ESTIMATING 2008 DISTRIBUTION VALUES

[Guest geschaft]

We have a large DB client (about 600 participants) that is interested in terminating during 2007 and distributing during 2008. They have asked for an estimate of the distribution liability at a projected distribution date of May 2008. The plan's current assets are less than the plan's distribution values based on the current distribution assumptions, so they are concerned about the potential additional funding.

The calculation system we have is Datair. What assumptions would you suggest using to estimate the distribution values?

Thank you

[david rigby]

Depends on how close you need to be. Simple is to calculate 1/1/07 PVAB, using your best estimate of 08 417 interest rate (phase-in starts in 08) and mortality, and then roll forward one year. Then adjust for different expected payment date.

[AndyH]

I'm pretty sure that it was stated at a recent conference that a 2007 plan termination paid in 2008 would be based upon 2007 law.

[Guest EA4924]

I'm pretty sure that it was stated at a recent conference that a 2007 plan termination paid in 2008 would be based upon 2007 law.

Andy,

Could you provide any more information on this? We have a client in this exact situation with a Plan Termination in 2007 and distributions most likely paid in 2008 because of waiting for the IRS determination letter.

Thanks in advance for any help on this.

[AndyH]

Unfortunately it is only anecdotal. I am 99.9% sure that I heard that conclusively stated at the ASPPA sponsored Advanced Actuarial Conference in Boston on 6/6/07 in the closing Q&A "Ask the Experts" session, but I don't know who stated it and I do not see it in the printed Q&As. Tom Finnegan was on the panel so maybe he could help out if you want to email him. Carol Sears was also.

[AndyH]

Thankfully (thanks to Tom) I can confirm that I did not imagine that discussion.

See for example Q&A 7 from the 2007 EA Conference Blue Book. This is accessible from the practicioners section of pbgc.gov. Apparently there was similar discussion at a 2007 ALI-ABA session also.

Apparently the IRS is accepting this position (at least for now).

Sounds to me like the current answer. But it also sounds like it may or may not be the "final answer".