AndyH

Apparently (I've been asked to post this) Relius generates a validation error when a lookback month is entered in line 21b when the full yield curve has been used, and this validation error prevents filing. Are there others out there who have experienced this and perhaps found a solution, or is everyone leaving that blank even though they may have used October 2008 rates?

I've heard JH say it also, and I know he's history, so I was wondering what the conventional wisdom is now. But does anybody remember what his rationale even was? I don't recall a cite.

If the participant has insurance equal to 100x his benefit (or more) and he dies, who gets the non-insured plan assets, Ned?

For purposes of the funding cushion under 404, we must ignore benefit increases to HCEs resulting from plan amendments adopted or effective during the previous two years. Is an automatic indexing of 415 or 401(a)(17) considered an amendment within this context?

Mike is right. This is not black and white. The general rule is that the two must be added together first, then imputation is done. There are many scenarios that are problematic with this rule but this is the general rule. I have the cite somewhere but I'm not sure where at the moment. p.s. Well, I stated what I was taught and convinced of recently. But look at 1.410(b)-5(d)(6)(i) which seems to leave the door open to separate computations if the testing option (sum of separate percentages) of 5(e)(2) is used. So I think it depends on exactly how the testing is being done, i.e. which if any testing options are being utilized, whether the plans have the same years (in the case of the ABT) and whether the same testing comp is used for each plan.

Bingo, found it in a 12/09 document. Thank you very much, I owe you one. And, I conclude that Thomas Jefferson was right.

Thanks for the feedback. Regarding #1, is this Corbel's system you are referencing? I don't recall seeing a change, but we are going back to look.

p.s. I looked at the Corbel PPA amendment addendum which eliminates whipsaw, changes vesting, etc. and it does nothing to modify the provision that says that interest is credited only on the last day of the year, IMHO. Does anybody else out there use the Corbel CB document (I'm sure there are many), and if so what conclusions have you reached about interest crediting on a mid to late year payment?

I don't think so, but I'm beginning to wonder about the interpretation issue. Corbel attached some non-whipsaw language to a snap-on PPA amendment that was due 12/31/09 and the last day interest credit language seems to make some sense with the whipsaw approach, where the balance is projected forward, then discounted backwards to get the lump sum. The whipsaw language is still in the main document that I am referencing. The PPA amendment altered that retroactively, but as an addendum. So the PPA amendment could possibly have altered the correct interpretation, retroactive to the removal of whipsaw. I'll have to look at that. I figured there are a lot of people that use this document so maybe they had some insights, but the feedback here may have helped me stumble on the solution. So TJ may be right on a couple of points. Thanks for the replies!

Thanks Thomas. You knew that your opinion was at the forefront of my thoughts before I etched them with my fountain pen. I happen to agree with you; problem is not everybody else does because of the "WHAT DOES THE DOCUMENT SAY" rule. And my 2 cents raises a couple of very interesting avenues of pursuit.

The Corbel VS document says that interest credits are posted only once per year - at the end of the year. I have a calendar plan terminating and distributing August 1. Do we: 1. Not have the current doc language? 2. Ignore the doc and credit interest to the distribution date? 3. Apply the document and apply interest only to the preceding 12/31. 4. Credit interest to the pay data because this is a plan termination and different rules apply (and that is kind of what is right anyways)? I know there are Jeffersonian-like debates on whether or not you are allowed to credit interest only once per year but as a practical matter that is what this document says. Opinion please. Ours internally are split. Thanks.

This may be the way to go - a corrective amendment could make the allocations all equal to 5% of 415 pay regardless of what the normal allocation provisions are.

Is the plan top heavy?

Right, but the June 8 announcement, available here http://www.pbgc.gov/practitioners/whatsnew.html contains the original announcement and links to two letters that are very satisfying reading.

A form of this came out a couple of weeks ago. If you read the letters back and forth to Congress that were originally linked, you'll see that their minds were changed for them.

I think this was noted on a slide from the EA conference as "unofficially" a method change. FWIW, and not for that reason, we are calling it a method change.

I don't have any more information other than the census presented, but your point is understood and is a valid area of inquiry.

No, I think you are right with respect to the accrued to date method. The testing period would need to be the current year and all prior years, I think, which does have other ramifications such as the required use of average (rather than plan year) comp if I remember correctly. But I'd have to double check that before being certain. Thank you.

NHCEs have no past service. If this were a safe harbor design I think it would be fine. Forget top heavy - the actual benefits are above 2% - I tried to simplify the actual benefit levels. Because there are two formulas that apply to HCEs vs. NHCEs I think it needs to be general tested due to lack of uniformity. So, does general testing get messed up by the past service grant numerically? I think not, but I'm not 1000% sure, so I thought I'd bounce it off the esteemed panel. It comes down to what is the amount of testing service and what benefit is considered earned in the testing year, which happens to be the only plan year. Using the annual method, testing service must be one. But I got 5 years of accrual, so is accrued to date with 5 years of testing service OK?

Having a brain cramp, need help on how to handle past service grants in a new plan for testing purposes. Looking at a proposal. New plan, two owners with 4 years of past service each, none for employees. Simplified example of design: Owners accrue 2% of pay x YOS = 8% of pay at end of Plan Year 1. Employees accrue $100 per month per YOS = $100 at end of Plan Year 1. Assume this works out to 2.1% of pay. 1. It seems to me that this must be general tested because the formulas are not uniform, right? 2. If so, how is the past service handled for testing purposes in year 1?. Do I have a NAR of 2% for the owners, or a NAR of 8%?

Belgarath, May I ask a couple of followup questions for my information? Will insurance companies actually state a "market value"? In limited experience, I have had trouble getting them to provide anything other than vash balue, accumulation value, etc. Isn't the cost to the participant actually the greater of the CSV or the sum of premiums paid, interest, etc. that was outlined in the springing cash value promulgation by the IRS from several years ago, or is that not considered current thinking? What is "interpolated terminal value", which I have been told should be the purchase cost? Is that similar to the premiums plus that I just described? Why might a "market value" be significantly greater than the cash value, other than the obvious load or exense charge that should wear away over time? Is this like the opposite of what happens when Manny becomes a free agent, i.e. his market value is a fraction of his current contract value?

Well, the broker could be a fee-only advisor. Then he'd just be wrong. But I guess there's a better chance he's the real tooth fairy.

Interesting (and very helpful), thank you.

The point is that if your actuary says one thing and this broker says another, and you don't trust either, get a third opinion from another actuary. My bet, for reasons SoCal tried to detail, is that the broker will be determined to be either wrong or trying to sell you something you should not buy.

The dark mirror image of the Easter Bunny, the Tooth Fairy, or Santa Claus, all trying to get a peek inside your house.