Pension RC

I am working on a defined benefit plan with a doctor and three staff people. The doctor's accountant wants to know how much of the 2013 contribution is attributable to the doctor's benefit. My first thought is to allocate to each participant a percent of the contribution equal to the percent that his/her TNC is of the total TNC. However, there is a funding surplus that wipes out the TNC, so the minimum is $0. Would this allocation method still be appropriate? Is there an alternate allocation method? Any help would be appreciated!

I am working on a plan that terminated 12/31/2012. There are four participants - a husband and wife (owners) and two employees. The final two distributions were in September 2013, when each of the two owners took a reduced benefit (since the assets weren't suffcient). At the end of September the account balance was $0.52. In October, there were $64 in dividends that were promptly transferred pro-rata, to the two owners. At the end of October, the account balance was $0.30. In early November, the remaining 30 cents was transferred out and the account was closed. For the 5500-SF. Would the plan year end be 9/30/2013 or 11/30/2013? Any help would be appreciated!

I am working on a plan that terminated 12/31/2012. There are four participants - a husband and wife (owners) and two employees. The final two distributions were in September 2013, when each of the two owners took a reduced benefit (since the assets weren't suffcient). At the end of September the account balance was $0.52. In October, there were $64 in dividends that were promptly transferred pro-rata, to the two owners. At the end of October, the account balance was $0.30. In early November, the remaining 30 cents was transferred out and the account was closed. For the 5500-SF. Would the plan year end be 9/30/2013 or 11/30/2013? Any help would be appreciated!

The SB instructions state that "minimum funding standards apply until the end of the plan year that includes the termination date." Is this true for a plan that terminates on the first of the year, where, clearly, the minimum funding requirement will be $0? Any help would be appreciated!

The SB instructions state that "minimum funding standards apply until the end of the plan year that includes the termination date." Is this true for a plan that terminates on the first of the year, where, clearly, the minimum funding requirement will be $0? Any help would be appreciated!

Does anyone know if a 1099 is required for the transfer of surplus assets from a terminating DB plan to a qualifying replacement plan? Any help would be appreciated!

Does anyone know if a 1099 is required for the transfer of surplus assets from a terminating DB plan to a qualifying replacement plan? Any help would be appreciated!

I am working on a DB where the only participants are a doctor, his wife, and a terminated employee. The terminated employee completed a distribution form to have the lump sum value of her benefit rolled over into an IRA. I have contacted the financial institution that holds the plan assets and they said that they need a letter of instruction mailed to them that is signed by a trustee (either the doctor or his wife) and that has a medallion signature guarantee provided by a bank. I drafted the letter of instruction and provided it to the doctor's wife. However, she explained that she and her husband are currently preoccupied with an urgent family matter and she doubts that she will be able to get to a bank this week. If she doesn't get to a bank until Monday, the financial institution surely won't receive it until December 31, and the rollover won't occur until 2014. However, the terminated employee knows that, if delayed until 2014, the lump sum will probably go down, as the December 2013 417(e) segment rates will need to be used (instead of the December 2012 rates). Is there any way to use the assumptions prescribed for 2013 if the actual distribution doesn't occur until 2014? Any thoughts would be appreciated!

I am working on a plan that the sponsor would like to terminate within the next 1-2 years. It has a 7/1 plan year and has a 2 month look-back, so the 417(e) segment rates used for distributions through 6/30/2014 would be the May 2013 rates. The sponsor would like to file the PBGC 500 in February 2014, let the PBGC's 60-day review period pass, wait until June, when the May 2014 rates are published, and to decide then if they should quickly make payouts by 6/30/2014 or, the May 2014 rates are more favorable, try to delay the payout until 7/1/2014 or later. If, in June 2014, they see that the trend is for the rates to increase, they'd like to amend the look-back month to a 1 month look-back and try to delay the payouts until June 2015 (after the one-year grandfathering period) and make payouts based upon the June 2014 rates. Is there a problem with doing this? Specifically, can the plan amend the lock-back month after the PBGC 500 submission (and 5310 submission)? Any thought would be appreciated!

I am working on a DB plan with a business owner and one staff person. My software is indicating the the plan is not passing the participation test because the staff person didn't benefit in 2012. In fact, she didn't work 1000 hours in 2012 (and that's why she didn't benefit). Is her not having worked 1000 hours a reason for the plan to fail the participation test? Any thought would be appreciated!

No - it won't. Therefore, I can just provide the top-heavy accrual for one year - 2013. Correct?

I agree that the staff people will need some form of pension. What I meant was that, since there would no longer be a way for the DB plan to pass the general test without changing the formula (and the owner didn't want to provide larger benefits for his staff), the owner decided to freeze the plan.

I am working on a DB plan with a business owner and three staff people that was effective 1/1/2006. Although the business owner's accrual percentage was much higher than the the staff people's accrual percentage, it passed non-discrimination by being tested in combination with a profit sharing plan. Also, top-heavy minimums were satisfied through the profit sharing plan. The profit sharing plan was terminated 12/31/2010 and, therefore, the defined benefit plan was frozen 1/1/2011. Now the DB plan is overfunded. The business owner would like to unfreeze the plan to absorb the surplus, and to create an A + B benefit using a new, general tested, formula. All four people have been participants since 1/1/2006. It seems logical to me that I would need to provide a top-heavy minimum only for the 2013 accrual and not for all 6 years of top-heavy service (2006 - 2010 and 2013). Am I thinking about this correctly? Any help would be appreciated!

Thanks!

I have a 78 year old participant who just terminated employment in October and for whom we prepared distribution forms. I know that if she selects a rollover, we will have to first process an MRD for 2013. 1) In that case, would the MRD be based upon the 12 months of 2013 or only based upon the months of November and December? 2) A related question (probably the answer to question 1 will answer question 2) - If she selects an annuity, will the two annuity payments for November and December satisfy the MRD? Any help would be appreciated!

Earlier this year, the sole-participant of a DB plan was paid out his 415 lump sum limit of about $2.3M at age 64.5. At the time, he already had 10 years of service and participation. His limit was based upon his average comp of $200,000, which was slightly lower than the $205,000 dollar limit. He is asking if there is any way for him to accrue an additional benefit. At first, I thought that he could do so by earning enough in 2013 - 2015 that his average comp would increase to $250,000. My thinking was that, since the dollar limit will probably increase above $205,000 (and, additionally, it is actuarially increased after age 65), his 2016 dollar limit would probably be above $250,000. However, it looks like, once he generates a new higher 415 limit by 2016, it will be completely offset by his 2013 payout of $2.3M actuarially increased to 2016. Am I thinking about this correctly? Any help would be appreciated!

I am looking at a 2012 SB created based upon software-generated results. It is clear that MAP-21 rates were used, but the effective rate of interest is lower than the lowest of the MAP-21 segment rates. Can anyone explain how this can be possible? Is there any allowance to use MAP-21 rates for funding, but to base the effective interest rate on non-MAP-21 rates? Any thoughts would be appreciated!

Is there an age above which one cannot start a defined benefit plan. In other words, if an 80-year-old actively self-employed person wants to start a DB plan with NRA of 65 and 5 year of participation (so the 80-year-old's NRA would be , is there anything stopping him? Thanks!

I am looking at a valuation report created by another firm and the 417(e) mortality table listed is "Male-modified RP2000 combined healthy male projected 23 & 15 years, Female-modified RP2000 combined healthy female projected 23 & 15 years." Is this just the Applicable Mortality Table? Also, what does "projected 23 & 15 years" mean - projected 38 years? Any help would be appreciated. Thanks!!

I am doing a 1/1/2012 valuation for a calendar year plan that terminated 12/31/2012. There is a small minimum required contribution. Is it permissible for the plan sponsor to elect to apply the prefunding balance toward the minimum if, at this point, all the distributions have been made and there are no assets left? Thanks!

Doesn't the drop to 73.06% at 4/1 trigger a lump sum restriction?

Thanks for your replies. My valuation software is indicating that there is a deemed burn at 4/1. David - why shouldn't there be a deemed burn? It is only a husband-wife plan, so I didn't think restriction notices were necessary. Is this correct? Thanks again.

I am unsure how much of the PFB to burn in the following scenario: 2011 FT: $163,759 2011 AVA: $162,793 2011 COB: $0 2011 PFB: $26,762 2011 AFTAP: (162793 - 26762)/163759 = 83.06% 2012 AFTAP not certified by 4/1/2012, so AFTAP drops to 73.06%. I think that there are two ways to calculate the deemed burn: Method 1: Assume that the 2011 FT increases to $186,190 so that the AFTAP equals (163793 - 26762)/186190 = 73.06%. Then I should burn $12,922 of the PFB so that the new PFB is $13,840 and the new AFTAP is (163793 - 13840)/186190 = 80%. Method 2: Assume that the 2011 AVA decreases to $146,405 so that the AFTAP equals (146405 - 26762)/163759 = 73.06%. Then I should burn $11,370 of the PFB so that the new PFB is $15,392 and the new AFTAP is (146405 - 15392)/163759 = 80%. Are either of these approaches correct? Any help would be greatly appreciated!

Thanks!!

Yes. It does. So you are saying that there could be target normal cost in the frozen plan because a participant is doesn't yet have 10 years of service or participation, so the proration changes from the beginning of year to the end of year?