i.e. day after end of the year. Reread it with that thought in mind.

Agree. Not a formal valuation but yes a calculation.

"life is fixed until final termination distributions" Agree.

The first issue is that most SEPs have an exclusive plan requirement, in which case the contribution limit is $0, If not for that issue, the limit would depend on whether or not the DB plan were subject to PBGC, first. If so, no combined limit. If not, either the combined contribution must be limited to 31% or the DC is limited to 6% or less and the DB has it's independent limits.

My experience is also that nobody asks at this point. Some had opinions in 2008 or 2009 though.

No, but the focus has. It has gotten much more theoretical - different mortality theories, etc. And (arguably) difficult.

http://www.theinfiniteactuary.com/ No decision to be made - use Rick G's course or materials and supplement it if you wish with other stuff. (Only problem is the online course is not available until 6 months before the exam and it ain't cheap. But you can get his prior stuff in hard copy from his website. http://www.softwarepolish.com )

Agree. Current ratio is a non-issue except for vesting, and also the impact of the DB on the top heavy status of any DC plans.

Yes, that is about right. No easy answer other than if you are considering ASA/FSA you should do the SOA exams, no question. Otherwise I think it's a tossup. If you have done calculus and heavy speed algebra this century, and don't actually have to work and live full time, you'll have an advantage either way with EA-1 or the SOA exams over some of us.

Double bingo. Ned's been on a years long yachting excursion it seems. Thanks.

Looking at a proposal for a CB/PS combo with life insurance. Owner gets 70% of pay in CB, employees get 2%. Maximum insured death benefit provided in the CB. Is there a way to modify this to satisfy both the incidental death benefit rules and the Benefits Rights and Features requirement with the insurance this skewed?

Lots of discussion of this at actuarialoutpost.com EA exam section

I'm not following the question. For what purpose? Are you talking about the gateway? the .5% for 401(a)(26)? Oh, maybe the question is about "Plan Year Compensation"? If so, that is specifically defined as current year. Definition is in 1.401(a)(4)-12

Agree.

No opinions? Is everybody using the current account balance/APR for the monthly benefit payable prior to NRA?

I saw a webcast a while ago in which the speaker stated that a cash balance plan that uses the projected accrued benefit as the basis for an annuity option must be careful to avoid having the QJSA be less than the most valuable benefit. Example, participant retires at age 55 and NRA is age 65. The plan says that the accrued benefit equals the current balance projected to NRA with credited interest (e.g. assume 4.5%). For payment at age 55 the benefit payable is the actuarial equivalent of the age 65 benefit. If actuarial equivalence was computed at 5.5% and the interest crediting rate is 4.5% this results in a QJSA lower than the value of the account balance and is prohibited. The speaker said to avoid this, either the monthly benefit must be computed directly from the current cash balance, or the actuarial equivalency rate must be not more than the interest crediting rate. Agree? Disagree? Would the answer be different if the interest crediting rate was variable?

Yes, plus many SEPs have a requirement that they are the exclusive plan. And you have other issues such as top heavy depending on what the DB document says.

There is an article linked to today's Benefitslink newsletter from PlanSponsor magazine that has me scratching my head, "The Cash Balance De-Risking Solution" It states a number of reasons why using the actual investment return on a cash balance plan is a good idea, and not many, if any, reasons why it might not be a good idea. But what about the accrued benefit? What happens if the investment return is 15% one year and the next year the sponsor is forced to freeze the plan?. Many documents I've seen say the monthly benefit at NRA is equal to the current account balance projected to NRA using the most recent interest credit. Doesn't that create a huge liability, whether the plan is frozen or not? Not to mention testing problems. Am I missing something, or is the article?

Thanks Effen, agree. Appreciate the opinion.

Running across situations with cash balance plans having less than 40% of participants accruing a benefit for 2013 less than .5% of compensation because of the use of low interest rates such as 30 year treasuries. How are others handling this? Amending, ignoring? Opinions please.

There is a specific adminstrative and legal process to this, with specific timelines. I suggest that you hire an attorney that specializes in PBGC matters. Like right away.

This is a legal question best answered by an attorney, but I am interested in the question so I will comment. it may be helpful to note that the participant and spouse's QJSA waiver needed to occur at or near the annuity start date, which presumably happened in the past. So there needs to be a new event, such as a plan amendment offering a lump sum that was not previously offered for that opportunity to be re-opened, I believe. Maybe a plan termination would be such an event, but a plan termination without a change in benefit options or similar triggering event is a matter upon which attorneys that I know disagree. I don't see any issue with the rollover if a lump sum is available and elected. I'd be interested in the comments or experiences of others on the retiree lump sum issue.