412(i) & traditional DB Combo

[flosfur]

Scenario A:

On this board and at conferences I keep reading/hearing that if the 412(i) funding arrangement provided benefits are less than the top hvy minimum for the non-keys, then the balance of the top hvy benefits must be funded through a traditional DB plans & Sch B filed etc.

Question:

Since the amount of the insurance/annuity to be purchased under the 412(i) funding arrangement is a by product of the benefits to be provided under the DB plan, how could the 412(i) provided benefits be less than the top hvy min (unless the situation in Scenario B below occurs)? That is, one first determines the benefits under the plan (including top hvy) and then go and purchase the requisite amount of the insurance product - yes.no?

Scenario B:

Just found out that an insurance co. will not issue contracts for certain participants in a DB plan because the required annual premiums for them are below the insurance company's Minimum required for writing a policy!! Therefore, the benefits for these employees need to be funded outside the 412(i) arrangement.

Question:

Is this common inthe 412(i) arena? They will take the $150k or so annual prem for the owner and tell the others to take a hike! I know they are not legally required to do so but is this not a bad business practice [question for Matt, The 412(i) Man - Matt, not a bad slogan to use:)]?

I wish I was in such a position - pick and choose business from the "same" client!

Questions on both scenarios A & B.

1. How is this dual funding arrangement is accommodated for Sch B & PBGC Form 1 Sch A - what is the number of participants shown on Sch B - just those not receining enough benefits under isnario

2. Since there is only one plan, is there a benefits, rights and features violation issue here?

3. Are there any others issue to look out for?

Thanks in advance.

Ps - Comment for Dave Baker:

I use other non-employee benefit related message boards but none come even close to macthing the quality of this website - editing, searching, auto email notification and such. Thanks for the excellent website.