Ted Munice

Normally we would assume that for a 1/1/2018 valuation, for instance, we would assume 2018 compensation and hours of service will be the same as 2017. We may or may not have a salary scale assumption. But what if we WANT to assume that 2018 compensation and hours are significantly less that the 2017 experience - such that we are in essence assuming no accrual for 2018 even though the participant had an accrual in 2017. Rev Proc 2017-57 seems to indicate that is a change that requires IRS approval for a BOY valuation. Am I interpreting that correctly?

Did the IRS issue some sort of guidance or notice in 2017 effective for 2018 that restricted what assumptions could be used in a beginning of year valuation? Specifically did they state that for a participant you must assume 2018 expected compensation and expected hours must be the actual 2017 compensation and hours?

I don't know if there have been more responses to this post from a few years ago or there have been new posts on this topic. But if a plan is frozen, overfunded, top heavy and not covered by PBGC it has to pass 401a26. If a plan had a formula before the freeze that gave some participants a de minimus benefit equivalent to 0.5% of pay, then even using the average accrual method, you would fail 401a26 at some point after the freeze. Maybe you get a technical pass the first year of the freeze if you test at the beginning of the year on the average accrual method. But after that you will fail if you accept the 0.5% as the minimum necessary. Note that if a plan is not covered by PBGC and is UNDERFUNDED it still does not seem to get an automatic pass on 401a26. It seems that frozen plans in some circumstances must be unfrozen? Am I wrong in the above? Has anybody had an audit where this issue came up?

A plan was frozen 2017 with no accruals that year. Doing a 401a26 test under average accruals to date as of 1/1/2017 it passes for 2017. The plan is formally terminated in 2018 and paid out. Does the plan have to pass 401a26 for 2018?

If a participant (active or terminated vested) elects a DEFERRED annuity upon plan termination, does the insurance company have to allow the participant to convert to an optional form at NRA based on the provisions of the terminating plan? That has been my understanding. If yes, has anyone had any recent experience in purchasing such an annuity - any pushback form the insurance company?

Code 4980 says that the excise tax on a reversion is limited to 20% if AT LEAST 20% of the surplus is allocated to plan participants. But it further indicates that not more 40% of the allocation can go to non-actives. And that even if more than 20% is allocated, only 40% of 20% - 8% - can go to non-actives. So for instance if 50% of the surplus is allocated to plan participants, 42% must go to actives and only 8% can go to non-actives. Am I reading this correctly?

Plan covers owner and sister. So covered by PBGC since sister does not have ownership. That's good as it allows 25% deduction for DC plan. Sister terminates. If she is not paid her benefit, remains in plan as terminated vested, I think the plan remains covered by PBGC, so we can still have a 25% DC deduction. Correct?

A plan needs 11g to pass testing (401a26, 401a4, whatever). The regulation clearly states that providing additional accruals to terminated nonvested participants through 11g is not permitted. But you can do this if you vest those terminated nonvested participants as part of the 11g amendment. Is giving them 20% vesting OK? Less OK? Whatever vesting percentage is given, must it apply to the entire accrued benefit or just the additional accrual being granted under the amendment? Is there anything that specifically addresses this?