LIBOR

Actually Andy there's no confusion !! using 0s all around is obvious for an annual measurement period! I was just curious if anyone would suggest not including the frozen guy at all ?

After reading Grey Book 2004 #27 it's evident that if the measurement period is "current and all prior" for all the plans being tested under the ABPT then for a "frozen plan" it's appropriate to use testing service as of the freeze date but current average compensation in the development of accrual rates - and that seems logical also. But if the measurement period is the "current plan year" for all plans being tested then it seems that Andy's response to my earlier question would be correct - i.e. the accrual rate would be 0/(current average comp) or 0 . Does everyone agree ?

Great replies !! Thanks everyone for your time !!

Just wondering if anyone knows how an employee benefit percentage on a benefits basis would be determined for a participant in a frozen DB plan ? Can you use the "accrued to date" over comp for this plan and "the annual change in accrued" over comp for other plans in the testing group ? If so, this would answer the question !! thanks all in advance for your time !!

My question involves the inter-relationship between 404(a)(7) and the new excise tax exceptions found at 4972©(6) and 4972©(7) that came in with EGTRRA - An example : Suppose my DB super max is 15% of pay and I have PS contributions of 5% of pay; the way I understand the rules is that an additional 5% into the DB will be non-deductible but the excise tax excepton rules in 4972©(6), ©(7) won't come into play until I exceed the combined limit of 25% of pay - at that point I look at the "stacking" rules in 4972©(6), ©(7) to see if an excise tax applies ?? In other words, the total non-deductible contribution will be the 5% additional plus any more over and above that amount - not just the amount exceeding 25% of pay. Do I have it right ???

Effen , could you elaborate more on the excise tax issue - I'm not sure I know what you mean ?

BRF's - yes !! and that in and of itself is enough of an issue !! thanks Pax !!!

I think Pax has a good point; 2004 grey book question #3 touched on the inter-relationships between the interest rate and the various Code sections that rely on it. I too was wondering if IRS has provided guidance either formally or otherwise in this regard ??

I have a client who would like to freeze their DB plan; but prior to the freeze they want to amend the plan to provide 3 additional years of service for any participants with combined age plus service in excess of 80. Are there any potential non-discrimination issues here ? Can anyone think of any problems of any nature with this prposal ??

For 1/1/2004 DB valuations, is anyone using 90% of the weighted average of 30-year Treasuries to develop the Max ? I thought PFEA of 2004 reset the allowable range to 90 - 100% of the weighted corporate blend ?

That's right ! By re-working 2003 for max purposes I don't want to create charges on the minimum side that weren't there before. As you note, we can re-calc 2003 for purposes of determining if quarterlies are necessary for 2004 ; and, the "gateway" calculation for DRC/AFC purposes is independent of the rate chosen for OBRA/RPA purposes. I was just checking to see I've covered all the bases. Thanks for your time and feedback !!

I'm considering a re-do of a 1/1/2003 DB valuation using 90% of the weighted average 30-year Treasury to create my Supermax. An Additional Funding Charge is avoided since my funded % is over 90% using the "gateway" rate. Also, the lookback rules of PFEA 2004 seem to indicate that I can recalculate using weighted corporate to see if quarterlies are necessary for 2004 - the funded % is over 100% and so quarterlies are not required. Two questions : (1) Is my read on the lookback rules correct for 2004 quarterlies ? and (2) will using the low end of the range for max purposes force me to use this same rate for some other purpose ? Thanks in advance for your time.

thanks Pax ; the minimum required can be an important subtlety !! thanks all for your time !!

So a DB contribution that exceeds 25% of comp plus the deferrals could all be deducted ?

little rusty on the DC side ; currently an employer with a K plan that only allows deferrals can also have a DB with a required contribution that exceeds 25% of gross compensation. Question : since this implies that the employer can take a deduction for the deferrals, does he in fact take it as a pension deduction or is it as a business expense in the payroll category for example ??

So, would you say that the AL after amendment is based on the projected benefit using (total service to retirement + 1) ?

A plan that uses the EAN method for funding is amended to enhance everyone's accrued benefit to date by giving an extra year of servce - this type of amendment is utilized frequently with "window" programs for a targeted subset. Question : we are accustomed to defining the amendment base as the difference of a "before" vs "after" EAN Accrued Liability where the Accrued Liability is defined in terms of the projected benefit ; but where the amendment deals with an accrued benefit, I'm not sure how the base should be defined ? Any thoughts are appreciated !!

maybe MGB is Mr. George Bush ??

thanks Pax but I still don't see where it refers to Transportation Workers Union - I just see 501©(5) & 6/30/55 ; I'm sure MGB is correct but I'm guessing his insights are "insider" type information ???

don't understand how MGB deduces that 501©(5) & 6/30/55 implies GreyHound?? also, I thought the nature of an "encrypted" message is such that you need a "code" to open it ?? MGB , can you provide a website where we can all see this "encrypted" message ?? I don't know : this is beginning to sound like something from a Bond movie !!

Don't know of any new developments but would like to get your thoughts (funding only ) - the funding method is FIL - on the following approach to this situation : I have a new client that opened (per plan amendment) & closed a window during the 1st quarter of 2004; I've opted per RR 77-2 to reflect the window on the FSA in 2005 rather than 2004; 20 participants take the window offering and all take lump sums. I propose to establish the 30 year amendment ( window) base as the difference between the total lump sum payout and the EAN-AL as of 1/1/2005 for the 20 participants under the plan provisions prior to the window. Does anyone see a problem with this approach or has anyone used a different approach for the situation where 77-2 is used in the following year as described above ??

A plan is amended to provide for an early retirement window in 2004 ; those who opt for the window can also take their benefit as a lump sum - everyone takes a lump sum and is cashed out in 2004. Utilizing Rev. Ruling 77-2 you decide to reflect the window amendment on the 1/1/2005 valuation. Question : Assuming an immediate gain funding method, how would the amendment base be defined on 1/1/2005.

here's my thinking : suppose I'm getting ready for a 1/1/2004 val. ; a window program is designed late in 2003 and enhanced annuity as well as lump sum options; let's also assume the window opens 3/1/04 and closes 4/1/04; I could do the val before 3/1 with an assumption as to (1) how many opt for the window and (2) of those, how many opt for the lump sum. Or I could wait until 5/1/04 to do my 1/1/04 valuation at which time the results of the window are known ( i.e who opts for it & what their selections are) and I could set my assumpitons ( i.e. number opting & what options) to actual experience. I was just wondering if, given the above choices, what practitioners are doing ?? Or are they doing something different ??

Utilizing Rev. Ruling 77-2 and recognizing the impact of the window in the next valuation is a clean approach ; but if you wanted to reflect the window in the current year and if the window opens after the beginning of the year and closes before the end of the year and if you have a choice to perform the valuation either before the window opens or after it closes then I was wondering how practitioners are handling it ? i.e. are there any compelling reason(s) why doing the val. pre-window with appropriate assumptions is preferred over waiting until you know the outcome of the window ? or vice-versa ?? There have been discussions in the past on this and I was just wondering what the current thinking is ?

great ! thanks Pax !!