Mike Preston

Higher only. An -11g amendment must satisfy 411d6 (that is, it can't take anything away). It also must satisfy the rules as stated in -11g. Read them lately? They aren't really surprising, but the one issue that trips some folks up is that the "addition" be non-discriminatory in and of itself, not just that the full non-discrimination test pass. Assume you have your two groups. You look at the test and note that, while you can't give an additional 1% to the HCE group as a whole, you CAN give an additional 1% to a specific HCE (the one that is longest in the tooth). If you put in an -11g amendment that creates a 1% contribution solely for that HCE, it fails because standing on its own it would not satisfy 401(a)(4). Note also that -11g amendments create contribution amounts which are not deductible in the prior year (in the case of a plan and fiscal year which are identical), so you end up taking the deduction in the following year. This might be disadvanatageous.

Andy, that isn't the way it is done out here on the Left Coast. It is merely a combined trust, not a master trust.

Who are these old men of which you speak?

You don't. I may have misled you with some of my words. The new law's methodology is effective as of the PPA effective date. I think we agree on that. It is the phase-in methodology that still is described incorrectly in your last post. The phase-in methodology is merely a method to determine the segment rates. There are "raw" segment rates (that is, those that are NOT phased in) and there are "phased-in" segment rates. The IRS publishes both. The new law requires that we take the raw segment rates and blend them with the rate from the old law. I'll use hypothetical, rather than real, numbers to try and drive home the point. Assume the IRS publishes the raw segment rates for a given month and they are 5%, 6% and 7%. Assume that the old law rate would be 4%. It is a simple mathematical calculation to determine the phased in rates. Speaking of lump sums (there are different rules for funding), the 2008 phase in percentage is 20%. Hence, we take 80% time 4% and 20% times 5% and add them up to come up with a phased in rate of 4.2%. We do the same with 80% of 4% and 20% of 6%, to come up with 4.4%. Finally, we do the same with 80% of 4% and 20% of 7% to come up with 4.6%. We now forget about the old law and we forget about the raw percentages. We merely do a single calculation under the new law's rules (in accordance with the EA meeting methodology), using the 4.2%, 4.4% and 4.6% we came up with. We specifically do not do a calculation at 4% and then take 80% of that result and then do a calculation using the raw segment rates of 5%, 6% and 7% and then take 20% of that result. Clearer?

This is a facts and circumstances analysis best performed by counsel for the plan. For example, if the resolution says something like: "Plan X is hereby amended....." then you at least have a leg to stand on. If not, then maybe not. Gotta go to a lawyer on this one, me thinks.

As far as a cite that goes to the issue of whether the EA presentation was correct or incorrect, how about the following: The PBGC has published some lump sums at: http://www.pbgc.gov/practitioners/miscella...ables/pvmg.html This is based on the table published here: http://www.pbgc.gov/media/news-archive/new...07/pr08-07.html Using the EA meeting methodology, my program's results are accurate to $1. Can your actuaries claim the same? I know that using a PBGC calculation to confirm/deny an IRS methodology is not an iron clad proof. But it isn't a bad start, IMO.

OK, let's set some nomenclature here so that we aren't on different pages. "Old rules" should refer to a calculation made under the law as it existed before PPA. "New rules" should refer to a calculation made under the law, after the effective date of PPA. Part of the confusion is that somebody has started mixing the two. The mere fact that a calculation made under the "new rules" involves a two-tier calculation doesn't mean that the first tier of that calculation is in any way a calculation under "old rules." It is still "new rules", but with different interest rates. There is only one circumstance where a post-PPA effective date distribution can be made under "old rules" and that is a situation where there really is no PPA effective date! That is, a plan which was terminated prior to its PPA effective date will forever more pay out on the basis of the "old rules" as the "new rules" just don't apply to that plan. But any plan that is not terminated prior to its PPA effective date will have the "new rules" and only the "new rules" apply to lump sums paid after its PPA effective date. Better?

Mike, I agree with you that the 2008 Applicable Mortality Table has replaced the 94GARU table for post-12/31/2007 distributions for purposes of computing the benefit under the old rules. What generated my question is the fact that two actuaries I use frequently have told me that in computing the benefit under the old rules you continue to use the 94GARU table--that position seems to cut against the IRS's position in Rev. Rul. 2007-67 (i.e., the position that the mortality table is not phased-in--it simply is changed effective 1/1/2008). I'm reassured that you agree with my position. I'm not sure we are on precisely the same page. You said "old rules" in your first sentence. Did you mean "new rules"?

The presentation at the EA meeting appears correct to me (if you ignore the annual benefit payable monthly stuff - I didn't look at that part). You need to have whatever source is telling you that it is incorrect come up with a cite as to veracity of the other methodology. I don't think they can, but I suppose anything is possible. Yes, I have programmed my calculation routines (both excel based and in a separate application) to use the interest rate methodology of the EA meeting presentation.

When Sal published his grand treatise on catch ups (an invaluable resource, of course) he made it clear that there was no clear answer as to the order of testing when it comes to this issue. Janet's order makes all the sense in the world to me, notwithstanding Tom's lucid reiteration of the IRS' concerns in this area. I say that after reading the catch up regs and finding nothing in there that would preclude Janet's order from being the right way to do it. From a practical perspective, I don't think it makes any sense to do it any other way. Having an employee make a deferral which causes them to lose out on their rightful share of the employer contribution just doesn't go down well.

That has always been their position.

A little confusing, if you ask me. If you are running your 410(b) analysis and it passes the ratio percentage test, you stop. There is nothing further to do. Your goal is to satisfy 410(b) and you do so. Now, I understand the reason that software products print things which are not technically necessary. They can be wonderful planning tools. If you "just barely pass" the 410(b) test on the basis of the ratio test, it can be very comforting to know that, since you pass the average benefits test, the plan can use a much easier to pass threshold than the 70% ratio test. So, even though the ABT isn't required, it is sometimes extremely helpful to be able to look at it without expending extra effort to get it. Nonetheless, from your perspective, if it isn't necesssary, then try to ignore it. Your plan passes 410(b). Be happy. Don't you think it is a little strange that here you start with the ABT and above you made it the second item done? That is the key to understanding this whole thing, in my opinion. The purpose of the ABT is to allow a test to use lower percentages. Don't pass the ABT? If so, then you are stuck at 70%. Pass the ABT, then you can use a lower threshold (depends on the plan's concentration percentage, but certainly no higher than 45%). But you don't need the ABT if the ratio percentage for your test in question is 70% or more. Now that you know that the ONLY purpose of the ABT is to allow you to use lower percentages in your testing, you know that you must still do individual rate group testing, right? But knowing that you pass the ABT means that you know you will have a much easier (although certainly no guarantee) time of passing your rate group testing. Of course they test every rate group. That is required. Your description gets a bit confusing once you say that the ABT is done. You say that "Relius does this test only on employer contribution (sic)." What do you mean by that? Are you saying that they so the same ABT that you referred to above, when talking about 410(b) testing, but only including the employer contributions? I doubt that they actually do that, but is that what you meant to say? What I think they do is that they run the ratio percentage test using the EBARs that result from using only the employer contribution. If that test fails, then they run the very same ABT that is run under 410(b) - including all contributions, both employer and match and deferrals and, if they have them, employee after tax contributions - and they use that result to determine whether the rate group test they just ran can be considered to pass based on a lower percentage than 70%. In a word, no.

I think it depends on plan language. The key to the issue is whether the plan credits them for hours in a way that is inconsistent with actual hours worked. For example, if I go along with your hypothetical of a plan using elapsed time for determining eligibility, said plan still might spell out the fact that the plan is crediting hours using one of the DOL equivalencies. In that case, your hypothetical test is probably not wrong.

The original post wasn't talking about excluding the participant at all. Can you elaborate?

I'd be interested in any citations that the folks who think one must retain use of the old table have. My understanding isn't that you phase in the old rules to the new rules at 20% per year. My understanding is that you use the new structure immediately. The "phase-in" is merely referencing the fact that the interest rates you use in your calculations are based on a phase-in. If your version of how it works is correct, I have a bunch of re-programming to do!

I think there was a discussion about this point just recently here on BenefitsLink. Apparently, if the plan is drafted such that it takes into account accrued compensation (which may involve specific definitions of compensation and the like) and the compensation you are referencing is truly accrued as of the end of the year and is paid in the first 2 and 1/2 months of the subsequent year, then it may be able to be taken into account. I would recommend ERISA counsel review the particulars of the plan to see whether it is allowed in the case you are referring to.

As to the first paragraph, the answer is no. A plan that covers only the owner is not an ERISA plan. As such, no ERISA bond is required. I don't kow how the second paragraph impacts the first. Could you expound?

Once the plan is terminated, there is no legal requirement to delay distribution until the letter of determination is received. Most consultants urge the plan sponsor to delay the distributions, though, as it just makes business sense to do so. Hence, if the plan's provisions allow for partial distributions, a plan participant can elect to receive a portion of their benefit after any distributable event of which plan termination is one.

No can do.

Starting in 2008, we are going to be getting annual updates to that table.

Mike, would you try hitting the "refresh" or "reload" button for your browser, and then see if the links start to work? If that doesn't work, could you empty your browser's "cached" files, and then see if the links start to work? Well, refresh and reload certainly don't do anything. I use firefox and it is trying to execute: java script:buddy_pop(); When I switch the rendering engine to IE it works, so it is a compatibility with Firefox issue. Firebug shows the error count incrementing when the My Assistant link is clicked, saying, of course, that buddy_pop() is not defined. If all else fails, I'll delete my cache, but I'd really rather not. On another issue, was it a deliberate choice to eliminate the profile information which displays along with a poster's name on the left of each post? mike

I am interpolating to months (either rounded or completed, depending on the history of the plan). I have found that the difference between the 1440 approach and the interpolation results are less than 0.07% (sometimes a lot less) and therefore an error factor (if you want to call it that) of less than $70 on a $100,000 distribution is something I can live with. I also think the interpolation factors will always result in higher amounts, not lower amounts, so on anything other than 415 limit issues, it is something I would think should be acceptable. If at the 415 limit, I expect that some will be attached to plans that are being terminated and for those, it is expected (although I get not universal), that an IRS submission will be made and the methodology therefore made clear to the IRS before approval.

<br /><br /><br />Ming, what you have described is the present value, today, of a single payment expected to be made at retirement. You have calculated the expected payment that is to be made at retirement the same way that I would calculate a lump sum to be paid on that date. Hence, if your valuation assumption is that 100% of participants will elect a lump sum at retirement age, your description is spot on. But if the actuarial assumption inherent in your funding calculation regarding form of payment is that something other than lump sums will always be elected, then you would value the expected payments (whatever they are) using the current segment rate structure. I believe there is something in the regulations that were just issued that reference the projected segment rates of which you write. If I had time today I'd look up that reference to see if it mandates one thing or another. I don't. Maybe somebody else does.

The tabs issue remains on my machine. As does the My Assistant and My Friends link. That is, they don't work.

I'm rooting for you.