AndyH

The MVAR comment reminds me of an ASPPA session from a few years ago on general testing. The speaker was knowledgeable and well respected (and not Larry D or a regular on this Board). He started getting into a discussion on MVAR calcs, and winded up concluding "ah, just use what your software spits out". That's one of those comments that you don't forget.

Dan, FWIW, I asked the same question a while back and I don't think I got much of a response either. Either people aren't thrilled with what they use, they use spreadsheets, or they don't want to divulge their deep dark industrial secrets I take it.

No, the name of the Trust, not the name of the Plan, should be listed as payer, if there are separate names. Except, that is, in the situation that Janet describes, but Bird swished a three pointer in that situation.

Even if the trust is not the beneficiary, it still is a pension plan distribution requiring a 1099-R.

So what happens if the suspension of benefits notice was not issued in a timely manner? In that case, would the plan need to be amended in order to allow for actuarial increases? That would be one approach. Another would be to provide the interest thru the date the notice is issued and hold your nose. Better still, amend it to say that this is what occurs if the notice is not issued timely. There could be issues with this but it is an option. Third, you could amend the plan to allow in service distributions but you would still need to rectify the past.

And how do the affected employees with frozen benefits that are being forfeited as they grow older feel?

Agreed, plus of course the plan should state that the SOB notice is to be issued.

Don't they have until the proposed effective date of 1/1/09 to fix these bizarre things?

Almost. But you are close to my point. Act Equiv is defined as the applicable interest and mortality table for all purposes other than lump sums. BUT early retirement has it's own reduction, one to the base and the other to the excess (the latter complying with 401(l)). My interpretation is that if such a plan also has a lump sum based on the deferred accrued benefit and computed solely on 417(e), that is ok under 401(l) and therefore remains a safe harbor. But if a plan says the lump sum is the greater of the 417(e) amount and something else (e.g. a flat 5% or in this case UP84 at PBGC rates) then I think that violates 401(l) in an integrated plan and makes it a non-safe harbor. I think the 7.5-8.5 that you reference serves two purposes - to satisfy 401(l) with respect to early retirement and also with respect to other annuity forms. So you may have pointed out another non-safe harbor issue - the use of 417(e) for conversion of annuity forms does not fly either.

Looking at an integrated DB plan that was clearly originally designed to conform to 401(l) in terms of annuity benefits because the early retirement factors are right from the 401(l) tables and the plan looks like a the safe harbor offset. The plan now provides, however, that a lump sum is offered and the lump sum amount is based upon the total accrued benefit and is the greater of the amount that would be derived from PBGC rates (e.g. 3.50% or so immediate, 4% deferred) and UP84 Mortality, or the amount that would be derived from use of the GATT rates. I think that continued use of a lump sum factor that might exeed the 417(e) requirements violates 411(l) and creates the need for the general test. Cite is 1.401(l)-3(B)(4)(E). Agree/Disagree?

That is a good point about the an excess asset allocation, if done. I'll bet that is often overlooked for many purposes but it would seem to be a 410(b)/401(a)(26) incident in one of the years, presumably either the one containing an amendment or the one containing the allocation. But I doubt that the IRA implication is policed.

This phase just got outlawed by somebody, but that can't take effect until after the Super Bowl: "It is what it is" What is it?

Either the plan was (and remains) frozen or it was not. Many things can be "adjusted" without changing the basic facts. If you want to know, you have to ask the details.

Thanks for your comments. In terms of years, 10/04 vs. 10/06, they were merely examples-I don't know what the exact years were. Only the language is exact. I am passing along the question from a colleague. The existence of similar rates is merely a coincidence. The prior firm definitely used (and programmed in a template) the applicable interest rate in the year of termination of employment, not year of payment, in multiple lump sum calculations. Yes, we will of course go back and ask for an explanation and/or cite unless a light comes on here. p.s. Jay could be on to something. The actuarial firm may not have written the document. Perhaps the written words provided a higher lump sum than the legal mimimum-then they might be bound by it until it was fixed. And maybe getting it fixed was delayed for some reason. There have been a couple of years where the applicable rate increased in the year of payment from the year of termination.

Go Greenville Drive! And their parent team! And here's for trading Neil Diamond and Dropkick Murphy for Carlos Santana instead of Jacoby Ellsbury et al for Johan Santana!

Takeover DB plan from a major firm says the lump sum (not just the minimum lump sum-only one definition) is based upon the "mortality table specified in Section 417(e)(3) of the Code and an interest rate equal to the rate defined in Section 417(e)(3)(A)(ii)(II) of the Code for the month of October immediately preceding the Plan Year during which the termination occurs." So, if I terminate in 2005 and get a lump sum in 2007 the 417(e) rate used is for 10/04. The plan has been administered this way and the actuarial firm even gave client a template that calculates benefits this way. Is there any justification for this that we may have missed? We think that "termination" replaced "distribution" in error, but major actuarial firm applied it as written.

Within the context of: "Can we amend the plan to make the eligibility for the profit sharing (and forfeitures) immediate while at same time leave eligibility for deferals and SH plan at 1 year with 6 month entry dates? At same time we would be removing the 1000 hour requirement but leaving in the employed at end of year requirement." Sure, you can have different eligibility for PS and deferrals. And you can amend so that people who are not yet eligible would be affected. Is that the question, or is there something more?

I don't think they are benefitting. The COLA is part of the AB; there is no increase in the AB. If for some reason you did have to test under 410(b), everbody benefits. Everybody gets a COLA based upon their AB at time of freeze.

Agreed.

Here it is: Sec. 4041.22 Administration of plan during pendency of termination process. (a) In general. A plan administrator may distribute plan assets in connection with the termination of the plan only in accordance with the provisions of this part. From the first day the plan administrator issues a notice of intent to terminate to the last day of the PBGC's review period under Sec. 4041.26(a), the plan administrator must continue to carry out the normal operations of the plan. During that time period, except as provided in paragraph (b) of this section, the plan administrator may not-- (1) Purchase irrevocable commitments to provide any plan benefits; or (2) Pay benefits attributable to employer contributions, other than death benefits, in any form other than an annuity. (b) Exception. The plan administrator may pay benefits attributable to employer contributions either through the purchase of irrevocable commitments or in a form other than an annuity if-- (1) The participant has separated from active employment or is otherwise permitted under the Code to receive the distribution; (2) The distribution is consistent with prior plan practice; and (3) The distribution is not reasonably expected to jeopardize the plan's sufficiency for plan benefits.

I believe that it is spelled out clearly in the PBGC regs. I'll take a look when I get a minute

Good question and good answer, IMHO. If the COLA was automatic then to stop it would seemingly be a cutback.

Is that a question or sarcastic rhetoric? Such a decision would of course be voluntary. If I implied otherwise that was certainly not my intent.

On the basis that since he is a Principal, he may be part of Management. Management may decide that it would be a prudent business decision to await governmental approval before proceeding with major distributions to the extent that they may be delayed.

If he were entitled to a payment if not for plan termination (satisfied the conditions and the plan is not restricted by being funded < 110%), then yes it would be allowable with the termination. Normal payments are permitted during the termination process; payments that are available only due to the termination are not permitted during the PBGC review period. Many people would advise against such a payment, but nothing prevents it.