Blinky the 3-eyed Fish

Since the extension only applies to "the deadline for amending applicable defined contribution plans, within the meaning of § 401(a)(35)(E), to meet the requirements of § 401(a)(35), relating to diversification requirements for certain defined contribution plans.", I would say it's a problem if you don't amend everything else PPA changed for DC plans.

How about the 417(e) changes?

It doesn't cover everything that needs to be amended, so in my mind, it's largely a worthless promulgation.

Exactly the way I would handle it. Hey, remember that time that TAG said you shouldn't take advice from some unknown fish? Good times.

This extension appears worthless to me.

My experience is the same as Effen Rigby. Am I cursing? I think I could put FAS 35 Liabilities = Lots 'O Moola and they would accept it.

I too think you have BRF issues potentially if the HCE's have the opportunity to make larger relative deferrals (owner hasn't taken salary yet or is self-employed or larger bonuses relative to salary) than the NHCE's. The earlier it is implemented the better, to stave off this potential issue.

The one participant can be allocated the excess assets. The limits for distributions are no different in a traditional DB plan versus a fully-insured plan. There is a recent post about the ease of switching to a fully-insured plan. I invite you to search for it.

I don't see how you can use the cash in the life insurance policy to meet the premium and still be a fully-insured plan. I am 99% sure of this fact. In this case I don't see why being a fully-insured plan is of any importance if they want to terminate. Have you considered switching it to a traditional DB plan? Most likely it is overfunded if you run the 2009 valuation and no contribution will be due for that year. A traditional DB plan can have life insurance in it, that's not exclusive to fully-insured plans. In fact the limits are the same. So, the policies can remain in the plan, the plan can be frozen and the surrender charges are preserved. Now, if they want to roll it over into a PS plan and there are still premiums to pay on the policy, I believe the policy, even though it's a rollover, would be subject to the DC rules to determine if the life insurance benefit is incidental. I am not positive by any means though, so this is definitely something to look into.

GMP, they can't pay out the employees without it being a plan termination (unless all are at normal retirement age). You can't have the termination without the waiver. So your idea to pay the employees out to avoid PBGC coverage won't work. You know that options to buy shares consitutes ownership? Have they thought of going that angle so that all of them are now majority owners? Call it a scheme or not, but it's far better than simply paying out anyone irresponsibly. If they don't want to go the options route, at least try to get the PBGC to buy off on a waiver by a 1/3 owner before doing anything. They should disclose it openly though since the PBGC submission doesn't ask for specific information on waivers.

I don't think it's quite that simple. After all, you have an accrued benefit equal to the CSV of the policies that is protected (as well as other optional forms) and needs to be tracked. It would seem that the guaranteed interest rate of the policy is too protected, much like an interest rate in a cash balance plan. It wouldn't make sense to have the lump sum be static. The document language should account for this grandfathered benefit. I know of no VS language that will account for this, so you probably are on your own to write it. The valuation would be fairly simple. Now it's just a traditional DB plan, and probably an overfunded one at that. I believe the new regs mention how life insurance is to be valued, so account for that when it's time for those to take effect.

Don't let them get away with it. Hunt them to the ends of the Earth. It's not over until you say it's over! P.S. Please change your signature accordingly.

"Nothing's finer than being in your diner." --- Jerry Seinfeld (Jerry later became dissatisfied with his encouraging words and proceeded to pick a fight with the waitress. In my mind though, it didn't detract from the aforementioned encouraging statement.)

The way I studied for this exam was to look at past exams to get the jist of how the problems were structured. Then I went over each of the books, read through the materials and did problem after problem. When I felt comfortable with the material I got out the past exams again and took them each within the 2 1/2 hour timeframe as if I was taking the test. Speed is very important in this exam, so you must know how long it will take you to work a problem. You must know the material and know it very well to do it very quickly. Repeatedly taking sample tests will let you know where you are with the material.

I am not saying that. While the in-service distributions are driving the rule change, I would still amend the plan to a 62 retirement age.

I know of a few actuaries who are tools. They could tell you the answer. This is an educated guess and I didn't check the numbers you provided, but chances are they are for age 62 retirement. The dollar limit is $195,000 for that age. Thus if compensation is only $50,000, and assuming that too is the hi-3 average, then take the numbers and multiply by 50/195. Of course, nothing substitutes for using an actual tool, err... actuary.

As my firm approaches doing DB PPA amendments, my plan was to allow for the automatic increases. Seems to me we can control the effect of the automatic unfreeze before an AFTAP is certified showing sufficiency by simply hard freezing the plan by amendment. The only downside I see occurs if the deadline for the AFTAP certification is nearing and it will be difficult to get the hard freeze signed in time. Also, I haven't explored the 204(h) aspects fully. I imagine though even if the plan is frozen via 436, the proper advance notice is required for a hard freeze.

Isn't that the same as arguing for paying $0 premium for term life insurance if you didn't die that year?

I agree there are no hard and fast rules. Unless actuarial equivalents yield a greater lump sum than that generated by 417(e) factors though, you might be in for some disproportionate numbers when it comes time to make one or more distributions. That is one reason a cash balance plan makes sense in these situations.

PPA changed nothing with regard to whether or not assuming a lump sum or an annuity is reasonable. It is or it isn't and you dang Yankee should be the one qualified to know the answer to that question.

Agree, this just affects benefit accruals.

I submitted numerous 2848s without a CAF. Then one day, months, maybe even years later, the IRS assigned me one. I felt so special.

Seen.

Well just to be clear, what exactly is defined as an amendment isn't in the Code. This is the interpretation of some at the IRS.

Yes, if the plan allows.