Age for EAAL and EANC for full funding limit

[Guest saeissler]

I am working on a DB plan that had a change in eligibility back in 2001, so some employees entered with no service requirement and others had a 2 year service require. The entry age that has been used for several years in the past to calculate the EANC and EAAL is the age at participation as if the current 2 year eligibility rules had always been in effect. I know that the employment age can be used or the participation age can be used, but can find nothing that tells me that this method is acceptable. Any thoughts?

[Andy the Actuary]

Under the cost method change automatic approval Rev. Proc. 2000-40, EAN is defined by spreading costs from plan entry age, which makes sense for why it is called "Entry Age" Normal. However, there are numerous examples of EAN being spread from employment age when benefits are credited from DOE rather than DOP. In such case, an employee first being valued brings with him an EAN accrued liabilitiy or a loss. I use EAN prosmiscuously because the method just described while in the EAN family is not EAN. Just make sure your valuation report describes what is going on and if you switch to the quasi-EAN, you may not hang your hat on Rev. Proc. 2000-40.

[tymesup]

Our friend PPA makes this question go away.

Andy, what's with the avatar?

[Andy the Actuary]

Andy, what's with the avatar?

Sex and age change operation

[tymesup]

Andy, what's with the avatar?

Sex and age change operation

We were just talking about having an assumption for sex changes, plus another two mortality tables.

How is this going to affect your NRA? 401(a)(9)? 415 limits?

[Andy the Actuary]

Andy, what's with the avatar?

Sex and age change operation

We were just talking about having an assumption for sex changes, plus another two mortality tables.

How is this going to affect your NRA? 401(a)(9)? 415 limits?

I'm still trying to determine who the spouse is in my QDRO!

[Guest saeissler]

Andy, what's with the avatar?

Sex and age change operation

We were just talking about having an assumption for sex changes, plus another two mortality tables.

How is this going to affect your NRA? 401(a)(9)? 415 limits?

I'm still trying to determine who the spouse is in my QDRO!

Andy - I just hope you got IRS approval first.......isn't an avatar a feature as in "benefits, rights and features"? was everyone given the same option?

But, wanting to make sure you understood my question - one participant was hired 8/1/99 and has a date of participation of 8/1/99, but the EANC and EAAL are calculated based on an entry age at 8/1/01, since the eligibility requirement is now 2 years.

[Andy the Actuary]

IRS_Rev._Proc._2000_40_Change_in_Cost_Method.pdf

But, wanting to make sure you understood my question - one participant was hired 8/1/99 and has a date of participation of 8/1/99, but the EANC and EAAL are calculated based on an entry age at 8/1/01, since the eligibility requirement is now 2 years.

Presumably, you're talking about the 2007 valuation. So, how has this been treated in prior years?

What you're proposing appears to satisfy the Rev. Proc. 2000-40. See attached.

[david rigby]

What you're proposing appears to satisfy the Rev. Proc. 2000-40. See attached.

Amusing. Since this is BenefitsLink, you could use this:

http://www.irs.gov/pub/irs-irbs/irb00-42.pdf

[Guest saeissler]

What you're proposing appears to satisfy the Rev. Proc. 2000-40. See attached.

Amusing. Since this is not BenefitsLink, you could use this:

http://www.irs.gov/pub/irs-irbs/irb00-42.pdf

Thanks all - actually this plan is being audited and the IRS agent did not agree with the EANC and EAAL calculations, so I was just trying to make sure the way calculations have been done in the past was okay, before I went into an explanation.

[Andy the Actuary]

Clearly, one of the problems -- at least in the some of the stock actuarial reports package systems produce -- is that the cost method may be inadequately or improperly described as EAN. EAN would have a specific definition to the reviewer.

What is going on that the IRS is attempting to replicate costs? This sounds unusual and there may be some greater problem in the background that they're investigating.

[Guest saeissler]

Clearly, one of the problems -- at least in the some of the stock actuarial reports package systems produce -- is that the cost method may be inadequately or improperly described as EAN. EAN would have a specific definition to the reviewer.

What is going on that the IRS is attempting to replicate costs? This sounds unusual and there may be some greater problem in the background that they're investigating.

The plan was a fully insured plan a few years ago, which is why it is being audited. Also the insurance premiums are part of the EANC and a "waiver of premium for disability" portion was included in error.

[John Feldt ERPA CPC QPA]

I am more troubled by the "age change operation".

[Andy the Actuary]

I am more troubled by the "age change operation".

I have increased my age so that I may legally imbibe.