AndyH

Well, I used to be a good tennis player so I'll take it.

Are we sure it is not PBGC covered? Andrew?

AtA and/or Jay, How can these people waive if they are not majority owners and the plan is subject to PBGC? Or does the PBGC coverage even matter - how can they waive period of not majority owners? Or if the plan is amended, the benefits can't be amended downward. Right? Could someone clarify? I don't do much in the way of terminations. P.S. Andrew (3 of us in this thread!), you confused me with the question. Are you discussing a situation with only 2 majority owners? Or 2 of those plus somebody else. And is it covered by PBGC?

Since he was "supposed to" make only 7 payments, isn't it possible that he had a fixed benefit entitlement at age 65 such as 70% of pay, and in such case any post-65 adjustment would be mererly an actuarial increase which might not support any more premium payments? As Effen said, more information is needed. Question: If you have one of these plans and fund it at a maximum level and then "roll it out" presumably into a plan that pays lump sums don't you have a 415 issue that the IRS might be interested in? Or if the policy values later increase unnaturally for whatever reason including a decline in a surrender charge don't you have a springing cash value issue potentially?

How would you know what the benefits provided by the plan, which generate the "premiums" are? This seems like an excessively broad statement. In addition, this cash out arrangement strikes me as playing with fire. Lots of potential issues.

..and if so Look at IRC 4972©(7) before you complete the 5330.

Agree. It may be that no excise penalty applies as a result of PPA changes to the excise tax rules. I am not fluent in the exceptions off the top of my head but I know they exist and would thoroughly research this issue before concluding that a penalty applies. And if the max DB deduction is really zero, the max deduction is really zero, not 25% of pay, I would agree.

I don't understand the question. What do you mean by "currently receiving minimum distribution payents as a lump sum"? How does that work? The minimums should represent amounts based on life expectancy, at most, so how would these exceed the life annuity amount not subject to the 436 restriction?

This Board has the makings of a diversified cross-functional team adept at identifying value levers in the execution of strategic initiatives across technology spend categories.

Is there a large unrecognized loss? If so, wouldn't a shorter amortization period for losses accomplish the objective, or removal of the 10% corridor if used? We've had those changes approved by one of the large audit firms.

Your forgot that we'd then have the opportunity to "leverage" everything.

Yes, thanks. I agree.

A recent webcast ad had so many BS terms in it, I thought it would fill most of the card in an updated BS Bingo.

Does anybody have the BS Bingo attachment?

If I may jump in and expand upon the questions..... Agree with the responses, of course. But, I have seen documents that are silent with respect to recognizing or not recognizing the subsidized ER benefit, with no known past practice. Questions: (1) Is a subsidized ER required to be recognized? (2) Can the lump sum be based on an immediate annuity, ignoring the deferred annuity? (obviously the early retirement factors would need to be different for this to be an issue here). I think the answer to both is no but I know at least one actuary who adamantly disagrees with my answer to 1 as No. Comments?

i don't think you can just disregard people who would have become eligible if not for the freeze. In that case I would think you have a 410(A) issue. And you might also have a 401(a)(26) issue in addition to an obvious 401(a)(4) issue. But, having said that, this prorata increase is common at plan termination. I guess these issues should be taken into account then.

Not sure you meet the criteria to allow testing only every 3 years. (my emphasis) From Revenue Procedure 93-42 SEC. 5. THREE-YEAR TESTING CYCLE An employer may rely for the two succeeding plan years on the tests substantiating that a plan complies with the nondiscrimination requirements for a plan year if the employer reasonably concludes that there are no significant changes subsequent to the test (e.g., significant changes in plan provisions, the employer's workforce, or compensation practices). For this purpose, whether a change is significant depends upon the relative margin by which the plan has satisfied the nondiscrimination requirements in the most recent year in which the plan was tested and the likelihood that the change would eliminate that margin. It isn't clear that you have a passing test to start with. I would not act as Commissioner if I were you. Your solution seems quite logical.

If the person is an NHCE who benefits in a part of an aggregated set of plans and is non-excludable they must get the gateway. You could provide this through either or a combination of the plans but you must follow the documents. If the documents don't guide or restrict you and the person is ineligible for a PS allocation then it sounds like you would need to do an 11(g) amendment to either bring the person into the PS plan or increase the CB allocation. Usually the PS approach is cheaper.

To the original question, see 1.401(a)(4)-3(d)(2) "In the case of a measurement period that is the current plan year, testing service for the plan year equals one (1)." I don't see any way around that. To the accrued to date question, see 1.401(a)(4)-3(d)(1)(iv) "Testing service. (A) Testing service means an employee's years of service as defined in the plan for purposes of applying the benefit formula under the plan......." I don't see any valid argument for denying past service credit to be used as testing service using the accrued to date measurement period unless the service credit is determined to be discriminatory or some other unusual situation covered in 1.401(a)(4)-11(d)(3) applies. Maybe such a situation, imputed service or past service exceeding 5 years for example, was implicit in the Larry Deutsh seminar discussion.

Useful info but note the original question was about the annual method. I am surprised to hear that there might be an issue with using a denominator greater than one for a first year accrued to date test that grants past service credit. I don't think the regulation or published guidance is clear enough to prevent that.

My vote would be they all count in that one year. Just one vote, let's hear from others.

I think that's true, but what about previously non-restricted plans?. For example, a plan terminates 6/30/2010 and had a 7/1/2009 AFTAP of 95%. It drops by default I think to a presumed 85% effective 7/1/2010 (post termination date), which expires (I think) 3/31/2011. Does this create a restricted condition on 4/1/2011?

FWIW, we tell people to expect annuities to be 10-15% higher than lump sums, currently 15% based on most recent experiences. Deferred annuities are the most expensive I am told. Makes sense. Another FWIW, I very recently checked a real quote for a 75 y/o female and it worked out to a 1.65% -2.% (net of expenses) interest assumption using 2011 female IRS mortality. And about 8 insurers were in the same range. But that is just an individual calc, not a group rate. I also find this link useful: http://www.immediateannuities.com/ I'd be interested in other comments.

If there is a valid reason for a client to adopt a fully insured plans in this situation I am open to learning. This could certainly be done through a regular DB plan, and the cliff vesting idea is a good one, although admittedly I'd hate to be the one keeping track of the minimum distribution requirements in year 4. B, debating a 412(i) is just as fun as batting practice to me. But I guess that's obvious.

Why would you advocate a 412(e)3 plan for such a situation? (Ned, feel free to chime in)