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I am reading the language a little differently. The participant may elect a smaller compensation limit as long as on the day of the election the accrued benefit is preserved. The limitation of compensation to less than the legal limit has always been permitted. They are not permitted to reduce their accrued benefit. I agree with you on this point.

The personal data for this participant is unique. However, the compensation IF employed by 2 separate employers is also unique. IF the participant is in 2 plans of the same employer, then compensation is whatever the employer pays the employee. There should not be separate compensations (except for potential different definitions of what is included for benefits / allocations).

A participant has 2 complete plan years of compensation. They earned $500 and $19500 respectively for compensation. The hours worked were 100 and 2080 (part time in the first year for the sake of argument). The plan requires 1000 hours for a year of accrual. Therefore, the participant has only 1 year of accrual. Can the plan 'legally' have the average compensation be equal to $10000 ($500 + $19500 / 2) for benefit purposes??? I can not find anything to prevent it but it just 'smells' funny. The average would be $10000 for 415 because it just looks at how many years exist and not hours. I have pretty much convinced myself that it is permissible but I just don't like it (sorry for the personal opinion) Thanks for any and all comments.

Depending on the number of people involved, it may be possible to keep some or all the insurance IF the plan goes under Revenue Ruling 74-307.

Thanks for the responses! I had completely forgotten that the unfunded current liability was already defined for larger plans. I agree with Mike that generally the IRS has permitted the maximum deduction to be determined as an end of the year number and deducted regardless of the actual contribution date. The projection to the end of the year would follow the same rules for the projection used for the full funding limit (in my opinion). Thanks again!

EGTRRA expanded 404(a)(1)(D) to allow the deduction of the unfunded current liability. A valuation is being performed as of 1/1/2003. Is the new maximum determined based on the values as of the valuation date?? May / must they be revalued as of the end of the year?? I would think the numbers would be calculated at the valuation and experience would either work or not. Another actuary wants to consider the additional accruals through the end of the year BUT this means they must also use assets at the end of the year for consistency. I have not found a good site for regulations. I have found a great site for code access.gpo.gov/ecfr. Check it out!

Thanks for all your input. I appreciate the cites especially (I did not look back far enough for the data - golly over 10 years ago ) I found some older data regarding the 415 limits so felt relatively comfortable with all past service and no normal cost prior to your responses. Now, I feel very comfortable. Thanks again!!

OK. Client has a plan with 100% of pay as the benefit which produces 14,166.67 (415 limit). Only active participant has 4 years of service and 28 years at retirement (for fractional accrual) BUT first year of the plan so only 1 year of participation. For whatever reason, they are running projected unit credit. Should the benefit for normal cost be 505.95 (14,166.67 / 28) and the past service be 3 * 505.95 = 1517.85?? OR, should 415 be imposed which means that because of only a single year of participation that the past service is equal to 1,416.67 and the normal cost is zero??? Thanks for any and all comments.

8.0 does have a modification that should help. The source may now have a checkbox activated which indicates whether it is a ADP or ACP safe harbor. This should enable the differentiation of these monies.

Are you currently having problems that you suspect are due to IE??? It should not (in my limited opinion) effect your Relius installation. I have upgraded IE on my laptop and Relius ran without any problems. Hopefully others will respond who may have more experience.

Another 'little' quirk is that IF the plan is top heavy (almost guaranteed with the size of the plans) then IF the value of the contracts are not sufficient to pay the participant the top heavy lump sum then a side fund must be established. This side fund then requires actuarial certification which the client was trying to avoid in the first place.

Just a quick thought that others more proficient in Crystal may be able to comment on. The report that you have chosen to modify contains tables (links) which are only populated when run through Relius (RPTPLAN for example). This could be causing your problem because there is no data in that table and the rest of the links are breaking down. IMPORTANT: The deletion of that table will require some of the fields to be relinked to their basis. For example, the plan name is in PLANSTAT.PlanNam rather than using RPTPLAN. Good luck!!

Yes, you may start up another DB plan. HOWEVER, the accrued benefits (at time of payout) must be used to reduce the maximum benefits permitted under the new plan.

Thanks for all the responses already!! The previous posting ended with a suggestion that it be included in the Gray Book for a future meeting. I would like to see if there isn't a consensus as to the method of resolving the situation. Yes, this situation is a first year valuation BUT it could happen in the second year as well (consider the plan did a great job of investing in Enron the first year - assets the second year are nonexistent). Everyone agrees that contributions made during the year are NOT included in the valuation assets. The basic question is what happens when prepaid contributions are subjected from assets and the assets go negative?? OR, in my example, 412 purposes usually subtracts the interest credited on the prepaid contributions from the assets as well - causing the same problem (not necessarily so for 404). Are they floored at zero?? Are they floored at zero for funding BUT full funding limits use negative assets to increase the full funding limit??? I vote for the consistency. The same result should apply for all purposes - funding and limits. That being said, I think that the negative assets should be used and create larger contributions to the plan. Additional comments are greatly appreciated.

What is the correct method for handling the following situation: Valuation 12/31/2001 Interest rate 7% Contribution 10/1/2001 35,000 Earnings 400 Market value of assets 35,400 Interest on contribution for Schedule B purposes 35,000 * (3/12) * .07 = 613 Assets for 412 35,400 - 35,000 - 613 = (213) Should this be floored at zero???? Is the answer any different for the full funding calculations versus the funding method itself?? I believe the only prohibition is that the IRS takes a dim view of negative present value of future normal cost. For example, I believe it is acceptable to have a plan using Individual Aggregate where the retiree liability is bigger than the assets that negative amounts are allocated to the remaining employees to determine the normal cost. Thanks in advance for any commentary.

There are obviously several questions: Do you need that much life insurance??? Have you considered qualified plans (IRS approved) providing retirement benefits for you and your employees?? VEBAs are legitimate but they can be abused like anything else. I would be sure to consult an attorney before committing to anything.

Thank you all for your comments. Especially the ones regarding the reasonableness of the funding method. The other recommendations regarding looking at the asset valuation method to not recognize or smooth the severe fluctuation are also very good! Luckily I am not the actuary having to sign off. This question was posed by a client and my reaction was that neither zero nor the present value of future normal cost was the correct result. BUT, I did not know whether there was a 'correct' answer - other than to change the funding method. Another actuary had a similar situation and developed his own spread factor on the basis of the future working lifetime of the terminated participants less than retirement age. I did not feel comfortable 'creating' a basis although it makes as much sense as some. Thank you all again for your interest and your comments.

A client is using Aggregate funding and has no active participants - all retired and terminated. Due to the recent market, the valuation produces a present value of future normal (assets less than pvfb). The client would like the normal cost to be zero and their actuary is telling them to fund the entire difference as normal cost. I do not believe either answer is correct. I thought there was a prohibition against using the aggregate funding method with no active employees. (My suggestion is to switch funding method to unit credit and deal with the amortization of the base. The client would obviously not like this because they want zero. TBSS - too bad so sad) Can the aggregate method be used?? IF yes, what is the 'correct' answer for the normal cost?? Any comments are welcome.

Sorry, misread the original posting about accrued to date testing. It did ask about contribution basis testing. It may still be possible with a judicious use of testing assumptions to prove that the DC plan is OK without going to contribution basis testing (depends on demographics)

There have been several presentations (by Deutsch and Groszkiewicz) dealing with this issue. Their presentations illustrate that it can be done BUT it does require division by average compensation (not one year) There is even a demonstration of where it is advantageous to use the 'fresh start' method (using only years from a specific date).

A question has arisen regarding the following: A HCE is NOT benefitting under the plan (for some reason). A second HCE is benefitting under the plan BUT has a zero accrual rate (for some reason). Are rate groups required for BOTH HCEs??? IF so, what accrual rate is used for the first HCE?? (Zero is not correct because he actually has none) The reason for the question appears to be a difference in the testing under 410b for the plan versus for the rate group (the rules are slightly different). Thanks, in advance, for any input provided.

Easiest way is to go to our website and go into training and check out the user groups. I do not know which group would be closest to you. (Either the Midwest group in Indianapolis or the Southern group based out of Jacksonville). All the groups have the ability to provide reduced costs for training and opportunities to mingle with others in the same arena. You could also contact Peggy Norton at the Corbel home office - (904) 399-5888.

There are various user groups around the country. These groups meet to go over the software and other issues related to pensions. There has been discussions about creating a DB Users Group. Any interest from other parties???

Version 7.2 permits the deemed distribution of the loan ONLY. This should fix the problem.

Generally, I handled plan terminations by vesting any employee who terminated during the past 5 years (not currently in pay status). Therefore, I would 100% vest a) and b) but NOT c).