LIBOR

Thanks pax ! that's what I had in mind also & then it would just be a matter of making an assumption regarding the number opting for cash. Assuming 100% would provide an upper bound ! Thanks again, pax, for your time & the response !!

Just wondering what techniques DB practitioners are using to estimate the funding impact of introducing a cash option to a plan? Needed estimates would be (1) cash only at retirement (2) cash at retirement & termination and (3) cash at term but only if it's below a certain amount , e.g. $15,000.

Yes! the UAL in my expression is the one Chamelnix refers to in his first paragragh - post amendment.

Base=UAL+CB+RA , assuming no OBRA FFC in prior year.

I'll have to re-look at my letter from the Joint Board but I agree; wording that relates to a CE extension shouldn't be included in a letter to a "re-newed" EA.

Great discussion !! and probably much, much, more than the originator needed - Amen

Haven't a clue but this post is definitely getting the hits !!!!

The plan, in this case, is silent; I was just thinking that this particular situation (i.e. restricted "hi 25" participant receives an unrestricted amount & is not restricted a year later & wants the lump sum he's entitled to) must come up in practice once in awhile & what are practitoners doing ? For example, if MGB's method is being used what interest rate is used for the roll-forward ? Andy, your question is a good one but a special case. I'd be happy with some feedback to my special case : the guy is unrestricted this year & wants his money ! how is everybody doing this calculation.

MGB's response includes wording like "roll it forward" and per RR 92-76 "only be done with interest". RR 92-76 doesn't really provide guidance on what "specific" interest rate to use - it just says "reasonable". Just wondering what other practitioners are using or what their thoughts are on this ? If the original lump sum was calculated using a specific Gatt rate, is that rate reasonable for the "roll forward" ?? Would the plan's actuarial valuation rate - 8% - also be reasonalbe ?? When the numbers get big, the rate used is significant !! I welcome more dialogue on this !!! MGB - Any thoughts ??

I still like MGB's concise response ; the only question in my mind is choice of interest rate for doing the accumulations; RR 92-76 requires the rate to be reasonable; the interest rate underlying the original calculation of the participant's lump sum is probably "reasonable".

It's analagous to college degrees; the BS is essential & MS, Phd show additional initiative. Some firms have higher entry requirements - it's similar in an academic environment too !

I'll have to look at RR 92-76 ; actuarially (& logically) the approach outlined by MGB hangs together. Thanks everyone for the input !!

Andy, I may have been unclear in my characterization of the situation; I'm referring to Reg. 1.401(a)(4)-5(B) for the case of a high 25 HCE who has reached normal, has elected a lump sum, but is restricted - Under 1.401(a)(4)-5(B)(3)(i)(A) the most he can get in a year is the amount that he would have gotten had he chosen a life annuity - he is subsequently paid the life annuity amount. My question is then : After he's received payments for a year, he asks - am I still restricted ? the answer is no & my question to my practitioner colleaques is : what is the proper way to calculate the lump sum that he is now able to receive ??

Top 25 HCE elects lump sum - is restricted ! - gets life annuity payments for a year per restricted rules - a year later he's un-restricted & wants a lump sum - how is the amount he's entitled to calculated ??

The Guardian Life Insurance Company (NYC) administered alot of these at one time - they have left the administration business, I believe, but if you contact them and navigate to someone in their old pension department you may strike gold - good luck !!

Annual interest credits under a frozen cash balance plan are based on Treasury +1, actuarial equivalence for a non lump sum benefit option is '83 GAM Unisex w/ 7%, and actuarial equivalence for the lump sum option is '83 GAM Unisex w/ interest at the 30 year Treasury rate. When a participant terminates & elects a lump sum, the account balance is brought forward with Treasury +1; if the 30 year Treasury is >= 7%, he gets his current balance ; if it's < he gets his balance times A/B, where A= a life annuity rate at current age using the lump sum basis & B= a life annuity rate at current age using the non lump sum basis - A/B is greater than 1 . Since it's not the typical "whip saw" calculation, I was wondering if anyone has seen this particular methodology for the calculation of lump sums in a cash balance plan ???

Is anyone reading Section 4.03 to mean that if the new actuary wants to change funding methods he/she can bypass the 5% test & go right to using the rules of Section 3 ??

Thanks for the analysis Pax - sometimes we think too actuarially & in this case I think the factors that you have mentioned are more relevant - thanks again !!

What I have is a municipal plan - no minimum funding requirement - and one plan document that describes a different benefit provision for each of 3 groups of municipal employees (firemen,police, & office staff) - the town now wants to create 3 separate plans - for funding purposes, would this have to be treated as a spin-off with the current single asset pool split to each of the groups ? or being a municipal plan, could the single asset pool be retained and just continue to merge the liabilities ??

For large plans early retirement subsidies can be "funded for" utilizing retirement decrements, and for small groups the impact of someone taking the subsidy can get factored into the gain/loss for the year - my question is if you have all inactive terminated vested lives, is there any reason you wouldn't assume everyone takes early retirement when eligible ?

I would recommend contacting one of software houses such as Blaze,Datair,orASC to see if they'd sell you a stand alone rate generation module; what you really need to generate factors is a program (Fortran or even maybe Lotus Script); you can develop your own factors using a spreadsheet but it gets very cumbersome when you attempt,for example,to do J&S factors for all age combinations; within a program you can just "loop" through the ages - good luck !

Just wondering what practitioners are doing with respect to the following for a participant who retires, elects a lump sum but is restricted: (1) Reg. 1.401(a)(4)-5 sets the life annuity equivalent of the accrued as the max that the restricted participant can receive in a year - are practitioners communicating a payment schedule with the above max as an annual cap or is the communication just that "the restricted participant can receive payments under any schedule as long as the max isn't exceeded in a year"; if a schedule is communicated, how is it determined ? and (2) The participant who elects a lump sum & is restricted might not be restricted a year later(e.g the RPA rate changes and/or assets perform well); how are practitioners determining the lump sum value a year later after the participant has received payments but of course not exceeding the max allowed as noted above ?

I'm not sure I have a clear picture of your answer; is your opinion that an actuary can ethically sign a Schedule B for a non-qualified plan since the legitimacy of the B is independent of qualification or are you saying the plan needs to be qualified before a B is signed.

If a takeover DB plan is not safe-harbor and has never passed the general test, should the enrolled actuary sign the Schedule B? Or even before it gets to that point - should a valuation be done before the plan defects are corrected? I'm just curious how other administrators or enrolled actuaries would handle this situation. And also let's assume the prior actuary is deceased. A related question would be - If this plan were ineligible for a favorable determination letter, would it nevertheless be appropriate for the actuary to sign the Schedule B; after all, the statement above the signature line on the B doesn't require the plan to be "qualified" ??? Any thoughts are appreciated !!!!!!!!!!!!!

Just wondering if there is any guidance on the assumptions to use in determining withdrawal liability ( i.e. interest and mortality ) ??