flosfur

DOV = 12/31/08. Carryover credit balance from 2007 Sch B = 45 2008 Sch SB lines Line 2b: Value of assets @ DOV: 85 Line 3: Funding Target @ DOV: 100 BOY balances Lines 9 & 13 = 45 (no reduction balances @ 01/01/08, i.e. line 12 = zero) Following the Sch SB instructions, Lines 14 & 15: FTAP & AFTAP = (Assets minus Credit Balances)/Funding Target = (85-45)/100 = 40% @ val date!?? 40% FTAP/AFTAP on Sch SB doesn't look good! Also, the AFTAP of 40% is not correct because, per S436(f)(3) the credit balance is deemed to be reduced down to 5 so that AFTAP is 80%! Do I show 40% on lines 14 & 15 or 80% but show reduction in balances of 40 on line 12 and balance of 5 on line 13?

Has anyone ever designed a plan & received a favorable determination where eligible employees are named individuals (plan passes the 70% coverage test) instead of by job classification/ pay level etc?

Code S404(a)(3)(A)(iii) reads: Certain retirement plans excludes. For purposes of this subparagraph, the term “stock bonus or profit-sharing trust” shall not include any trust designed to provide benefits upon retirement and covering a period of years, if under the plan the amounts to be contributed by the employer can be determined actuarially as provided in paragraph (1). What would be an example of such "certain retirement plans" which is not a DB plan? Is a Target Benefit Plan such a plan?

A follow up question. Can the credit balance be applied to the quarterly required amount, as was the case pre-2008?

That's not much of a relief. How would you know if you are within +/- 0.05% without doing the actual calcs?

You mean the credit balances can decline!?

Per the proposed regs issued December 2007, no leeway - see example 9 in S1.430-1(f)(7).

Has the IRS issued any guidance on this? What if, as is the case for 2008, the return on assets is negative? Is the credit balances reduced!? I hope not!

Yes, that is for 2008 only because, for purposes of using credit balances towards minimum required, assets are reduced for "prefunding balance" only [see S430(f)(4)©]. Since there is no prefunding balance @ BOY of 2008 PY, assets are not reduced for credit balances. Talk about convoluted rules!

As I stated in my subequent post on AFTAP, for the EOY Val, the FTAP & AFTAP on line 14 & 15 as computed in accordance with the instructions don't pertain to 2008 (& probably 2009 also). My 2008 FTAP & AFTAP were based on the 12/31/07 valuation numbers and were well over 100% so I don't need to burn any credit balances for 2008. I would, howver, need to burn some for 2009's FTAP & AFTAP - hence my statement "I need to decide..." (which the employer will authorize, of course).

Has the IRS issued any guidance for calculating 2009 AFTAP for EOY valuation? In the absence of guidance, do we continue with the "good faith compliance" calculation in line with what was done for 2007 & 2008? That is the 2009 AFTAP = adjusted assets/(Adjusted FT + Target NC) where assets, FT & NC are taken from the 2008 Sch SB and adjusted for balances, transitional FT % etc. In that case, for EOY, the AFTAP shown on line 15 of 2008 Sch SB is of no consequence and is misleading as it does not apply to 2008 or 2009!, and one need not worry if the % is less than 60% - correct? Where does the FTAP on line 14 come into play? Is it of any consequence?

No, not current or prior year AFTAP but "prior year funding %" has to be 80%+, which for 2008 is simply Valuation Assets (without reduction for carryover balance) divided by CL [line 1b(2) divided by 1d(2)(a) of 2007 Sch B]. This % should be entered on line 16 of 2008 Sch SB. Since this is based on the prior year %, BOY/EOY valuation issue is irrelevant for applying credit balance towards the minimum.

What is affected by the FTAP % to be reported on line 14 of 2008 Sch SB? I need to decide the amount of credit balance reduction (aka how much credit balance to burn)? Reduce enough so FTAP is at least x%(?) or reduce enough so AFTAP is at lease 60% and don't worry about FTAP? Plan's FTAP & AFTAP are less than 80% even if the credit balance is reduced to zero. So the question is, should I worry about keeping only the AFTAP 60%+ or does the FTAP also has to be x%+ for purposes other than S436. (AFTAP is greater than FTAP because FT for AFTAP is multiplied by the applicable % (<100) and assets are not reduced for credit balances.

On a second thought, giving a full year credit because of reduced hours requirement for a short plan year doesn't sound right. What if the short PY is 1 month long? Would the participant receive a full year benefit accrual credit?

What's FSCOB?

I am resending this as a new topic as there was no response to it when it was added to another thread. ------------------------------------------ Plan year was changed from 05/01 - 04/30 to the calendar year with a short PY from 05/01 - 12/31 to align with plan sponsor's fiscal year change (no other devious reason). The plan says (which is pretty much general language) that hours requirements will be proportinately reduced. So 1000 hours requirement for year of participation would reduce to 666.67 hours. For anyone with more than 667 hours, is the S415 accrued $Max based on n+1 years of participation or n+0.667, where n is the accrued participation years at the start of the short year. It makes a big difference when n is on the low side, like 1! Year of participation for S415 is the same as for the plan benefits.

Is the Target Normal Cost prorated, especially for the Max, for short plan year? I think not, because the TNC is the value of benefit accruing during the plan year, short or not!

How does the BOY val solve this dilemma?

I have a short plan year & crediting of service related question. Plan year was changed from 05/01 - 04/30 to the calendar year with a short PY from 05/01 - 12/31 to align with plan sponsor's fiscal year change (no other devious reason). The plan says (which is pretty much general language) that hours requirements will be proportinately reduced. So 1000 hours requirement for year of participation would reduce to 666.67 hours. For anyone with more than 667 hours, is the S415 accrued $Max based on n+1 years of participation or n+0.667, where n is the accrued participation years at the start of the short year. It makes a big difference when n is on the low side, like 1! Year of participation for S415 is the same as for the plan benefits.

I would appreciate your help in checking my calculation of Maximum Target Normal Cost for 2008 at various ages. Assumptions: Valuation - segment rates: 5.31 / 5.92 / 6.43%. Pre/Post retirement mortality: None / 2008 combined static mortality table (which is irrelevant if probability of lump sum payment at NRA is 100%). S417 - applicable rates: 4.85 / 5.02 / 5.09%. Pre/Post retirement mortality: None / 2008 applicable mortality table. Plan’s A/E: 5%/5%. Pre/Post retirement mortality: None / GAR 94. S415 maximum lump sum based on: 5.5% & GAR 94 mortality NRA: 62 / 2008 Max monthly accrual: 1,541.67 Probability of lump sum payment at NRA: 100%. Lump sum at NRA not to exceed S415 max lump sum. Age TNC 35 41,700 40 56,900 45 84,400 50 112,500 55 149,900 TNC is rounded to nearest $100.

I sent an email to Relius last week with these problems - they have similar emails from others. They said they are working on the fixes except for lines 14-16, which are EFast requirement!?

Since the revised calculations create a pre-funding balance and "not a deficiency" and as long as the amount contributed and deducted is less than the maximum permissible, I don't see why Actuary B should have any reservations about signing the Sch SB with zero pre-funded credit balance? This is a no harm, no foul situation! But the client may want to have irt redone so there is a credit balance which can be used to reduce future years' minimum. By the way, what part of the WRERA created this problem?

The plan specs or the assumption page would not tell you if there are delayed retirement ages for one or more employees. You will have to determine that by calculating the NRD of an individual and see if that was in the past or is in the future. In any event, an actuarial increase in the accrued benefit should not result in a TNC because there is no "additional accrual". An actuarial increase is not an additional accrual - it is a quid pro quo for delaying payments! If there is a TNC, then it is a coding problem. For a person past NRA, the prior year accrued in the employee data screens should be set to the Actuarial Equivalent of the prior year accrued for the RA used in the current valuation. If that is done, then there will no TNC. As to the possibility of TH accruals, for a "frozen plan" there should not be any additional TH accruals after EGTRRA (unless a plan decided not to adopt that rule).

I thought the whole idea of a transitional rule is to lessen the impact of new laws/regulations. With that in mind, I thought the transitional segment rates would produce lower required contributions. But that is not to happening in general because looking at the 2008 rates, the 2nd & 3rd segments are about equal to or less than the regular rates! Needless to say, transitional rates produce higher FT & TNC for a benefit stream starting after 5 years than the regular segment rates! Was this intended or is there something wrong with the published transitional 2nd & 3rd segment rates or have copied them down wrong?

Do you have guidance cite for excluding the Catch-up contributions? Thanks.