dmb

(2) No, but if you haven't yet, you might want to consider asset smoothing. This will likely give you assets for AFTAP purposes of 110% of MV. Also, if client has made any contributions in 2009, you may be able to credit them as 2008 contribution which gets counted before the calculation of average market value. Would you then not want to add to the Prefunding balance the excess created by designating 2009 contributions to the 2008 plan year?? Otherwise the assets are being reduced by the credit balances (unless the Assets/FT is at least 94%) and those excess contributions would just be subracted out of the assets.

I agree with Blinky, regardless of whether or not the COB is applied to meet minimum funding requirement, the Excess Contribution for the PFB is equal to the discounted contributions at the beginning of the plan year less the funding requirement at the beginning of the plan year.

[quote name=Dmb, why did you have this problem? I assume you are talking about only voluntary FSCB waivers. They had until the end of the year to make the waiver yet WRERA came out before year-end. I know we were in a holding pattern until the last minute on any waivers. I'm not talking about waiving FSCB, i'm talking about applying the FSCB to mininum funding, more specific to meeting quarterly contribution requirements for 2008 plan year. Plan with a large FSCB at 1/1/08 and expected large funding requirement applied necessary amount of FSCB to meet quarterly contribution requirement. The thinking was based on their budgeted cash contribution, the entire FSCB would be applied plus the cash contributions to meet funding requirement for 2008, however, with WRERA and subsequent relief, there will be excess contributions but since they already applied FSCB, the excess will not be able to be added to PFB.

That sounds about right. Have you heard any talk of possibly making credit balance elections revocable for 2008 and maybe even 2009 due to relief?? Some clients have made credit balance elections for 2008 when thanks to WRERA and subsequent relief and guidance they wouldn't have needed to make those elections.

Extreme examples often help clarify the issue (the "issue" being ... could the EA be held liable, complicit, etc.), so lets make one up: Suppose the 2008 AFTAP was 110%, and effective 4/01/09 the as-yet-uncertified 2009 AFTAP automatically becomes (110-10=) 100% so (from 4/01/09 through 9/30/09) there is still no lump sum restriction in place for 2009 payouts. Also suppose that in the July-Aug 2009 the EA's unofficial 2009 AFTAP is determined to be 85% or say 75% (only the latter resulting in the 50% restriction) and communicates this with all its implications to the Plan Administrator. And, via conversation with the EA, the Plan administrator learns that a non-certification by 10/01/09 results in a 2009 AFTAP<60 with no lump sum payouts allowable and a plan freeze ... AND the plan administrator thinks THIS would be a great result (for his company), doesn't particularly care about emplyee relations issues, and tells the EA to do NOTHING. If the plan administrator's mind cannot be changed, the only option that seems reasonable for the EA (to not be dragged into litigation, even though NOT of his own making) is the document to the plan administrator the consequences of his actions and resign the engagement BEFORE 9/30/09. Who really wants a client like this anyway. In this situation i believe the actuary must certify the AFTAP by 9/30 at the latest, but realistically the AFTAP should be certified when calculated and after a reasonable time period after the employer has been provided options regarding the AFTAP. The certification should not be delayed simply because the employer wants it delayed. IMHO the actuary will be held liable if the actuary does not issue certified AFTAP solely on employer's request.

Yes, this is a bit of a loophole in the HCE issue. I think there have been some threads on this board about this issue in the past couple of years.

Assuming the participant terminated employment in 2009, I agree that the only way this participant is not a HCE is if lump sum is paid in 2009. If not paid in 2009, pariticipant will become a Former HCE.

I agree, but its always good to hear what others are doing.

We are not necessarily waiting for client to request. I guess our official stance is AFTAPs are prepared on a normal operating basis and brought to client's attention when complete. If plan may face restrictions, we would advise them of their options and give reasonable time to make decision. If client requests AFTAP calculation before we provide to them we would calculate at that time if we had necessary data to prepare calculation. We will not sit on an AFTAP until 9/30 (calendar year) if we have calculated the AFTAP. This was our position prior to EA meeting.

I have a client that requested a 2009 AFTAP certification (calendar year plan) so lump sums would be restricted, albeit 50% restriction in this case. Their presumed AFTAP would have otherwise been over 80%, but we certified to 60-80 range. As you say, client does not want to lose assets to a decent size lump sum at this time. We feel the client has a right to request the AFTAP certification and as Actuary, if we complete the AFTAP, we must provide client with options but shouldn't wait beyond a reasonable time period before certifying AFTAP.

We have proposed modifying the language in the model notice to refect accounting for the credit balance to our legal department. Don't know if it has been approved yet.

The way we read it, the directions for the 2006 calculation specifically tell us to apply ERISA section 302(d)(8) (and only section 302(d)(8)) which instructs us to subtract the credit balance from plan assets.

FWIW, after having some discussions with another national actuarial firm, we are now subtracting the credit balance from assets for the 2006 calculation. Don't know if things would be different if one of our actuaries would have attended session 103.

Do you recall who said it or at which session?? Thanks.

It also states that language as stated in Appendix C of the FAB should be included which includes the Funded Current Liability percentage for the pre-PPA years. Indeed it does, but that language in "C" means -- at least to me -- that you don't subtract the FSA CB. That's what we are thinking, but we have heard from others with opinion that credit balance should be subtracted. Hopefully others will chime in. Thanks for the quick responses.

It also states that language as stated in Appendix C of the FAB should be included which includes the Funded Current Liability percentage for the pre-PPA years.

With regards to the 2006 Funded Current Liability Percentage, should the credit balance be subtracted from the assets before dividing by the Current Liability. Reading through the regs is very confusing and it seems there is an argument for both subtracting and not subtracting. Thank you.

I know some of these have been asked before, but I'm looking for consensus. 1) Lets say my 2008 AFTAP is 75% and my 2009 AFTAP is 65%. I gave the appropriate notice in 2008. Do I need to give another notice in 2009 even though nothing changed? The statute says the notice is required "after the plan has become subject to a restriction". I was subject to the restriction in 2008, nothing new in 2009, so it seems that no additional notice is required. Agree? 2) Lets say my 2008 AFTAP was 85% and the 2009 AFTAP is 75%. My plan only pays lump sums less than $5,000 and therefore the restrictions have no practical impact. Do I still need to give a notice? I think the conservative answer would be yes, but does everyone still agree? Don't have any plans less than 80% for 2008 so i'm not sure about scenario 1, but would guess you would need to provide another notice, i would say no notice for Scenario 2 because there will be no restrictions. That is the way we are operating under Scenario 2 since the small cashouts are not subject to restrictions.

Speaking of PBGC and the funding notice, Q7 of the FAB 2009-01 states that the end of year liabilities are calculated using the interest rates used per ERISA 4006(a)(3)(E)(iv) which are the standard rates used for calculating liabilities for PbGC variable rate premium. However, there is an option to use the actual Funding Target for the variable rate premium liabilities. If that option is taken, can or should the same liabilities be used for the Funding Notice??

Has anyone heard that guidance regarding additional funding relief is about to be issued regarding the ability to use any of the "applicable months" that applied to the segment rates to the full yield curve as well for 2009 plan years??

The Form 990 includes a section where Officers, Directors, Trustees, Key EEs and HCEs need to be listed disclosing compensation amounts. One of the items includes "The annual increase in actuarial value of a qualified defined benefit plan, whether or not funded or vested". Has anyone seen this and does anyone know what actually needs to be reported?? Thanks.

We have been using the lesser of the 3rd segment rate or the pre-PPA pre-retirement interest rate assumption.

Is a governmental 403(b) plan with a service based employer allocation schedule subject to non-discrimination testing? I believe governmental plans are subject to testing, but not sure about governmental 403(b). Thanks.

For the record, purchasing annuities is not in the plan document, but the employer has made a written election pay retirement benefits only by purchasing annuities rather than paying monthly benefits from the plan or by lump sum from the plan.

(1) What does plan and investment contract (if any) say about annuity purchase? I.e., is the purchase contractual? What have participants been told say in the SPD. Some plans allow the participant to elect for an annuity to be purchased. It would seem if the public expectation has been established that annuities will be purchased, then it would appear a burn to get the AFTAP to 80% is in order. (2) If no expectations established, then if would seem a burn is not required because we are talking about an investment decision. Otherwise, the scope of plans to which the deemed election would apply would be widened since likely every plan conceivably could purchase an annuity as an investment decision. (3) If there is true paranoia about this issue, then the Plan/Trust could be amended to preclude the purchase of annuities. Of course, then, if you terminated the plan, the plan would have to be amended to allow for the purchase. If (1) does not apply, I'd be inclined not to burn the CB so long as annuities are not purchased in the forthcoming year.. The employer does enter into a contract as an election to purhcase annuities, but from a participant standpoint, they would not know the difference between receiving their benefit from the plan or from an annuity. So i guess (1) does apply, but i'm thinking the situation would be similar to a plan failing a 110% test and an HCE recieving their benefit from the plan rather than from a purchased annuity. Thanks.