Pension RC

Thanks for your response, David. The freeze doesn't include any language providing for benefit increases due to an increase in the 415 limit. Therefore, there is no way for there to be a target normal cost - correct?

Thanks for your response. I'm looking over over a prior valuation and see the following footnote: "Plan is funded to a lump sum limited by 415. This funding assumption could result in a target normal cost for a participant with no increase in accrued benefit when there is an increase in the IRC 415 benefit." Do you know what case this could be referring to? Thanks again!

For a plan with an end of year valuation date, would the: 1) funding target be end of year present value of the BOY liability? 2) target normal cost be the end of year present value of the accrual during the year? 3) AFTAP include the funding target and the target normal cost in the denominator? I saw an SB that included the funding target and the target normal cost in the denominator for the AFTAP, but not for the FTAP. Is this a mistake? Any help would be appreciated!

I am working on a 1/1/2012 valuation for a frozen plan. A few of the actives seem to be getting a target normal cost due to the fact that the 415 dollar limit is not as reduced at the end of the year, as they are closer to age 62. Is that possible? Moreover, I assume that none of them should be getting a TNC due to the increase in the dollar limit from $200,000 to $205,000, since, for the TNC, the same BOY dollar limit would be used at the end of the year. Is that correct? Thanks very much for your help!

A couple of years ago, a coworker asked me to prepare distribution paperwork for an alternate payee. I noted to my coworker that the QDRO states that the AP's benefit is not payable any earlier than the "attainment of the Participant's 'earliest retirement age' as that term is defined by internal Revenue Code 414(p)." Since the plan allows for distributions upon termination of employment, I understood this "earliest retirement age" to be the earlier of termination of employment and attainment of age 55 (plan's early retirement age). However, this person was 43 and still active. My coworker told me that it was okay, since the plan sponsor was fine with it and it was more advantageous to the AP. I prepared the distribution forms, but they were never completed by the AP. Recently, I was asked by the plan sponsor to prepare updated distribution forms for the AP. My coworker has since retired, and I think that she was mistaken, as there is no language in the plan itself allowing for distribution to an AP earlier than the date allowed in the QDRO. Does anyone have any ideas of what can be done (amendments, etc.) to allow the payment to this AP? Thanks!

I am working on 2012 valuation of a 1-person DB plan. Looking back at the 2011 valuation, which was done by someone else, I see that the accrued benefit is based upon an old high three average, from 2001 to 2003. However, the only way I can match the benefit is if the 2001 compensation limit was $200,000, as it was in 2002. The chart that I have shows the 2001 compensation limit as $170,000. I think I remember reading that one could consider the comp limit prior to 2002 to be $200,000. Does anyone know a source for this? Thank you.

Thank you for these responses. So are you saying that, IF the plan considers the early immediate annuity, then you must consider the 417(e) assumptions as well, but if the plan doesn't require one to consider the early immediate annuity, then you could simply use the greater of the deferred normal retirement benefit based upon plan assumptions and the deferred normal retirement annuity based upon 417(e) assumptions?

If a 55 year-old participant is eligible for an early retirement, normal retirement is age 65, there are subsidized early retirement factors, and you are calculating his immediate lump sum, it seems to me that the participant should receive the greater of four lump sums: 1) The age 55 present value of the age 65 normal retirement benefit, based on the plan's actuarial equivalence, 2) The age 55 present value of the age 65 normal retirement benefit, using 417(e) assumptions, 3) The age 55 present value of the immediate subsidized early retirement benefit, based upon the plan's assumptions, and 4) The age 55 present value of the immediate subsidized early retirement benefit, based upon the 417(e) assumptions. Does anyone agree/disagree? Thanks!

Actually, the original plan document, effective 1/1/2011, defines compensation as excluding comp after 12/31/2010. It also defines benefit service as including service prior the effective date. Since the benefit formula is 10% for 10 years of service, and the participant has a date of hire of 1/1/73, he was fully accrued at 1/1/2011 and there were no accruals after 1/1/2011. Now that I'm thinking about it, if they didn't hit the 415 limit on 1/1/2011, then they won't hit it going forward, so I guess my question isn't relevant.

I have a one-person plan, effective 1/1/2011, which bases compensation on comp prior to 1/1/2011. When calculating the 415 comp limit, do I include comp after 1/1/2011? Any help would be appreciated!

Thanks very much for this reference. I see that, for a plan with a valuation date other that the first day of the plan year, the assets are excluded from the actuarial value of assets. This plan's valuation date is the first day of the plan year. My question is if it can be listed on the SB as a 2012 contribution and, if so, would the 2011 date be listed?

I have a one-man DB plan whose plan sponsor, during 2011, inadvertently contributed $24,970 over the maximum deductible for 2011. Can this be considered an advance contribution for 2012? If so, would the 2011 date be put on the 2012 SB? Any help would be appreciated!

Thanks for your response. I agree that it isn't reasonable to assume a single life annuity form of payment in a one-person DB plan and think that I'll change that in the 2012 valuation. I was just trying to match the 2011 results and was wondering why the valuation system seemed to ignore the present value based upon plan assumptions. Do you have any thoughts?

I am checking a 2011 valuation of a one-man DB plan that was effective 1/1/2011. The assumed form of payment is a single life annuity. Since there is no accrued benefit, at 1/1/2011, the funding target is zero. I would have expected the target normal cost to be the greater of 1) the present value of the 2011 increase in the accrued benefit using plan assumptions and 2) the present value of the 2011 increase in the accrued benefit using the IRS mandated assumptions. However, my valuation software is ignoring the option using plan assumptions (which would have been greater). Does anyone have an idea of why the valuation software would be doing this? Thanks!

Earlier this month, I prepared an SB for 2012 using the same plan provisions that were used for the past few years. Two of those provisions are:1) NRA of 62 and 5 years of service and 2) eligibility based upon 1000 hours. Subsequently, I realized that the GUST and EGTRRA adoption agreements actually had NRA as 61 and 5 and that the EGTRRA adoption agreement (but not the GUST adoption agreement had eligibility based upon elapsed time. The person in our office who prepared the EGTRRA adoption agreements erroneously made this "elapsed time" change for many plans and I'm confident that the plan sponsor did not intend to amend the eligibility to elapsed time. Moreover, I am fairly certain that NRA in both adoption agreements is a mistake. Can these two corrections be made now and enable me to file the SB with the provisions always used? Any help would be appreciated!

I am working on a sole prop's DB plan and the sole participant also has a PSP. In calculating the the 25% of comp limit to the DB contribution (when there is more than a 6% contribution to the PSP), does one look at 25% and 6% of the sole prop's net schedule C comp listed on his schedule C or 25% and 6% of his "comp for pension purposes" once 1/2 of the SE tax, his medicare tax, and his pension contribution have been removed? Any guidance would be appreciated!

I have a client who deposited a 2012 contribution in 2011, Is this allowed? Would it be listed on the 2012 SB with the date in 2011? Any comments would be appreciated. Thanks!

I am working on a one-man DB plan. The participant's date of birth is 7/29/1948. Therefore, at 1/1/2013, the participant is 64.427 years old. His high-3 comp is $200,000, which is less than the dollar limit of $205,000. He has over 10 years of service and compensation. For the lump sum using statutory assumptions (5.5% and 2013 AMT), I am getting a limit of $2,376,153.55 for a 64 year old (using N64(12)/D64) and a limit of $2,320,292.40 for a 65 year old (using N65(12)/D65) and interpolate to get a 1/1/2013 limit of $2,352,343,54. Does anyone have any ideas of how I can get the limit to be any higher? Any thoughts would be appreciated. Thanks!

I am completing the PBGC Schedule 501 for a Defined Benefit plan that has terminated. During the distribution process, we performed a diligent search for 19 missing participants whose lump sums were less than $5,000 and then automatically rolled over the money to Millennium Trust, providing them with the participant information, etc. Do I answer "No" to question 5 on Form 501 ("Were you able to locate all participants and beneficiaries?") If so, would I need to complete a Schedule MP for them? I don't know how I would do that, as the Schedule MP seems to assume that you either purchased annuities or are transferring the money to the PBGC. Any help would be appreciated. Thanks!

I have a participant who would like to receive a lump sum distribution, but the plan's AFTAP is below 80% (it's also below 60%). If, after the participant begin receiving an annuity, the AFTAP increases, can she elect to receive the remainder as a lump sum? Thanks!

I am processing a the benefit of a participant who was employed since 1976 and is still employed. In 2000, he dot divorced and a QDRO was issued assigning the alternate payee a fraction of the participant's benefit. The numerator is the number of years of marriage and the denominator is the number of years that the participant was employed. The plan froze 1/1/2009. Although the QDRO doesn't spell it out, it seems logical to me that the denominator should only include service until the freeze date. If it included service after the freeze date, then the participant could cause the alternate payee's benefit to decrease by continuing to work. Does anyone have any experience/guidance pertaining to this? Thanks!

Am I correct that in 2012 this question is still unresolved (i.e. that if the minimum with interest is greater than that maximum, then the minimum with interest will be fully deductible) ? Thanks!