Game Plan for DB NQPs in Light of the American Jobs Creation Act(Also Appears in Nonqualified Deferred Conpension Section)

[Guest cjk]

It seems clear that the aim of the American Jobs Creation Act relative to NQPs was in the direction of "defined contribution" forms of NQPs. But as we all realize, DB NQPs were caught up in the "net." I am working towards constructing a "game plan" as to the most effective and efficient way to work with clients to assist them in bringing their DB NQPs into compliance with the Act. My role is that of actuary/consultant/administrator relative to these DB NQPs.

From my perspective, it seems premature for any client to make significant changes, at this point in time, to their SERPs or "restoration" plans (i.e., excess plans or those restoring benefits limited by the IRC §401(a)(17) compensation limitation). I say this because I anticipate that the next set of released NQP guidance will be more directed towards "defined benefit" NQPs. From what I can tell, the guidance is expected to be released around June 30, 2005.

It seems to me that the best steps to take now are to:

- Identify sections of the existiong DB NQPs that may be affected by the Act

- Participate in ongoing dialogs with the client and counsel so that we can:

-Discuss the pros and cons of "grandfathering" benefits in the DB NQP

-Discuss the ongoing complexity associated with having "grandfathered" benefits in the DB NQP that are still "coupled" with the qualfied plan as to distribution dates and forms of benefit (e.g., complexities in an "excess" plan)

-"Head-off" or redirect changes that could be an administrative nightmare.

I am interested in how others are approaching this challenge.

[Kirk Maldonado]

I think that scheduling and conducting meetings with clients is premature. I think that it would be more productive to wait until the guidance is out. Most of my clients don't want to have meetings if the answer to most of their questions will be "We won't know the answer to that until the guidance comes out."

This isn't to say that you shouldn't notify them of the developments and that you will need to meet with them after the guidance is out, I just think that having meetings now won't be the best use of the client's time.