Waiving benefits for funding and termination

[Guest flogger]

A man and his wife are the only 2 participants (and the only ee's) in a DB Plan. The wife dies leaving the PVAB (the death benefit in the Plan) to her husband. The husband essentially freezes the plan by amending it with a cap on benefits equal to his accrued benefit. No further contributions have been required since he froze the Plan due to good asset performance.

Now the assets have dropped and there is a funding requirement. The two liabilities pieces are his PVAB and the death benefit. He doesn't want to fund. Can he waive the death benefit for funding purposes? That would negate the need for funding. Can he waive any of his AB?

[Blinky the 3-eyed Fish]

Waivers for funding purposes are not allowed.

Since the assets dropped, have you tried switching to one of smoothed funding methods in Rev. Proc. 2000-40?

[JAY21]

Blinky, do you think there is any wiggle room here ? I know there's a Revenue Ruling (forget the cite) that states something to the effect that a waiver cannot be used for funding since it would be "unreasonable" to believe someone would not revoke it and accept something less than their full benefit. However, I swear I heard a former ASAP Technical Director state informally that only revocable waivers were precluded under this Rev. Ruling, infering that perhaps Irrevocable waivers might pass muster. Maybe I misunderstood him though. Anyone think there's wiggle room here for an irrevocable election, maybe in conjunction with a Election to Limit Distribution under a plan term ?

[Blinky the 3-eyed Fish]

I hadn't heard the comments you reference and am aware of nothing that states there is any possibility of making any kind of waiver for funding purposes. It sure would make my life easier if some clients could do that though, so am open to any new information.

[Guest merlin]

It's RR 81-136, and it talks about funding an ongoing plan using an assumption that a participant will take less of a benefit than he would otherwise be entitled to under the plan provisions. Maybe there is wiggle room in the year of plan termination.

[Guest merlin]

Should be a"?" rather than a "." at the end of my last sentence. Sorry.

[Guest flogger]

What about the death benefit that his wife left to him? How do you think that should be valued--as the PV of her AB, or should it be treated like a lump sum distribution at her death with earnings added(subtracted) based on fund performance or ??? And do you think the waiver rules apply to a beneficiary (albeit a participant too) of a death benefit?