AndyH

Yes, but apparently it is supposed to be ignored, at least the portion attributable to 417(e) rates. If you search this board, you will find lots of discussion of this, and evolving consensus toward that conclusion.

Well I've run across an example that I question. It is apparent to me that not everyone does this the same for valuation purposes. Anybody willing to calculate this one and lay out the details? First plan Year (calendar 2011) (415 dollar limit $195K) NRA and ARA 65 (yes, 65 not 62) Age 57 Average Comp (Hi 3) $245K Actuarial equivalence AMT (post retirement only) and 5.5% interest Cash balance interest credit 5% Assumed payment form: lump sum The pay credit allocated is $170,000. I think this exceeds the 415 limit. Anybody disagree?

I thought that your "I" was required up to age 70 1/2 at which time you then need to provide both the actuarial increase to the prior benefit plus the formula accrual. (Same comment as Effen on the late increase I believe).

Agree - especially using MAP-21 "current liability" - it could be cheaper to fund to 110% rather than to fund the termination liability, especially if the termination payouts won't occur until 2013. Also, I'll be you there is some "gotcha" here with the flipping of plans to avoid the restrictions, but I don't know what it is either off hand. Seems that this is the kind of thing that made the IRS target early Normal Retirement Ages. Maybe they could argue that this payee's age is effectively "the plan's" NRA and attack it on that basis, or attack it as effectively a prohibited in-service distribution.

Thanks for the additional info Effen. I'll look for that.

I'll buy that as a second argument. Thanks!

Thanks for the feedback. Looking at the DOL regulation 2530.203-3 for the first time in a while, now I am thinking that issuing a SOB notice to a vested term is irrelevant since they have no "section 203(a)(3)(B) service", i.e. "suspendible service". So that leaves only the document question I think.

Takeover plan does not expressly state that benefits that don't start until after age 65 for a vested term are actuarially increased. Plan does have Suspension of Benefits provision for active or reemployed retirees. It says nothing about vested terms. Plan states that benefits are "available" for a vested term at NRA age 65. I see this "SOB for actives only" fairly often, and usually there is no retroactive annuity start date language. I assume that we are required to provide an actuarial increase if no relevant SOB type notices have been provided to vested terms once they approach age 65 - anybody disagree? Why don't plan documents typically address this? I have seen many from different sources that ignore this issue as it applies to vested terms. Comments?

Sure, over time as benefits are not increased as much as they would have. Not usually material though. But I second the sentiment that nobody ever (in my experience) administers these things properly. Not worth the aggravation under normal circumstances IMHO.

Yes, you should be able to do it through a corrective amendment until 10/15. I have been told that you actually do have until 10/15 anyways without an 11-(g) amendment, although the deduction would most likely be taken for 2012. I have not researched and verified the latter part myself, however, so don't rely on it without your own research.

"so i agree that the safe harbor design aspect is irrelvant." I guess this is what they call an "academic" discussion. "I think we are arguing semantics " I'm not stupid enough to argue with E.F. Hutton

Thanks for the comments. Bird, you think this would be true even with an annuity without a life insurance feature? I see all kinds of stuff about that within the context of a life insurance policy. But you think it's the same with an annuity?

Underfunded DB plan with only 2 participants with benefits is being terminated. Assets include individual annuity contracts in the name of each participant from 3 insurers (6 contracts total). Contracts will be distributed in-kind (presumably). Plan sponsor will fund liabilities less assets but is struggling for money. No majority owners exist, so no waiver is possible. How should the insurance contracts be valued, at "accumulation value" or "cash surrender value"? Differences in values are not huge - 5% to 7%. Obviously I cannot provide all the details of the contracts. Just looking for comments/observations/opinions. Thanks.

The plan probably says that the payments must be made and consent is not required. If so, I would send him a letter along with the check and a Benefit Information Pamphlet (IRS boilerplate) tell him that he will receive a 1099 at year end, and that without such action he would be subject to the 50% excise tax. Key part is follow the plan.

I'm certainly aware of the testing rules; I thought this was a document question. Well, half the solution to any problem is understanding the question I guess.

Mike, for my information, where in the law is the exemption?

It is a potential variant of a safe harbor often called the "alternative flat benefit safe harbor". It is subject to a fairly simple test that is contained in regulation 1.401(a)(4) which essentially compares the accrued benefit fractions for NHCE and HCEs. If there are no NHCEs then it would pass any nondiscrimination test including this one. So, it would satisfy the requirements to for the alternative flat benefit safe harbor.

Early english translation?

Maybe we read it differently. I'll parse the question: Q1: Can the participants receiving the 3% SH allocation but not the base be consiered in rate group testing A1: Yes, they must be considered. Q2: if so must they then satisfy the gateway requirement which is 4.49% or might they be exempt from gateway since they're not eligible for the new comparability base allocation? A2: Yes, they must satisfy the gateway. How to accomplish this is another question which has not yet been asked.

I don't see this as a complicated question. Yes. If not utilizing the otherwise excludable rule, which was the premise to the question, a nonelective employer contribution, whether it be SHNEC or not, must be included in testing and gives rise to a gateway requirement.

Do you mean single employer collectively bargained plans instead of multiemployer?

Thanks. I don't see anything in the PBGC instructions that directly conflicts with this, but it seems open to argument from them if they choose to do so.

If a cash balance plan has a variable interest crediting rate or has changed from a fixed to a variable rate, is it required that accrued benefits be valued for purposes of computing annual PBGC premium liabilities by projecting account balances to ARA using an average of the last 5 years of crediting rates? Opinions please.

Has anyone had any more recent experience with the issue of deductibility of employer contributions under 404(o)(5) after the year of termination?

I think so. The benefit was fixed when the plan was teminated, and service at that point would be used to determine the benefit. This assumes that the plan does terminate with that term date. If it changes, the benefit may or may not change depending on what transpires.