Gary

When adjusting the 415 dollar limit for benefit commencement before age 62 during plan year 2008. I have read sources that indicate the mortality to make adjustments for payment before age 62 to the dollar limit is done using GAR 94 for benefit commencement in 2008 plan year. That is, the app table before 2008. Of course there was a new app mort table in 2008 I would expect that table to be used for 415 dollar adjustments. I also bellieve I have read in a more recent source that it is indeed the new app mort table. Which one is it? And can you provide a pertinent cite? Thanks.

I serve a client's retirement plan and I informed the pension attorney in writing that the plan should be amended to incorporate a unit accrual formula of 3.25% per year. The attorney delivered the client a two page amendment that provides for an amended formula of 3.5% instead of the 3.25% he was instructed to do. To me it seems reasonable to just provide the client with a replacement page that shows the correct intended formula of 3.25% instead of 3.5% and he can just toss the old page. FYI It is a one participant plan. He is the owner. The valuation was performed with the intended 3.25% formula. Any thoughts? Thanks.

With the implementation of a new plan the Corbel language provided the descriptions of the various safe harbors and then a separate "maybe" amendment that enables sponsor to decide later in the year. This "maybe" amendment provides an annual option to amend plan prior to 30 days before year end. So if that is a sufficent amendment in it of itself, then perhaps the supplemental notice is all that need be provided near end of each year and no additional amendment need be drafted. Not sure, but one interpretation. Thanks.

I subscribe to Sungard Corbel and use their plan document admin system. I created a 401k safe harbor plan. I chose the option where the client provides the "maybe" notice and the output provided a plan amendment that enables the client to reserve tje right to adopt a plan amendment no later than 30 days prior to the endo fo the plan year to provide the 3% nonelective formula. However, the Corbel documents did not provide a sample plan amendment to actually adopt the safe harbor provision if they decide to do so late in the plan year. Am I missing something. Doesn't the plan sponsor need to adopt an actual plan amendment later in year to apply the 3% safe harbor? Or is the supplemental notice sufficient? Thanks.

What would be the problem if there were common law employees? Of course I could assume they retire at 62 anyway. Yes, I agree they need to terminate or retire to receive pension before 62. Thanks.

I am going to prepare a new DB plan document for a client. My understanding is that NRA must be set at at least age 62 unless the typical retirement age in the particulat industry is justifiably less than 62. My simple solution to use age 62 is as follows: Set NRA to age 62 and have early retirement begin at age 55 with fully subsidized benefit. That is, accrued benefit with no reduction for early retirement. This way the plan can use an assumed age 55 retirement while meeting the age 62 requirement for in-service distributions. Any thoughts with this approach? Thanks

A plan has a fiscal and plan year of 6/1 to 5/31. And the limitation year is the plan year. The 415 regs are effective April 5, 2007 and apply for limitation years beginning on or after 7/1/07. So this means to me that the 415 regs apply for the specific plan above for the plan year beginning 6/1/08. The plan was terminated as of 5/31/07 and assets distributed 4/7/08. First question is did the plan need to be amended for the final 415 regs? Since the regs were effective 4/5/07 (prior to date of plan termination) it seems that there is no harm if a plan amendment adopting the 415 regs was signed. Of course they would never apply since the plan assets were distributed prior to the date the rules appply (i.e. 4/7/08 versus 6/1/08). Regarding application of the remedial amendment period: My understanding is that the remedial amendment period for the final 415 regs is up until the due date of the filing of the 2008 tax return. The 2008 fiscal year ends 5/31/09 and thus isn't even due yet. So does this mean that an amendment is not required until for example 8/15/09 (due date w no extensions) to avoid disqualification and thus really never had to be doen for this plan? Thank you.

Here's the Story (of a man named Brady ....): I'm looking for observations on a practical level, not extremely technical. A client has a 401(k) plan with match that is administered by another firm. Presumably they have certified that the plan meets the ADP and ACP tests. My firm then implemented a cross tested plan that includes a profit sharing plan component and a defined benefit plan component. We are to now value the plan for its second plan year. The client provides data that he thinks is sufficient, but really isn't ideal, unless they just can't get complete data. For example regarding the 401(k) plan we have account balances as of end of last year but not this year and we have the amount of deferrals and matches for the current year. So in order to compute the average benefit percentage, I don't have year end account balances but can impute some estimate. For the profit sharing plan (which our firm handles) the client did not provide year end balances, but of course we know the allocations for the first year of the plan. So again we can simply estimate year end balances for non discrimination and average benefit testing. The testing is done on an accrued to date basis. I don't know for sure but I beleive they do not have sub accounts for the PS plan and just one account with a total value. As practioners, I am looking for a consensus. Are most of you getting year end account balance data or imputing year end data? While year-end balances are not imperative yet, after a couple more years the estimates will be all but worthless. Regarding plan distributions. 2 employees terminated and are due benefits from the profit sharing plan. Let's assume all assets are combined in one account. The plan provides that the valuation date be the last day of plan year or any other date the administrator deems appropriate. These are to be the first plan distributions from the plan. The plan year end is 3/31/09. Logistically any suggestions? That is, would you just recommend to take the value as of 3/31/09? And if not what day might you use (recommend to client), as the values change daily? Thanks.

We do accrued to date testing thus the reason for (the perceived) needing account balances. We do accrued to date since the testing is combined with a DB plan (that provided for 5 years of past service at inception) and it produces better results. So curious to hear responses in light of the above. Thanks.

Here's the Story (of a man named Brady ....): I'm looking for observations on a practical level, not extremely technical. A client has a 401(k) plan with match that is administered by another firm. Presumably they have certified that the plan meets the ADP and ACP tests. My firm then implemented a cross tested plan that includes a profit sharing plan component and a defined benefit plan component. We are to now value the plan for its second plan year. The client provides data that he thinks is sufficient, but really isn't ideal, unless they just can't get complete data. For example regarding the 401(k) plan we have account balances as of end of last year but not this year and we have the amount of deferrals and matches for the current year. So in order to compute the average benefit percentage, I don't have year end account balances but can impute some estimate. For the profit sharing plan (which our firm handles) the client did not provide year end balances, but of course we know the allocations for the first year of the plan. So again we can simply estimate year end balances for non discrimination and average benefit testing. I don't know for sure but I beleive they do not have sub accounts for the PS plan and just one account with a total value. As practioners, I am looking for a consensus. Are most of you getting year end account balance data or imputing year end data? While year-end balances are not imperative yet, after a couple more years the estimates will be all but worthless. Regarding plan distributions. 2 employees terminated and are due benefits from the profit sharing plan. Let's assume all assets are combined in one account. The plan provides that the valuation date be the last day of plan year or any other date the administrator deems appropriate. These are to be the first plan distributions from the plan. The plan year end is 3/31/09. Logistically any suggestions? That is, would you just recommend to take the value as of 3/31/09? And if not what day might you use (recommend to client), as the values change daily? Thanks.

A plan sponsor implements a new Db plan combined with a new 401k/PS plan. The plan sponsor decides to give each employee up to 5 years of past service when implementing the DB plan and the 401k?PS plan starts contributing allocations from date of participation. So in other words the employees potentially receive past service credit with the DB plan and not with the DC plan. In checking the non discrimination on an accrued to date basis is it reasonable to determine the DB accrual based on the total accrued benefit divided by total credited service after the first year of the plan and test the DC plan accrual based on the accrual rate over the one year, since the allocation is only for the one year? That is, both plans are being tested on an alleged accrued to date basis, but the service can be as much as 5 when testing the DB accrual and is only one when testing the DC accrual. Thanks.

One client had a plan loan with a balance of about 30k (after making some payments) and then discontinued paying off the loan. It was actually 15k for husband and 15k for wife. The client than took an additional $60k for a total of 90k for the two participants, split 50/50. The client did not pay anything on the 2nd loan. As far as the rules go, I see these as deemed distributions subject to income tax and since under 59 1/2 the 10% penalty. I can simply break the bad news to the client as it is. Does anyone respond to a situation like the one above in any other creative way? Finally, a separate client (one participant plan) took out 55k and defaulted on that loan immediately. In this case it seems that we treat the 50k as a deemed distribution and since the remaining 5k is above the 50k limit it would be addressed as a prohibited transaction. Since the employee has not reached the plan's NRA I don't see the extra 5k as a retirement type taxable distribution. How have others addressed this type of situation in practice? Thanks.

Ok, then let's say it is a 1/1/09 plan year. The previous response was "no". While it may not seem reasonable, does anyone know of a specific regulation section that would not allow this? It would seem that the wife would not even be part of the non excludable group of employees; where the non excludables appear to only include 1 employee (the owner). Is it because the excludable employees (alone) have to pass coverage rules too? Thanks.

Yes, but what about the situation where an individual wholly owns two companies with a total of say only 5 employees?

Does this reporting only apply to large plans? That is, a certain size or asset value or amount of underfunding? I know it references AFTAP under 80%. Thanks.

An owner of a company has two common law employees. Neither employee met the 21 & 1 requirement to enter the plan on 1/1/08. The wife was hired 1/1/08. Can the DB plan include the wife for 2008 and exclude the employees? That is, liberal entry for wife, but still exclude employees due to the statutory requirement. Thanks.

The client asked via email "who requires the Schedule B to be delivered and maintained"? As far as I know the IRS does as per their instructions for Form 5500EZ. Not sure of any specific regulation requiring the delivery of the Schedule B. Anyone know of any? This inquiry pertains to the 2007 plan year. Page 4 of the 2007 5500EZ instructions states in the section labeled "Schedules", "The completed Schedule B is subject to the record retention provisions of these instructions. See the instructions for Schedule B (Form 5500)." Does anyone know precisely where the record retention provisions are found? Thanks.

I agree with the above. I have a client that does not want to be provided the Schedule B because he does not want to pay the fee. Thanks.

Our firm charges a fixed amount for the valuation. And an additional fixed amount for the 5500ez. So if the 5500ez is not filed we then prepare the B only and charge $300. However, some clients do not want Sch B since they do not want to pay for it. I'l rephrase my questions. Is it required to supply the client with a Sch B? Again no 5500ez reequired since under 250k and client does not want 5500ez either. Would other practioners provide the B to client saying that it a necessary deliverable or handle it some other way? Thanks

Regarding 1 participant plans that file form 5500ez. Say the plan has less than 250k a 5500ez is not required. My understanding is that it is not required to provide the client with a Schedule B. I have some clients that do not want the Sch B since they do not want to pay for it. We charge $300 for the B. Valuation charged separately. Any comments on how others handle this type of situation? Thanks

I looked closer at the regulation. It seems for the 3 month short computation period, if an employee works the requisite 500 hours such participant should receive at least 0.25 years of service credit for accrual purposes. However, it seems perfectly acceptable to provide one full year of service credit for such three month period. Does my interpretation make sense? Thanks.

A plan provides that if a participant completes 500 hours in a PLan Year (4/1 - 3/31) such participant shall receive one year of credited service for accrual purposes. It is an all or nothing situation. The plan sponsor merges with another company and the plan year is changed as follows: 4/1/06 - 3/31/07 4/1/07 - 6/30/07 7/1/07 - 6/30/08 and so on So there is one plan year that is only 3 months during the transition. An employee completes 500 hours during the period 4/1/07 - 6/30/07. Any reason why such employee cannot receive the one year of credited service for accrual purposes? Or does anyone know of a regulation that addresses this situation directly or by means of an example? Thank you.

Some good analysis provided. Bottom line is: Economic times are rough ... with many people losing jobs. Are pension actuaries safe today ... or tomorrow (i.e. in the years to come) for that matter? Who Knows. I'm 47 years old and have been toiling in the pension and benefits field for 25 years (since the summer of '84); first as an actuarial student and then as a pension actuary. I've been working for companies ranging from the top international consulting firms to self-employed (non traditional pension work) and much in between. I've worked on public plans, small plans, large plans, union negotiated plans, non qualified plans and so on. We've seen a lot of change over these years. Good times and difficult times. It's fair to say that the defined benefit pension world essentially began to atrophy right about the time I entered the market in 1984. Not many pension actuaries younger than me it seems and for obvious reasons. I am currently a small plan pension actuary at a tax law firm. I don't know what the future of my firm is, let alone my own at the firm. So the question is: How to I prepare for an uncertain future? One consideration is to prepare myself to be a free lance pension actuary. Obtaining contract work, my own clients, and a general mixed bag of pension actuarial projects. Given my current post, and the subject matter of this thread: What do you - the general pension actuarial public think the best options ahead for us are? Of course, this was essentially triggerred by the media concluding that not only is an actuary one of the best professions, but it also has the brightest future for future job opportunities. Thanks.

SOmeone told me that on a TV news report of some kind earlier this week it was reported that actuary is one of the best professions of the future. Regarding pensions, it seems large plans are terminating and freezing, and not many mid size companies are implementing new plans. Is my perception that pensions are struggling correct? When they report actuary as a great profession for the future do they just mean non retirement actuaries? Any thoughts on these reports that have been coming out? Thanks.

My knowledge is consistent with yours. My reference in this thread re: waiver of benefits comes from Q 8:29 of the 2009 Pension Answer Book. Q 8:29 is entitled "What alternative is available if IRS will not waive the minimum funding standards?" In the answer it states in part "To keep the pension plan in compliance with the minimum funding standards (pre PPA vernacular, though the author of the pension answer book sees no reason why this wouldn't apply post PPA too), owners of the company may have to waive their benefits irrevocably." So not sure what exactly is being addressed (since no known cite by me on this) in the above comment from the pension answer book. In conclusion, the point being, is that there are small DB plan sponsors who would like to not have to fund their plans now. A funding waiver is very expensive and only helps matters for that year and a plan freeze helps some, but not necessarily enough due to the unit credit PPA funding method now versus old individual aggregate. Thes plans have unfunded FTs since they are relatively new plans with past service credits at inception and 1005 of pay formulas. Thanks.