EA Meeting - anything of importance so far?

[mwyatt]

Anything of importance to report to us non-attendees?

[FAPInJax]

Nothing all that earth shattering. A note regarding quarterly penalties - it appears that for many plans, the valuation rate is now in excess of 175% of the mid-term. This creates the unique situation where not making the quarterlies could actually pay off - NOT!! The numbers must be floored at zero.

[david rigby]

Well, here is something I heard Don Segal say, but I cannot prove it.

IRC 412(d)(1) discusses funding waivers and how they are amortized. I have always thought that the amortization rate is the greater of the funding rate or 150% of the federal mid-term rate. My SOA study note from 1991 says the same thing.

Don stated that the "greater of" is permitted but not required if 150% is less than the funding rate.

Can anyone help?

[Guest Brian4]

Looking at the Code, it appears that the interest rate is the greater of the 150% of the federal mid-term rate, or the current liability interest rate. For January 2003, the 150% of the mid-term rate is 5.17%, while the bottom of the current liability interest rate range is 4.98%.

[david rigby]

Im not clear about your reference to the current liability interest rate.

The language is "...rate of interest used under the plan in determining costs (including adjustments under subsection (b)(5)(B))..."

OBRA89 added the parenthetical phrase above. Subsection (b)(5)(B) refers to the current liability interest rate, and its range.

[Guest Brian4]

One interpretation is this refers to the current liability interest rate. So, for calendar 2003, if the current liability interest rate is 5.17%, the same as the 150% federal mid-term rate, and the valuation interest rate is 8%, then use 5.17% for a funding waiver base.

However, the 1989 legislation changed the references for the greater of interest rates both for late quarterlies and funding waivers to use the current liability adjustments. So, the interpretation above differs from the comment about late quarterlies.

I think the comment about optional use of the greater of language is an error.

What is the source of the comment posted by Frank about not using 175% of the federal mid-term rate if it falls below the valuation interest rate for funding, e.g., session number?