flosfur

Somebody is arguing that distributions on account of disabilty are tax exempt? I don't think so but don't have anything to dispute it (without doing some digging). Incidentally, to broaden the question, what type of disability payments are tax exempt? For example, are the disability payments from an employment (under the disability insurance) taxable?

I don't know it being illegal!? Unreasonable, yes, but illegal? I am not fond of BOY vals for small plans and have never initiated one myself. But I have taken over many cases with BOY vals where the only this BOY were the value of assets. In many cases even the employees who terminated after BOY were treated as terminated! Following your appraoch, what do you do when BOY val produces a cost and the client goes ahead and makes the contributions before the year-end but client's Sch C/K-1 comes out to be less than the amount contributed and he cannot deduct all or part of the amount contributed!? Not many clients would be hapy with the outcome.

If the employer doesn't want the cert done, which actuarial standard of practice is breached? Or is one supposed to go ahead and do the cert anyway and not get paid for it? And in the case of actuarial services to small plan TPAs, one is in a reactioanry position - one provides services when the TPA requests services rather than initiate performance of services. So if a TPA doesn't ask for the valuation and Sch B to be done one can't go ahead and do the work. For all I know, he may have had the work done by someone else already! Similarly, if the TPA doesn't ask for an AFTAP cert, one is not a position to go ahead and do the cert (unless one wants to do it for free). In this case, is there a breach of some actuarial standard?

From your comment I can only presume either you are not in the small plan industry and especially Sole Props & Partnerships or your small plan sponsors are clairvoyants and know their business profits for the year well ahead of the year-end.

Where is the deceit? If an employee terminates and needs to be paid out accelerated payment, then one can do the cert at that time or is that against the law??

My question was concerning "not doing a cert before cert 10/01 (or 09/30 if you like)". When I tell an employer that a cert is needed by 04/01/08 and that another one would needed by 10/01/08 and if the 10/01 cert is not done, then the "04/01" cert was utter waste of time and money! So why do the "04/01" cert (for small plans only)? Clearly it would not sit well with the employer since he has to pay for the work.

Didn't my question say why do a cert "before 10/01" (or 09/30 if you like) since one has to do another cert on or before 09/30? The issue is why should an employer pay for 2 certs in 2008? Hey, I'll happily take the fees but to me it seems just a waste of employer's money paying for two certs in 2008.

In small plans it is going to be impossible to do an AFTAP cert for PY xx by 10/01/xx considering that we (at least I) don't even start working on PY xx val till well into the year xx+1 regardless of BOY or EOY val date! Is there any rumor of postponing the cert date by the congress or IRS to the date when Sch B is required to be filed or some other relief?

Other than issuing the ERISA 101(j) notice for ERISA plans, what are the practical consequences of not completing an actuarial certification before 10/01 for small plans in general and for one-person plans in particular, keeping in mind that: In small plans, the restriction on accelerated payments is generally of no consequence as the plan sponsors are not in a great hurry to pay out benefits. In any case, if and when there is a need to payout accelerated benefits one can do the actuarial certification at that time, i.e. do the actuarial certification on as needed basis. In particular, for 2008, why should one do an AFTAP certification before 10/01/08 based on the 2007 val when another one will be required by 10/01/08 based on the 2008 data?

Are you guys suggestimg that for S417 lump sum, we have to compute segment rates ourselves using the formula: x% of S417 segment rates + (1-x%) of 30 year Treasury rates published by the IRS? I thought the S417(e) segment rates published by the IRS for PYs after 2007 are the "phased in rates" and those are supposed to be used without any additional adjustment!

Great help. Thank you very much.

It is not in the 5500-EZ instructions but there was an understanding in the pension community that EZ filers were not required to file Sch B for 2005. Was this a formal guidance (Announcement, Notice) or just a statement at a conference etc?

How definite is it that that this is going to happen? Can one quote new plan funding numbers with 50% cusion?

I cannot quite figure out why the various % ranges are mentioned in h(2)(i) when "... less than 90% .." would have sufficed? Also, why was "at least 70% but less than 80%" range left out? What am I missing?

Per sub-section 436(k), for the plan year preceding 2008, FTAP may be determined using such "methods of estimation" as the Secretary may provide. In the proposed regs 1.436-1, did the IRS skirt the issue of providing "methods of estimation" or is the method outlined in 1.436-1(j)(2)(iii) and 1.436-1(3)(iii)(B) their "methods of estimation" - which is simply, net assets divided by 412(l)(7) CL, and doesn't say how to estimate assets or CL or at least CL? I have few small plans with BOY vals and for most of them I have not even started working on the 2007 vals and for some it may be Aug/Sept before I get the 2007 val information. How does one estimate 412(l)(7) CL @ 01/01/07 for FTAP/AFTAP purposes? How about using the 1d(2)(a) & (b) numbers from the 2006 Sch B and increasing the sum by CL interest rate?

No, not everyone's - not in standard termination. The benefits must be 100% covered after majority owner's waiver or sponsor's commitment to make make the plan whole by depositing additional funds. Otherwise, no standard termination!

Thanks. Very helpful.

Has anyone compiled a list of IRS/PBGC/DOL guidance (regs, notices, rulings etc) to date on PPA, especially for the DB plans? Or is such a list available somewhre - IRS/ASPPA/COPA/Academy's websites? I would appreciate if you could share. I am way behind on this and need to catch up quick.

Under the law, it would be $250k. And if your plan defines the earned income as defined in IRC 40100©(2) [and I don't see any reason for defining it otherwise), then it would be $250k.

I have done the same (I always had it for single interest rate) and would like to compare the results. I have yet to add the additional feature for valuing the greater of S417 & plan assumptions lump sum instead of annuity from the date of event - in my case it would be NRA since for small plans I assume no pre-retirement decrements.

On that point, my question is, is the notice required at all by April 30 if an AFTAP is certified to be >80% by 04/29, say? If it is required then is it OK to say that the benefit restrictions applied from 04/01 to the day before the certification date so there is no need for a second notice to let them know that the restrictions are now lifted!

But by definition, Section 412(l)(7) CL can be determined by disregarding certain % of pre-participation service and the proposed regs do not say, S412(l)(7) CL without regard to S412(l)(7)(D). So my vote be for 100%.

Per the proposed regs, for 2007 (the pre-effective plan year) 2007 FTAP = 2007 Net Plan Assets @ valuation date / 2007 Current Liability (CL) per section 412(l)(7) on the "valuation date". Consider a calendar year plan: 1) For a BOY valuation case, the 2007 CL @ valuation date would be the value of benefits accrued @ 01/01/07. What about the EOY valuation case? Would the 2007 CL be the liability computed @ 12/31/07 with respect to the benefits accrued @ 01/01/07 or the benefits accrued @ 12/31/07 (the valuation date)? If it is the value of benefits accrued @ 12/31/07, the FTAP is most likely going to be <100% for most cases since one cannot take into account the contributions to be made after the certification date! 2) If the 2007 valuation has not been completed yet, can the FTAP based on 2006 valuation be used to provide actuarial certification? After all, the CL @ 12/31/06 of benefits accrued @ 12/31/06 is equal to the CL @ 01/01/07 of benefits accrued @ 01/01/07 (assuming the CL interest rate used for the 2006 val is within the 2007 permissible CL interest rates).

A participant died without designating a beneficiary for pension plan's benefit. The executor of the deceased's estate is requesting the distribution to the estate. Should the taxes be withheld from the distribution?

My understanding is that a self-employed person's earned income for pension plan purposes is the income on which Self-Employment tax is paid/payable - income shown on Sch SE of Form 1040? An individual has Sch C earnings of $X and royalties (from inventions) of $Y but only pays SE tax on $X. Can the royalties be considered as his earned income for pension plan purposes and deduct DB cost against that income? Having a problem with a takeover case where the client has, in the past, contributed and deducted far more than the Sch C earnings of $X. (Why royalties from inventions are not subject to SE tax is a question for another day).