PPA Questions

[FAPInJax]

I do not know whether any of these questions have answers (I just know the questions keep coming up):

1 There was a restriction on distributions to HCEs that involved 110% of the current liability using the highest interest rate. Is this still in effect now that current liability is not being used for funding numbers???

2 An ongoing plan amends the formula to increase benefits in 2007. The plan is now attempting to run the 2008 PPA valuation. It appears that the target liability and normal cost are computed using the increased formula (even for the HCE). However, the cushion amount may not reflect the increase in formula for 2 years. Is this correct??

3 I heard rumors that Mr. Holland suggested that PPA valuations could be performed without pre-retirement mortality. This appears to contradict the Measurement of Assets and Liabilities proposed regulations but I am all for it. Any truth to the statement??

4 What happens to a plan with a quarterly penalty in 2008? The calculations are performed but the extra penalty is NOT added to the minimum contribution required (at least on the current version of the Schedule SB). Does this mean that it is no longer deductible??

Any and all answers are appreciated. Thanks in advance.

[mwyatt]

Bump, these are some good questions (albeit with no real guidance, especially the supercedence of 436 over the early termination restrictions). Anyone?

[Mike Preston]

There is precious little guidance out, especially when the regulations that are out aren't officially in effect until 1/1/2009. That gives the IRS plenty of time to make even further changes. Until then, we are "on our own" with the proviso that we must do something that, when viewed later, will be acceptable. Tough standard, really. I know that "acceptable" in this context is theoretically defined as something higher than "good faith" but lower than "perfection".

Anyway.....

1. Yes, because that section of the non-discrimination regulations hasn't been modified.

2. Yes. I have never heard it suggested that an amendment made before the effective date of PPA escapes the 2 year lookback. Interesting concept. Do you know where it originates from?

3. No opinion at this time. Have you sent Jim an email? He is very good at responding to things that he can respond to.

4. My quick reading of the Code indicates that the quarterly addons are part of the new definition of minimum funding. If the SB doesn't include it in its current form, my guess is that will be corrected. This is the first I've heard that a portion of a required contribution might be considered non to be deductible. You'd have to point out the Code sections (or, better I should say the Code sections which aren't there that you think should be) in order for me to buy into this.

[ak2ary]

3 I heard rumors that Mr. Holland suggested that PPA valuations could be performed without pre-retirement mortality. This appears to contradict the Measurement of Assets and Liabilities proposed regulations but I am all for it. Any truth to the statement??

He made that statement in the ASPPA webcast on the proposed regulations. Specifically he said that the actuary was required to determine whether a pre-retirement mortality assumption would materially impact the results and if the actuary decided to use a preretirement mortality assumption he/she MUST use the mandated table

[FAPInJax]

Thanks for the 'answers'.

2. Yes. I have never heard it suggested that an amendment made before the effective date of PPA escapes the 2 year lookback. Interesting concept. Do you know where it originates from?

I tried to find the origination of the 2 year lookback and it is escaping me at the moment. However, it popped up with respect to the maximum deduction of the unfunded current liability (presume therefore it is in 412(l) somewhere).

My question (poorly worded as it may have been) was that the target liability and target normal cost are computed on the benefits accrued / accruing in the year for minimum funding. There is no reference (especially in the new proposed Measurment of Assets and Liabilities regulations) to not using benefits for HCEs that were attributed to amendments in the prior 24 months. This would be consistent with the prior rules where the minimum funding was permitted to recognize these benefits. However, I can not find a distinction in target liability for 404 / 430 other than the reference to the cushion not counting those benefits.

3. No opinion at this time. Have you sent Jim an email? He is very good at responding to things that he can respond to.

Unfortunately, I do not have his email. If you would like to send it to me privately (or openly if you do not think it will generate a flood of emails to him) I will be glad to contact him.

4. My quick reading of the Code indicates that the quarterly addons are part of the new definition of minimum funding. If the SB doesn't include it in its current form, my guess is that will be corrected. This is the first I've heard that a portion of a required contribution might be considered non to be deductible. You'd have to point out the Code sections (or, better I should say the Code sections which aren't there that you think should be) in order for me to buy into this.

I would hope they would make the change in the Schedule as you note.

Thanks for all the comments.

[Andy the Actuary]

Unfortunately, I do not have his email. If you would like to send it to me privately (or openly if you do not think it will generate a flood of emails to him) I will be glad to contact him.

Such information should be anything but guarded. In fact, it would be of benefit if an on-line database of IRS/DOL/Treasury/PBGC benefits related contacts was maintained. Then, you could easily obtain telephone number, fax, street address, and email address.

If such on-line directory is available, please advise. Otherwise, you may wish to email Dave Baker to express your interest in such a directory becoming a BenefitsLink feature. Dave's non-secret email address is davebaker@benefitlinks.com.

[david rigby]

Jim does not hide his e-mail adddress in the Actuarial Directory:

https://www.actuarialdirectory.org/solution...t.aspx?tabid=64

[Andy the Actuary]

Jim does not hide his e-mail adddress in the Actuarial Directory:

https://www.actuarialdirectory.org/solution...t.aspx?tabid=64

David, this was helpful as I was not aware of this directory. Unfortunately and presumably, it lists only actuaries and not other government professionals. By the way, Harlan Weller does report an email address in this directory. Hence, I would still lobby for a well-advertised, consolidated, comprehensive source.

Sorry if any offense was taken to the word "secret." This flip adjective was more pointed toward others wanting to guard government employees' contact information than the employees, themselves, seeking to guard it.