Rev. Proc. 2000-40

[Guest penman]

Regarding Rev Proc 2000-40 Section 4.02 - Fully Funded Terminating Plan, what does the term "benefit liability" mean for a non-PBGC DB plan covering only a husband and wife? At DOPT the assets are 1% less than the 417(e) lump sum. I want to switch to a BOY val.

I am generally aware of the various methods of handling the val and FSA in the year of plan term. I can still go back and revise 2004 to a BOY val but I just want to focus on the "benefit liabilities" term and to see if there is any wiggle room due to the circumstances?

[Blinky the 3-eyed Fish]

Being it's a valuation, I would not factor in 417(e) rates into the equation to determine the present value figure, but rather would base the liabilities as determined under valuation assumptions at the BOY. This is my opinion and I haven't heard any other opinions stated on the topic, so take it for what it's worth. But I base my opinion on two things. First, above in 4.02(2), the present value term is used in this section as well, which clearly is based on valuation assumptions. Second, it is very possible for the stability period used to determine the 417(e) rate to have passed by the time the distributions are paid. It would not make sense to factor in 417(e) rates that very well may not be used in the ultimate distribution calculations.

[Guest penman]

Blinky, thanks for responding. Those are good points about the "present value" term and the stability period issue. I was going with the thought that section 4.02 was giving some options in the year of plan term if, as of the date of plan term, the plan was "sufficient", like in a PBGC plan termination, to pay everyone out.

The one item with your response that I question is your saying assets > pvab on a valuation basis at BOY rather than at plan term date. 4.02(3)(a) says plan term date, what am I missing?

The definition in 4001 of the PBGC regs says "Benefit liabilities means the benefits of participants and their beneficiaries under the plan (within the meaning of section 401(a)(2) of the Code)". That doesn't say much and it does not specifically say anything about PV's or LS's.

Would your answer be different if this were a plan covered by the PBGC?

[Blinky the 3-eyed Fish]

You are right about the date. It's the term date, not BOY. I should add I was referring to the assumptions at the BOY. That wasn't clear.

My answer would not change if PBGC covered because I consider it a valuation determination, not a distribution determination.

[Guest penman]

I appreiciate your input on this, thanks.