AndyH

Hmmmmm.????? You must have one wacky company.

The range has not changed. Certainly Mike's comments are correct, and I will add that the use of an interest rate outside the 7.50-8.50% range usually indicates that design was not intended to be a safe harbor, so other provisions may not satisfy the safe harbor rules either. You may need to general test it for reasons other than the rate.

Not if before the freeze they had the right to postpone payment past age 65.

I guess the 412(i) crowd has a lot of time on their hands to think in between reading "Howdy letters", laundry duty and once a week showers. But let's hope they are not out on work release thinking these things up.

I know only enough about this subject to be dangerous, but my guess is that the answer to the original question depends upon whether or not the contract has a "participation" feature, i.e. the sponsor continues to share in the risks and rewards of experience.

Thanks for the comments Merlin. All good points. Now the focus is on whether the insurance can be limited or phased out. It seems that the company has high turnover in early years of employment and a lot of the policies are being issued and then cancelled and the premiums are being wasted. I'm interested in suggestions for phasing out or limiting life insurance. But, what is non-negotiable is that existing policies for HCEs must be maintained. I suppose that no new policies could be issued provided that BRF testing is satisfied. Could a 5 year waiting period be imposed for insurance coverage if BRF numberical testing was satisfied? Or would that somehow be a 410(a) issue?

Can you be a bit more specific about your situation? If you are cross testing a DC plan using the accrued to date method then you would add back distribution of benefits to HCEs "(including a reasonable adjustment for interest)" but you can disregard distributions to NHCEs. Note that you only include people who are benefitting in the current testing year, not people who terminated years ago. I'm not sure if this covers your situation completely but it should help.

Well put. Google Barry Mannilow COPA Cabana or try: http://www.collegeofpensionactuaries.org/ But you can't get in unless you join.

Tom, so you submitted that question (and answer)? So you are the one who submits legal briefs that cause the panel to not ever get to the questions that everyone else wants answered?

No.

Would someone kindly elaborate on exactly what is under scrutiny. If a DB plan provides 8% to owners and .50% to everyone else and is offset by a DC plan that gives everyone 5% is this under scrutiny? What if the owners do not get offset by the DC plan? Is that an area of controversy? I think not. What if the owners get 7% in the DC instead of 5%? That seems to be the issue, right? The uniformity of the offsetting plan?

I have not looked it up, but isn't there something in a(4) that says that diferences in BRFs inherent in different types of plans that are aggregated can be ignored. If something is required, then this might be a way out.

Agreed.

The benefit is the sum of (a) what the benefit was and (b), the amount, if any, from Appendix A, which list one social security number (or job classification) and amount. No mention of when it is collected. Same amount at whatever age chosen. Therefore not an early retirement subsidy. Or instead gross up the amount and make it subject to the normal early retirement reduction. Actually that is better.

(e)(1)(i) "The term optional form of benefit means a distribution alternative ...or a distribution alternative that is an early retirement benefit or retirement-type subsidy described in section 411(d)(6)(B)(i)..." An early retirement reduction 1/15, 1/30 benefit either is or is not a subsidy for these purposes. If not, then there is only one subsidy and therefore the HCE has his own optional form of benefit. If the 1/15, 1/30 is considered a subsidy then there are two different subsidies, therefore two different optional forms of benefit, IMHO. I don't see where anything in (e)(1)(ii) changes that. I presume this is academic, since a QSERP type provision could accomplish the same thing without going through BRF, right?

I'll take the other side. This is addressed in two places, 1. a(4)-(3) which defines the safe harbor or amounts testing criteria. It is a non-uniform subsidy which makes it a non-safe harbor and creates the need for numerical general testing. 2. In addition, it is a b/r/f under -(4) (e)(1)(i) (as you acknowledged). 1.401(a)(4)-4 (a) says in part: "...BRF's are made available to employees in a nondiscriminatory manner only if each brf satisfies [current and effective availability]" I submit that there are two separate requirements and you have met only one.

In the Average Benefit Percentage Test? Yes, always.

Double bullseye. What Tom said. I was trying to reinforce the point with a different fact pattern.

Good idea.

For the rate group portion, people who are not in the plan but do not have a statutory exclusion are included as 0%. For the ABPT portion, they are in the test and their deferrals are included. This will help. So, to your question, they (other divisions) are excluded from neither test. But if they were to have nonelective ER contributions like the plan you are testing, those would be ignored from the rate group test unless you were permissively aggregating (and met the necessary conditions to do so).

Insurance in a plan is great. Just ask Ned. Consider terminating and transferring all or part of the surplus to a qualified replacement (DC) plan? How much could you allocate (what is their pay level now and in the future) before they evolve?

No, you missed my slant. I thought this would be a topic for something authoritative such as the NonDiscrimination Answer Book.

Which book?

Thanks for the comments pax. First, this is (naturally) a takeover so it does say that insurance shall be purchased in the amount of 100 x and says little else about the details. Normally the administrative rules are spelled out. I have seen a lot of insured plans over the years and if it is individually designed then it always says must purchase or it has no insurance at all. And if it is an adoption agreement there is usually a series of boxes to check. But that does give me an idea-perhaps there is something useful I could extract if I can find a prototype that supports insured plans or through LRMs. Re: the agent, I would like nothing more than to ignore or dismiss tha agent but that is not always politically possible. I need facts to support my claim that a minimum adjustment of $25,000 is inot permissable, as I believe to be the case. (The agent also says insurance is not to be purchased for anyone over age 60 but I can handle that one!) And, yes, I agee, it should be amended to be more specific but I'd like to clarify the available parameters. There are plenty of insurance people out there who should know this. And i have seen language in insured plans that deals with non-insurability but I have never had a reason to focus on it. Thanks again.

Are there standards or guidelines anywhere that determine the minimum adjustment to face amounts or the maximum "administrative delay" period before a new policy is issued for a new participant? Example: Plan provides that life insurance is purchased equal to 100 X the anticipated death benefit. In year 2 the formula would call for a $10,000 increase in the death benefit. The agent says the minimum increase is $25,000. My impression was that an adjustment standard above $5,000 or so was not allowed, but I have yet to find this in print. In year 2 a new participant enters 1/1 and insurance must be purchased. By when? The plan document is silent on these matters other than that the insurance face amount must be 100 X. Is there anything in print that addresses these issues?