AndyH

Sponsor has four DB plans: 3 frozen union plans and one active non union plan with no HCEs (hourly only). Sponsor wishes to consider merging them as a cost cutting move. The plans have the same major provisions (NRA, normal form, optional form, death benefit). Three are funded about 75-80% on CL basis (pre-2006 rates), one is funded at 92%. All are well over 100 participants. None of the plans are funded on "termination basis" using lump sum methodology or on an annuity basis using any realistic discount rate, which seems to require mainenance of termination priority classification data, whatever that might entail. Are there any major pitfalls to merging plans in this situation? Is the termination priority data maintenance problematic? I can see possible shifts in 412(l) levels being a possible issue. Others?

Thanks Effen I obviously misunderstood. I'm a bad speed reader. I second the Effen comments completely! ttott, I bet the lawyer who wrote the document was a real late night slacker who skipped pension classes in law school and rounds up his client's bills to the next highest $500. I hope it is top heavy and that solves your problem. Otherwise maybe you have a coverage failure and can amend the formula via 11-(g) corrective amendment to remove the rounding?

Huh? Why isn't it simply $600 x .03 x 25=$450 which is then rounded to $500? BTW, ttott, I find your casual manner to be entertaining. We need more entertainment.

I invoke the override rule that says that anything we can do to get Blinky into "Life Beyond Employee Benefits" is permitted. I think she has been sighted outside of her small "window to the world" fishbowl only once.

No, not unless you are general testing one or the other on a benefits basis. In this situation, it sounds like one of the allocations is tested on a benefits basis like an age weighted PS plan which by itself is ok but with the other allocations runs afoul of the gateway (smoothly increasing at regular intervals). And I think that to separate one formula from the other is restructuring which is prohibited for gateway purposes. There are a couple of ways around it in the regulation but it would need to be looked at closely.

I'm not so sure about this. The two nonelectives must first be combined if this is within one plan and these are all nonunion people. There is a gateway problem here. Remember you cannot restructure for purposes of satisfying the gateway. The 2001 regulations provide some rules covering this type of thing that perhaps Blinky or someone else has memorized but I do not. I just know they exist. (I am assuming that the 3/1 or 5% gateway is not being satisfied and the alternatives are being explored).

But then would you the need to refund part of your fee to the taxpayer?

yes, if it is deferred comp it is W2 and it is subject to FICA tax unless that was prepaid.

Look at what you just said for your answer, "a few of the major participants". "my guess is they already pay an outside advisor" What makes someone "major"? Do the "minor participants" have an advisor?

JanetM must be devastated!

Steve, Aside from "control", wouldn't her participation in a 403(b) or 457 accomplish the same thing as an IRA?

If an accrual exists, how else would the transition be handled? By one year amortization? I've had many clients that have auditors that take the position that the pension FAS#87 calcs are not material to the financial statements or who do not have audited financials. What is unusual about that? Then one day magically they feel the need to comply with GAAP. I agree it is the auditor's call but I don't see any options other than whether the transition is $0 or not and what the amortization period is. I don't see any restatement issues unless there were audited financials before and the FAS numbers were not immaterial then perhaps there was a misrepresentation which is a different situation.

This can arise under the Average Benefits Test even for different years and I believe the answer would be to use the sum of two separately calculated EBARS, as the non fish poster was inclined to do before the fish correctly harpooned him (or her).

I think you just have an adoption date that is current, and create the transition amount as if it were circa 1987. Mutual insurance companies had a mandatory adoption date of only a few years ago, and although there rules had different terminology and some slightly different twists the unfunded PBO versus the accrual was the transition amount. I think this happens all the time.

thesaurus.com can often be useful in these discussions. Instead of "deviance", actuarial "aberancy" or "weirdness" make the beginning and end of the suggestion list. Looking at "error" instead, it suggests "boo boo" as an alternative. That's it, "actuarial boo boo"

Harry, I couldn't resist the urge to comment that those regs seem to have been targetted at what I call the "yellow brick road" plans, ones that pick up and merge acquisitions into them with their strange provisions, just adding more and more complexities and weird provisions, come to think of it exactly like the OM plan that I still struggle with! But by the time they were finished writing the regs they found complications with just about everything and the final rules offer little practical relief, IMHO!

the first.

I agree with Belgarath. It is the accrued benefit that would be split up, not the lump sum. So if the accrued benefit changed from $500/month to $700/month, then the lump sum value of $500/m would be paid first, followed by the lump sum value of $200/m. And, yes, I would definitely give notice as if 204(h) notice were required although perhaps you could argue that it is not required. I wouldn't want to tell Joe that quits to get his pension that guess what, he can't get it till next year.

Thank you all. Extremely helpful.

If an employee in an excluded class is well over age 21 and has completed well over 1 year of service changes job classification to a status that is covered by a 401(a) plan, when must such employee be allowed to participate? Immediately? Or ..... 1.410(a)-4, which is at least partially obsolete, seems to allow a wait until an entry date that is the lesser of "(i) The first day of the first plan year beginning after the date on which such employee first satisfied such requirements, or (ii) The date 6 months after the date on which he first satisfied such requirements" where the requirements were being in eligible class, attaining age 21 and completing 1 year of service. Thanks for any help.

Maybe it has something to do with your favorite noted insurance companies?

I have never heard such a thing. Are you sure that is what it says, or are you referring to "mistake of fact" language? Nondeductibility is not a mistake of fact, as I understand the IRS position. And I don't think you can avoid the excise tax either. Regarding CL, you don't report the CL used for 404 on the B, at least pre-06. You can use one rate for 412 that goes on the B and another for 404. (sent before I saw pax's reply)

Nope. Wish we had MGB. All the more reason to go 412(i) some might say. Oops about 4/15. Passed Memorial Day, now??? How does it go, April showers, May flowers. June .......? July has the 4th Sept has Labor Day Christmas? Lots of new targets for them to shoot for. Maybe election day? How to explain this to clients?

I think the "offset" is a moot point because of the mandatory disaggregation rules? What am I missing? What is violating anything?

OK. DONE. But the person who sells these things should know how to service them.