2008 Maximum Pension Deduction

[Gary]

In 2008 pension plans are subject to the new minimum funding requirements.

I have not had to apply the new rules yet and I have a client that once a maximum pension deduction estimate for 2008 for a plan they are considering to implement.

Does an estimate that is essentially the first year-end unfunded current liability (of course $0 assets) serve as a conservative estimate (i.e. not overstate) for the maximum deduction sound reasonable?

It's a situation where the estimate is for doctors (actual data not yet provided) that will accrue the 415 limit in their first year of participation.

A more detailed calculation with actual data and applying 2008 law will follow later.

Thanks.

[Mike Preston]

It depends on the interest rates. What are you using for your current liability "estimate"? It depends on whether we get technical corrections and are afforded the opportunity to a cushion of 50% of the Target Normal Cost. It depends on whether the accrual can be constructed as a past service accrual or not. It depends, huh? If their current and retirement ages are between 62 and 65 you can use the free trial version of the software I previously uploaded to this board to do an exact calculation. In about 10 seconds.

[mwyatt]

Mike, I'll admit that I've attempted to read through the morass that is the Technical Corrections Bill, and find it particularly fiendish to understand the context at times. Do you, or anyone else out there more versed in parsing edits out of context, see anything in either the House or Senate bills dealing with the extension of the Cushion Amount to cover the Target Normal Cost also?

[Mike Preston]

Not in the current versions floating around. May be added to another version theoretically set for discussion starting in late April.

[david rigby]

Hewitt does a periodic update of pending legislation. Current version, it appears no inclusion of this issue.

http://www.hewittassociates.com/_MetaBasic..._ret_031208.pdf