flosfur

There is no FICA on distributions - deemed or otherwise. This looks like a hoax to me - a tax would normally come from the IRS and not the employer.

No, I didn't go to work for the TPA. He is one of few TPAs I do the vals & Sch Bs in my own office. They send me the required info for the work to be done, eg. current year census and trust accounting and for the cases that are new to me, prior year val and Sch B and plan docs as amended. As I said, I started working on this TPA's cases late last year and only worked on handful of his 2005 cases. He just sent me a case to do the 2006 work for which he sent me the 2005 Val & Sch B and plan docs. The 2005 Sch B has my forged signature. I know that he was the TPA on this case for 2005 so no other TPA was involved for 2005. Also this TPA does not have an ee so only he could have forged the signature. Interestingly, I just found out that the actuary he worked with before me had his enrollment suspended. How does one find out why an actuary's enrollment was suspended? Is that public info?

This is new one for me. First of all, have you checked with the XXX's HR dept/plan adminstrator/consultant to see if this is real and not a hoax from someone. Secondly, the benefits/allocations are calculated by the XXX's consultant/TPA. So if a mistake was made then they are responsible for the error and not the emplyee. Thirdly, erronously computed benefit accruals or allocations are just book entries which can be corrected before they are paid out. So I don't know how the excess benefit accruals can come about. Finally, assuming there are no penalties invloved, a FICA bill of $10k for the employee implies an imputed income of about $130k - that seems a lot of "excess accrual" for someone with <$100k pay.

As a 3rd party actuary to a TPA, on a takeover case for 2006 work I noticed that someone had forged (bad forgery) my signature on the 2005 Sch B with my EA # and the rest of my information on page 1 of Sch B. This is a classical case of the "dumb criminal" - the TPA or someone for him forged my signature and he expects me not to notice it! If I worked on the case last year then I wouldn't need last year Sch B or plan doc which he sent me! Where does one report a case like this? I don't know if the local police or the DA's office cares about this kind of fraud!? I started working with this TPA late last year and worked on only handful of his cases for 2005. So, I won't know on how many Sch Bs he has forged my signature unless I go through the 2006 cycle on his cases. But I have no intention of working with him anymore.

Takeover case. A plan covers an owner, his wife and a previously terminated employee. Owner and wife are not active but the business is still in existence. So they are not getting service/participation credits and hence no additional accruals. Prior year’s info: Individual aggregate method. Present value of future benefits (PVFB) = $320k and assets = $272k. In a nationally marketed software, the prior actuary coded the owner and the wife as “inactive”. As a result, the individual normal costs computed by the software are zero, which the actuary used for preparing the Sch B. I think this is wrong as there are unfunded benefits which cannot never be funded under this calculation method. Anyway, it does not satisfy the funding equation for a reasonable funding method of regulation 1.412©(3)-1: PVFB = PVNC + Net balance of bases (= 0) + (Assets – Credit Balance) Do I need to go back and redo the prior year valuation and Sch B and file an amended return? Or can I simply redo the calcs and carry forward information based on recomputed numbers.

That's the IRS's position. But, the code says use the greater of plan interest rate or 5.5% and says nothing about considering plan's mortality. So I don't know how the IRS justify their position.

Yes, there was a FFC.

This approach was put forward by the accountant.

For some period, the US Treasury stopped issuing (selling) 30 yr bond. During that period the H.15 did not have the 30 year rates. So the IRS came up with a method to compute a proxy rate for the 30 yr treasury bond. The Treasury started re-issuing the 30 yr bond about two years ago so I don't know why the IRS is not taken the rates from H.15. For pension plans you should use the rates published by the IRS.

A sole prop's deduction for a pension plan is limited to the net Sch C earnings minus 1/2 Self Employment Tax. A sole prop's net profits are $20k with a required DB contribution of $100k, $80k+ of which cannot be deducted. Compare this with: A one-person S-Corp has revenue of $25k, $5k of non pension plan expenses and $100k of contribution for the DB plan it sponsors, thus creating a loss of $80k. The loss of $80k flows to the only shareholder and ends up on his/her Form 1040 (line 17 for yr 2005) thus reducing his/her other taxable income of any description (shareholder/spouse's W2, investment income...) which far exceeds the S-Corp loss of $80k. The DB contribution will be paid by the S-Corp with the money loaned by the S-Corp's shareholder. Ignoring the issues relating to the loan from the owner to the corp (interest on the loan/imputed income..), corporate taxes and extra admin expenses, is there anything wrong with the above mentioned S-Corp situation?

A plan hits the traditional (aka ERISA) full funding limitation (FFL) but the 90% of RPA '94 FFL is higher than the ERISA FFL thus requiring the plan to contribute more than the ERISA FFL. There is no base for waived deficiency. Should the amortization bases be set to zero (fully amortized) in the following year? I say yes but what say ye?

The Form 500 refers to "proposed" termination. Since "proposed" implies in the future, filing before the "proposed" termination date should be OK. My beef with the form is that if one can file the form within 180 days after the termination date, why don't they change the form to say "actual or proposed" termination date?

Blinky is right - it is right in the PBGC instructions: for a new plan that does not grant past service credits for benefit accruals, the premium would be zero. But they still want you to file the forms, even with zero premium - go figure. I have this confirmed in writing by the PBGC.

Where can one find the 30 year Treasury Rate soon after a month ends. I am looking for the December '06 rate and have been searching the IRS website since Monday 01/08 but found nothing. Datair's website has the various interest rates and even they don't the December's 30 year rate as of today.

Follow up question: If the employee's sole beneficiary is the ee's spouse, Q&A-3 of the 1.401(a)(9) permits the period certain to be as long as the J&S life expectancy if it is longer than the applicable period for the employee, provided the period certain is not provided in conjuction with a life annuity under A-1(b) ... (last sentence of A-3(a)) What does this proviso mean and what is it trying to circumvent? Is it saying that a life annuity with a period certain equal to the J&S life expectancy is not permitted "if" the resulting period certain is longer than the applicable distribution period for the employee? Assuming the period certain satisfies the length requirement, one can use life annuity with period certain of J&S expectancy and get slightly better results than using annuity certain only.

If the plan's A/E interest is 5% and one uses 4.99% as the annual increase, say, then that is almost like valuing an annuity certain with the certain period equal to the J&S life expectancy because the discount rate is almost zero % and it's a one step calculation. Whereas with annuity certain, one has to first look up or calculate the J&S life expectancy and then compute the annuity value.

Why? Due to the restrictions on "reannuitization"? I'm just interested in how others are handling these and why. How is it "reannuitizing", if one is just providing the permitted Equivalent alternative optional benefit? May be I need the definition of "reannuitization".

As SoCalActuary stated, to minimize MRD (i.e. make the MRD "really" the minimum!). Since it is going to be a J&S with the spouse as the beneficiary why is the spousal consent needed? It's not a big deal to get the consent but why?

A plan's normal form of NRB is life only annuity. To satisfy the RMD rules, among other alternatives, the payments can be made a) as an equivalent 100% J&S annuity and b) as an Equivalent increasing annuity with annual increases <5%. Q1: Can these two be comined, i.e. as an Equivalent increasing 100% J&S? I don't see why not. Q2: Are there any documents that are required to be executed to use these alternatives or does one just compute the numbers and keep them in file? Thanks.

Notwithstanding, how one can have a $50k minimum required with an unfunded RPA of $100k for a new or old plan: The DB/DC combo deduction part of the section of 404 says [s404(a)(7)] (rephrased): the deduction is limited to 25% of eligible comps or the "minimum required contribution". So the deduction limit related to the unfunded CL limit doesn't even come into play.

I didn't know one had to send in a Tip to responses on the Board, especailly when the responses are " I guess" this or I guess that! Thank you Sires, one and all.

Then that's really not a COLA in the regular (Economics) sense! Isn't that really an equivalent increasing annuity/pension, increasing at 4.99%?

Huh!? W-2 is just a form which among other items shows a) Income subject to Federal taxes [box 1], b) income subject to SS tax [box 3] and, c) income subject Medicare taxes [box 5] => using 2005 Form W-2. As far as I know, income subject to Federal taxes shown in box 1 is what is commonly referred to as W-2 wages and that's what shows up line 7 of Form 1040. So which item on (Form) W-2 is Section 3401(a) income?

I am curious about the math behind the magical 4.99% COLA? Why 4.99%? Why not a COLA of 8, 15, 20% or some higher %? Isn't COLA a pre-deteremined % as published by some governmental entity such as Social Security Admin or CPI increases published by Bureau Labor Statistics ..? I don't think any of these have been in the 4.99% neighborhood recently (in USA).

An elementary question. What's the difference between W-2 wages and Section 3401(a) wages? Corbel prototype & volume submitter documents have 3 options to select from for defining "Compensation": a) Wages, tips and other comp for Form W-2. b) Section 3401(a) wages (wages for withholding purposes). c) 415 Safe-harbor comp. For the world me I cannot figure out the difference between option a & b!? Aren't the W-2 wages also the wages subject to withholding?