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Plan purchases annuities to pay retirement benefits other than small cashouts. No lump sums. AFTAP is 70%. If employer can pay monthly benefits from the pension fund rather than purchase annuities, is plan subject to deemed waiver of credit balance if it gets AFTAP to 80%?? Thanks.

Thank you.

My vote is $10,000. You do not reduce the annual additions by the refund amount. I have a similar situation, but without catch up. 401k fails ADP, HCE receives refund of excess contribution. On the New Comparability employer side can the amount of the returned salary deferral be incorporated in the New Comp allocation if the HCE goal is to receive the 415 max contribution. For example in 2008, HCE defers $15,500, but due to failed ADP $5,000 is returned. For New Comp allocation can he receive $35,500 or is he limited to $30,500 (based on original deferral). New Comp allocation subject to passing non-discrim testing of course. Thanks.

403(b) plan currently does not have provision for employer discretionary contribution. Employer would like to add provision for 2008. Can the 403b plan be amended by March 15, 2009 to allow for 2008 plan year employer contribution??

I'm not sure what you mean? As Andy points out, it appears the maximum assumed earnings rate (for purposes of smoothing) is the third segment of the funding rates (Sec. 121(a) of WRERA). I agree that the MAXIMUM assumed earnings rate is the third segment of the funding rates. However, that doesn't necessarily mean that rate will be the assumed earnings rate. For example, if a plan has most or all of its money invested in a money market, or similar account, the assumed earnings rate would not necessarily be as high as 6.43% (Jan 2008). While the current money market rate may be only 1.5%, over the long term, maybe 4% is a reasonable expected rate of return.

Should the expected earnings be based on a short term assumption or long term assumption?

Thanks. I'm sure this will make its way to an ERISA attorney.

Thanks for the help, i will definitely look closely at the Reg.

DB plan with less than 100 lives. 204h notice issued 9/30/08 saying benefit accruals will cease 10/31/08. Plan amendment says benefit accruals cease and plan will terminate 12/31/08. What are consequences of different dates. Since participants were notified of accrual freeze, can another notice be issued saying the freeze is 12/31/08, not 10/31/08??

Would the thinking be different if the plan wasn't frozen. Active plan, only pays benefits from pension fund (no accelerated forms), no lump sums (except for small cash outs) or purchase of annuities. Would there be deemed waiver of credit balance if it would boost AFTAP to 80%??? And is the answer conclusive or just an interpretation of regs? Thanks.

Plan Year is 7/1-6/30. The initial AFTAP for plan would have been 68% which triggered deemed waiver of $660,000 of $680,000 credit balance to reach 80%. Enter Technical Corrections, with the assumed rate of return, assets increased enough to cut deemed credit balance waiver in half. Is it feasible to revise AFTAP or is credit balance considered waived based on original calculation?? Thanks.

I'm still a little confused. i have a plan that is an enhanced match safe harbor 401k with a new comparability profit sharing piece. It sounds like since the employer will be making a profit sharing contribution the non-keys will require a 3% TH minimum allocation regardless of the safe harbor. Is that correct?? Thanks.

Just need confirmation. 2008 calendar plan year: I'm looking at 2007 compensation to determine if participant is HCE in 2008. Is the threshhold $105,000 or $100,000?? Thanks.

Agreed and it also doesn't specify which month we get the 3rd segment from when it might matter. Is it implied that its the month of the your funding rate assumptions??

Tom, let's take #1 one step further. Same scenario except the participant in question terminated employment with less than 500 hours and there is a last day requirement. Participant is entitled to the 3% SH, but since they terminated wth less than 500 hours are they still subject to gateway requirements?? Thanks.

Your point of certifying the AFTAP is well-taken. Now that I have enrolled in law school, I would opt to argue for the plaintif against whom the sponsor took action to deny payment of a lump sum. Also, your "impact of not deferring" is an excellent suggestion and I will consider adding it to packages with the client's approval. PPA is the worst piece of legislation since the rescinded TRA86 Sec 89. Hopefully, Congress is reading this board and will be engendered with the wisdom and courage to repeal it. Me and my fellow actuaries in my office had a discussion this morning regarding Effen's suggestion that a client may want to restrict lump sums. The question then became: If the 2008 AFTAP was over 90%, but it looks like the 2009 AFTAP could possibly be less than 60% or even less than 80%, when is the right time to certify the AFTAP. Do you certify the 2009 AFTAP simply because the employer doesn't want to pay lump sums??? As Effen mentioned, this could work in either direction.

I believe the employer needs to make an election to apply the FSCOB to meet the quarterly requirement. The date the election is made is then the date the quarterly contribution is satisfied. If an election is not made and a contribution is not made, i would say the quarterly contribution has not been satisfied. That does cause issues when you're electing to apply COB based on prior year's information and current year's quarterly requirement could be less. I don't have any cite for this, just MHO for what its worth.

Thanks. I understand we'd be stuck with the Yield Curve, but we're just checking our options and wanted to clarify. Thanks again.

If electing the full yield curve instead of the segment rates, are the monthly choices the same as when electing the segment rates....the month of the valuation date or one of the four prior months?? Or are the options different if electing the full yield curve?? Thanks.

Thanks for the response, and just to be clear, what about 410(b) and 401(a)(4) testing??? Thanks again.

401k plan has a matching formula based on compensation. Participants earning up to $40,000 receive 100% match on their salary deferrals, paticipants earning more than $40,000 receive 50% match on their salary deferral. Is there additional testing other than the ACP test on the match since it isn't a uniform formula?? Thanks.

Does anyone have plans that base pre-PPA lump sums on a GATT minus interest rate?? If so, how are you calculating the PPA Funding Target as of 1/1/08??? Are you using assumptions to consider the value of the "GATT minus" rate that may turn into a "PPA minus" rate?? Even if employer decides to go with straight PPA rates how should the "GATT minus" be reflected in the Funding Target calculation?? Thanks.

Thanks. That would help.

So i guess my only option at this point is to continue end of year val for 2008.

I am involved in a possible take over of a small plan with end of year val date (12/31). Per 2008-21 the plan's 2007 AFTAP would be slightly over 100% based on the 2006 assets and curr liab. How would changing val date to the beginning of year for 2008 effect the 2008 AFTAP calculation as the transition rule per 2008-21 is for plans with end of year valution for 2006, 2007 and 2008?? Thanks.