FAPInJax

Definitely follow the document! An early retirement benefit does not necessarily mean a lump sum computed based on the early retirement benefit.

Actually, it is worse than that. The compensation limit is high 3 and therefore an average of 265000, 260,000 and 255000 produce a maximum of 260000. Now, the dollar limit at 65 is 210000. The use of 5% 2015 Applicable mortality produces numbers like 66 226257 67 243993 68 263432 (over the 260000 so limited) You can see it does not take long.

The general answer is no. This ability has not been restored since the Pension Protection Act was passed. Now, there is an exception IF the number of participants has grown to over 100 and then it becomes mandatory to have a BOY valuation. Many actuaries are anxiously awaiting the ability to have an automatic approval for a change in valuation date to BOY (it was previously permitted pre-PPA I believe under Revenue Procedure 2000-40).

Generally, AE increases start at the NRA. They are meant to compensate for not beginning annuity payments. A benefit suspension notice tells the participant that they will NOT be getting Ae increases but will continue to get the formula benefits (in this case the frozen benefit). However, the benefit suspension ceases at age 70 1/2 and AE increases commence at that point.

Generally, pay the employees off and the owners take the shortage. They now have the option to further fund the plan termination and any dollars contributed go to themselves.

How will the SB show all contributions made during 2015 when 280,000 was made during 2014??

I believe the cite should have been 1.411(a)(13)-1(b)(2) This section specifically refers to lump sum based benefit formulas (cash balance plans for instance). It says that the relief of 411(a)(13) (which I believe is the ability to say the PVAB = Account balance) does not override the requirements for post-retirement adjustments (absent a suspension of benefits) It appears we will need to ensure the language is appropriate in our documents.

I was also under the impression that attainment of normal retirement age 'established' the normal retirement benefit. This then, according to your document, may receive an AE increase and the lump sum is now subject to 417(e) (Basically, the cash balance account balance no longer automatically provides 417(e) coverage)

It is fun because the DB plan is accruing for the prior year while the DC plan is performed for that same year. The Relius software recognizes the issue by correctly pairing the plans up based on the year of accrual.

Valuation must reflect PFB. Basically, the 1/1/2015 valuation cannot be completed until 2014 is wrapped up. The AFTAP from 2014 carries over to 2015 and drops 10% at 4/1. What was the number from 2014?

Not quite. Actuaries still assumed 5% and then the IRS started their infamous audit program where they believed that 'all' plans should be using 8%. You could show them a Dr plan (they are famous for thinking that they are good investors <G>) where the plan did not have a positive rate of return for the last 5 years and the IRS still wanted to assume 8%. [The IRS ultimately lost the battle but the start of the attacks on DB plans had only just begun]

Well, based on historical leanings (back when PPA was first initiated): 1 The change will be in 2016 (my best guess). The table will be mandated based on the fact that the IRS wants the ability to 'check' the results. This is why the tables are currently published and the software companies do not compute the various tables. The current tables already include a projection as you will notice the Applicable tables improve each year and I would expect this to continue. 2 The 50/50 blending of the optional small tables (male / female) to produce the Applicable table will continue.

I concur with the enthusiasm and loyalty part - even though I am a Yankee fan (experienced the same down year <G>)

Well, let's presume you have the following information for each employee - deferral and compensation. I believe the following can be done in additional columns 1 Determine the % of compensation for the deferral 2 Calculate 50% of the lesser of (the percentage OR 2%) 3 Calculate 25% of the lesser of ((the percentage minus 2%) OR 2%) 4 Sum steps 2 and 3 5 Apply the percentage in 4 to compensation That should do it - famous last words <G>

Let's throw some overly simplistic numbers in. Participant has a life annuity of 1,000 / month Option 1 Joint and 75% contingent annuity This annuity provides the participant with 800 / month and IF the spouse dies the annuity remains at 850 and IF the participant dies then the annuity drops to 600 / month Option 2 Joint and 75% survivor annuity This annuity provides the participant with the same 850 / month BUT upon the death of either the participant or the spouse the annuity drops to 600 / month The pop-up annuity is, in my opinion, a rare option to see in plans.

Awkward still works as there are many unanswered questions to be resolved by the IRS and DOL. As one actuary stated - "I am sure that IRS / DOL will be issuing clarifying regulations any day now."

There must be some 'missing' information to arrive at the 611. I am not sure what it is since all the numbers are even except for the final results (perhaps the use of the balance was not on the valuation date?). However, I would agree based on the information provided that the answer would appear to be 2,000.

Actual rate of return is zero.

I have seen plans with a normal retirement age of 62 and fully subsidized at 55 (even earlier with some firms). The 10% per year approach can 'easily' be funded because in the second year and later the infamous 'cushion' calculation helps and the new differentiation between the minimum and maximum interest rates. The problem comes up when the assets start getting decent rates of return and the liabilities are not growing at a similar rate. It just requires keeping a close watch on the assets versus the 415 lump sum at every point in time and monitoring the current and future expectations.

Yes, minimum distributions can be delayed until vested and they do not have to be made up.

It sounds like maybe the contribution credits and interest credits you are adding are already in the balances and that they are in twice? Normally, on a BOY valuation the contribution and interest credits are for the 2012 year (in your case) because 1/1/2013 is the first time the compensation would be known for the 12/31/2012 allocation.

No. I would prefer EOY valuations but BOY are fine. The funding target is based on the balance in the participant's account as of 12/31/2012 for the 1/1/2013 valuation. The contribution credit expected to be made during 2013 is used for the target normal cost. I presume you have a daily valued fund which is why the 1/1 value is different from the 12/31 value?

You will use either last year's compensation (with or without a salary scale) times the current pay credit percentage or a fixed dollar amount.

Relius uses an 'aggressive' approach when the little box is checked and has always been explained in those terms. I would recommend using the manual banding option and then reviewing the results carefully. This is because the regulations just refer to 'significant' differences between HCEs and NHCEs with no definition of the terms. What is significant - I would argue that having the HCEs have a larger number than the NHCEs (regardless of the size of the difference)??

I was not aware of anything that permitted (off the top of my head when I wrote the response). However, I have had discussions where the topic was broached about redoing the calculations using the lower interest rate to match back to the AE calculations. I agree with My 2 cents but was commenting on a possible alternative approach. So, a question that has been raised before, what happens to a 1 man plan where the participant is at NRA? The lump sum of the benefit is based on 5% and there is no discount using applicable rates (let's say 5.5, 6.5, 7.5)(taking steps 1 and 2). What is the effective interest rate? Any interest rate will work but can one argue it is 5% or does it floor at 5.5%?