de minimis plan amendment base

[Guest henrit]

My multi-employer client consists of numerous small employers, a few of which have had their accrual rates changed in 2004. The funding method is immediate gain, and the base for this amendment is less than 0.1% of liabilities.

Must I amortize a de minimis base for 30 years as a plan amendment? Or is it okay that I 'lump' it with the gain/loss of the plan and amortize it for 15 years? Any citations will be appreciated if it is okay to lump it with my gain/loss base.

Thanks.

[Guest HarveyC]

Do you have any reference (cites) to de minimis bases? I've never heard of these before but, if they exist, would be useful.

[SoCalActuary]

Are you using a projected benefit funding method such as entry age normal?

If you are using unit credit, and there are no past service increases, then your accrued liability would not change by increasing the formula for future years. Any benefit increase under this approach would be a part of the normal cost.

If you have granted past service credits in the increase, or if you use a projected method, then you should be able to measure the plan's accrued liability before and after the amendment, arriving at the change due to amendment eligible for the 30 year amortization.

[Guest henrit]

The number of actives I have on my case is 50,000, and the total number of participants around 100,000.

The trust consits of numerous small employers, some of which are as small as <20 participants. We use Entry Age normal which granted past service. Yes, we can theoretically calculate the change in AL by isolating the employers where there was a change in accrual rate. My concern is the administrative burden of keeping track of each of those employers each year, and the change in liabilities are tiny relative to the whole picture.

[Guest HarveyC]

It appears you are trying to avoid calculating the amount these amendment bases, and would like to simply have them absorbed in experience. If so, I don't think you can do this; there is no de minimis rule for amendment bases. If it's any consolation, you can combine all your amendment bases into one in any give year.

[SoCalActuary]

Do you find the immediate gain method to your advantage, given the requirement to track changes? You might consider a change in method to a Frozen Initial Liability, where future normal costs are spread on tabular entry age costs.