Reasonable?

[Guest Partly Cloudy]

New DB plan. Husband and wife only. Same age. AA = 57, RA = 65, PS = 5+. Client would like some flexibility annually. Using FIL would create a range, but is it reasonable given the age of the participants? In other words, if they simply made the minumum each year the benefits would not be properly funded. On the other hand, they're funding there own retirement so who cares? Maybe the IRS cares? Maybe the JBEA cares? I would appreciate some input as to whether any of the actuaries out there would (or do) use this approach. Thanks.

[FAPInJax]

Looks like a client in need of some consulting. They must understand that the 'image' of flexibility does not exist when there is less than 10 years of funding. Pretending that the flexibility exists and paying off the past service liability over 30 years would be ludicrous.

All of the above being true, there are no requirements that the client levelly (?) fund their retirement over their remaining years.

Personally, I would use Individual Aggregate and adjust the benefits if necessary in the future IF reduced contributions are really needed.

[david rigby]

Frank's comments are reasonable. Might not get much difference in the contribution under FIL, PUC, IA (depending on prior asset performance). IA will provide the same as Agg. method. The important thing is that 30-year funding is not appropriate with this demographic mix.

It helps to have your valuaiton date at EOY to provide the most flexibility, but not mandatory.

[Guest dsyrett]

This might help in two or three years: design your plan to have a relatively large initial unfunded accrued benefit so that you create an unfunded current liability in excess of your individual aggregate costs. Once you get beyong the two year amendment rule for increases in HCE current liability you may be positioned to haver a range of contribution: Individ Aggregate normal cost to RP unfunded current liability.

Otherwise I agree with the earlier comments that FIL, etc would not be appropriate.

[Guest Partly Cloudy]

Thanks all for your helpful responses.

[Blinky the 3-eyed Fish]

Dsyrett, is it your opinion that the initial implementation of the plan is considered an amendment for purposes of determining the UCL? How about others?

[FAPInJax]

We just had a similar discussion and believe that the initial plan IS considered the first amendment (otherwise it would be very easy to set up a plan with a huge first year deduction of the unfunded CL).

It will be interesting to see if there are different points of view.

[Blinky the 3-eyed Fish]

No, it wouldn't be easy to set up a huge deduction because of the 415 dollar limit and the fact that each participant is limited to 1 year of participation the first year. My personal opinion is that it is not considered an amendment.