Need help please

[AndyH]

I'd really appreciate informed opinions as whether the following Exam question is correct or is in error:

Data for Question 4 (1 point)

An employer sponsors defined benefit Plan A, which covers salaried employees only. The employer suspends benefit accruals in Plan A effective December 31, 2006. A partial plan termination is deemed to occur on that date. The employer then establishes a new defined benefit Plan B that covers all employees effective January 1, 2008.

Consider the following statement

Vesting service in Plan B must include all years of employment since the effective date of Plan A.

Is the above statement true or false?

(A) True

(B) False

The official answer is A (True). I think it is false because only a termination, not a partial termination or a freeze causes a plan to be considered a predecessor plan within the meaning of 411(a)(4) say the DB answer book, the ERISA Outline Book, and anything else I can find.

Is there some DB-specific rule in some weird place that I am overlooking? Help would be really appreciated.

[Blinky the 3-eyed Fish]

I would have received 0 points for my answer. I know of no "weird" rules that would make a partial termination equal to a termination for the predecessor plan rules.

On a side note, are you studying to be an EA?

[AndyH]

I guess. It only took me 25 years to get around to it. It's a lot harder to find the time at this point though.

Blinky, are you saying you think the official answer is incorrect? Or just that you assume your answer would be wrong? I need one point and I think this is my ticket.

[Kimberly S]

I am not an actuary, and these days only work on DC plans. But I thought a predecessor plan could be ongoing, meaning neither a partial termination nor a complete termination termination would be required to necessitate vesting credit going back to the start of the earlier plan.

[Andy the Actuary]

The Plan that was partially terminated has not been terminated. Ergo, the new plan cannot be a successor plan because there was no predecessor plan.

When I wrote the EA exam in 1977, the essence of the test was essentially arithmetic and being facile with the widely-applied "alternate funding standard account" and "short-fall funding method." It did not contain "word" problems which were left to the attornies.

The answer appears incorrect as I reread the regulations under 1.411(a)-5. That said, someone must have interpreted partial termination to mean termination. I saw the words a few times, "termination within the meaning of 411(d)(3)(A)." This section of the code deals with termination and partial termination.

[AndyH]

The Plan that was partially terminated has not been terminated. Ergo, the new plan cannot be a successor plan because there was no predecessor plan.

When I wrote the EA exam in 1977, the essence of the test was essentially arithmetic and being facile with the widely-applied "alternate funding standard account" and "short-fall funding method." It did not contain "word" problems which were left to the attornies.

The answer appears incorrect as I reread the regulations under 1.411(a)-5. That said, someone must have interpreted partial termination to mean termination. I saw the words a few times, "termination within the meaning of 411(d)(3)(A)." This section of the code deals with termination and partial termination.

Thank you very much. I agree completely. I think it is wrong on a second point also. If Plan A were terminated as such deemed a predecessor plan, only participants of that plan (salaried in this case) need to have prior vesting service credited, as I read the rules.

p.s. Revenue Ruling 2003-65 clearly confirms that a partial termination is not a termination for this purpose.

[Blinky the 3-eyed Fish]

Blinky, are you saying you think the official answer is incorrect? Or just that you assume your answer would be wrong? I need one point and I think this is my ticket.

The former. I bet some person who wrote that question is on these boards if you posted the year it was on the exam and the what exam it was from.

I guess. It only took me 25 years to get around to it. It's a lot harder to find the time at this point though.

You can do it! Be the ball Danny!

[AndyH]

May 2008 EA2-B. The test was released last Thursday (much later than normal).

If the correct answer is B, which I think it is, then I pass (assuming they change the official answer to B). I need one point.

[david rigby]

Although I don't have immediate access to Code or Reg for confirmation, my first guess would to answer True.

BTW, if the JBEA decides that the question is invalid (for any reason), I think the protocol will not give you the point. Instead, they will throw out the question, for everyone.

[mwyatt]

Hate to say it, especially with it being a pivotal point for pass/fail, but research on RIA Checkpoint leads to true as the answer.

[Guest Sieve]

I'm not an EA--hey, I'm not even an A--but Rev. Rul. 2003-65 does not stand for the proposition that "a partial termination is not a termination for this purpose" as AndyH says. In fact, that Rev. Rul. says that service after a partial termination cannot be ignored for vesting purposes when plan benefits are unfrozen following the partial termination, since only service after a termination (and not after a partial termination) can be ignored. In fact, the Rev. Rul. specifically states that, because the plan was frozen (and partially terminated) rather than terminated, vesting service must go back to the beginning of the frozen plan.

Seems to me (as a non-actuary) that this exam question is asking whether or not you can get around that rule (i.e., not disregarding service after a partial termination) by starting a new plan with the same features as the old frozen one. Clearly you can't disregard that service by unfreezing a partially terminated frozen plan as per the Rev. Rul. (because the frozen plan is not terminated), so let's just start a new plan and keep the old one frozen and ignore service after the freeze by doing an end run around the rule (i.e., by not unfreezing the frozen plan but by beginning a brand new plan). The question is concluding that the new plan and the frozen old plan are not predecessor and successor, but are, in effect, one and the same: a frozen plan which is effectively unfrozen by instituting a new plan. No, that doesn't work to allow service in 2007 to be ignored for vesting purposes--it appears.

Sorry, AndyH . . . based on the Rev. Rul. you point to, I would agree with David Rigby & mwyatt that the answer is correct. Of course, what does it matter what I think? It's what the test writers think.

[Andy the Actuary]

I'm not an EA--hey, I'm not even an A--but Rev. Rul. 2003-65 does not stand for the proposition that "a partial termination is not a termination for this purpose" as AndyH says. In fact, that Rev. Rul. says that service after a partial termination cannot be ignored for vesting purposes when plan benefits are unfrozen following the partial termination, since only service after a termination (and not after a partial termination) can be ignored. In fact, the Rev. Rul. specifically states that, because the plan was frozen (and partially terminated) rather than terminated, vesting service must go back to the beginning of the frozen plan.

Seems to me (as a non-actuary) that this exam question is asking whether or not you can get around that rule (i.e., not disregarding service after a partial termination) by starting a new plan with the same features as the old frozen one. Clearly you can't disregard that service by unfreezing a partially terminated frozen plan as per the Rev. Rul. (because the frozen plan is not terminated), so let's just start a new plan and keep the old one frozen and ignore service after the freeze by doing an end run around the rule (i.e., by not unfreezing the frozen plan but by beginning a brand new plan). The question is concluding that the new plan and the frozen old plan are not predecessor and successor, but are, in effect, one and the same: a frozen plan which is effectively unfrozen by instituting a new plan. No, that doesn't work to allow service in 2007 to be ignored for vesting purposes--it appears.

Sorry, AndyH . . . based on the Rev. Rul. you point to, I would agree with David Rigby & mwyatt that the answer is correct. Of course, what does it matter what I think? It's what the test writers think.

Your point about this action being a potential subterfuge and that in effect there is but one plan is well-taken but can you cite the code/regulations thread to support it? Perhaps, the real question is what is essentially a legal, and not an actuarial question, doing on the EA exam?

[Guest Sieve]

Well, the old legal axiom "form over substance" is the general rule I would point to. With regard to this specific question, however, I would refer to one of the conclusions at the end of the cited Rev. Rul., in which a new plan is established and merged with the frozen plan, and the result is the same: cannot ignore service after the partial termination, even when a new plan is established (albeit here there was a merger as part of the transaction which is, yes, a major difference).

So, chose one of these arguments (they're the best I can do without lots of research):

• This prior frozen plan IS a predecessor plan, in fact, because it is followed by a replacement plan (even though the frozen plan wasn't terminated): another DB plan. If the rule were any different, you could freeze a plan and start a brand new identical plan and ignore service in between the freeze & the new plan. (This argument sucks--technical term from the IRC--because there just was not a termination so nothing preceded anything else. Also, I don't think they used the predecessor plan rule because, if they did, only salaried employees would have vesting service credited back to the beginning of the frozen plan--as AndyH pointed out in an earlier post.)
  
• The rule is that service may be ignored "during any period for which the employer did not maintain the plan or a predecessor plan . . . " (Treas. Reg. Section 1.411(a)-5(b)(3)(i).) Focus on the phrase "did not maintain the plan . . ." Here, we have the same plan being maintained following the freeze, just in different clothing. So, no service can be ignored in light of the fact that there was no termination of the 1st plan. (This is a much better argument.) If this were not the rule, we get into the successive plan scenario.
  
• Gut feeling.
  
• The question was, at a minimum, unfair.
  

Code & regs will not say anything about subterfuges. There is no specific "if it quacks like a duck" language. But, never having been exposed to an EA test, I have no idea why legal issues were included--maybe because thet're easier than actuarial issues . . .

[AndyH]

Thanks for the comments. I'll re-read the Revenue Ruling because I did not get the same interpretation.

I agree it quacks like a duck. And the "end around" comment is also appropriate. But all the interpretive stuff I can find says it is not a duck and the end around is perfectly legitimate.

And what about the salaried only issue? Why can't previously exluded people be denied pre - Plan 2 effective date service?

But I have high respect for all opinions here so this is much appreciated.

[AndyH]

Sieve, here is the conclusion to that Revenue Ruling. It addresses vesting under the first plan, and it addresses vesting if the first plan is terminated, and it addresses vesting if a new plan is established and the first plan is merged into the second plan. it does not, in my opinion, anywhere state that prior service must be credited in a second plan if the first plan is not terminated or merged. (I view a merger as having the same effect as a termination anyways).

It seems to me to leave the door open to different vesting service years in the case where two plans are maintained, one frozen. The bold is my emphasis.

HOLDING

The freezing of accruals under a qualified retirement plan, so that a partial termination of the plan occurs, does not constitute a plan termination for purposes of determining whether service for the plan sponsor after the plan was established may be disregarded toward vesting if accruals resume under the plan. Accordingly, all years of service for the plan sponsor following the establishment of the previously frozen plan must be taken into account for purposes of vesting. If, instead, the accruals are earned under a new plan maintained by the same employer and the new plan is merged with the frozen plan, then this holding also applies, so that, after the merger, service after the frozen plan was established must be taken into account for purposes of vesting in any benefit accruals under the new plan.

[Andy the Actuary]

This discussion makes me pine for those halcyon days when an entire workday was required to develope N's and D's by hand using yellow columnar worksheets and a mechanical calculator that looked like a cash register.

[david rigby]

Included in the original question is

A partial plan termination is deemed to occur on that date.

Let's remember that is not a necessary result of the plan freeze, but is conditional. See IRS Reg. 1.411(d)-2(b)(2).

[AndyH]

Hate to say it, especially with it being a pivotal point for pass/fail, but research on RIA Checkpoint leads to true as the answer.

Mike, anything concrete you can point me to? Thanks for your help. At this point, I remain completely convinced the correct answer is False.

[AndyH]

Included in the original question is

A partial plan termination is deemed to occur on that date.

Let's remember that is not a necessary result of the plan freeze, but is conditional. See IRS Reg. 1.411(d)-2(b)(2).

Agreed, but everything I read says that a termination or merger of a plan, not a partial termination (regardless of what caused it), must occur for such a plan to be considered a predecessor plan for purposes of determining whether a sucessor plan must credit vesting service prior to it's effective date.

This was ata's initial comment which I remain in agreement with.

FWIW, I think the DB Answer Book clearly supports a False answer, as well as the ERISA Outline Book.

[tymesup]

I guess. It only took me 25 years to get around to it. It's a lot harder to find the time at this point though.

Blinky, are you saying you think the official answer is incorrect? Or just that you assume your answer would be wrong? I need one point and I think this is my ticket.

Got you beat on the exam route. Passed SOA Part 1 in 1978 and Exam M in 2006, 28 years apart. May get around to Exam C in May 2009.

Good luck with your exams. Would never have guessed you're not an EA, you're one of the folks I respect around here.

[Belgarath]

He's a member of Red Sox Nation! This automatically confers respect and adulation.

[AndyH]

Thanks tymseup. I always am interested in your comments as well.

OK, now I need to find Harwood and Willie who complained that I wasted their time!

[AndyH]

[

The former. I bet some person who wrote that question is on these boards if you posted the year it was on the exam and the what exam it was from.

[

Yup, you win the bet. I looked it up and I see one very regular and one infrequent Board contributor on the committees.

[Guest Sieve]

One last shot, and then I'm through . . .

So, AndyH, since the test question's new plan is a DB plan, you don't see the new plan as basically "unfreezing" the old frozen plan, thus putting it squarely within the first half of the Rev. Rul.'s conclusion that unfreezing a frozen DB plan requires inclusion of all years of service for vesting? (Notice that the unfrozen plan in the Rev. Rul. was even accruing benefits under a different formula.)

[Andy the Actuary]

By and by, in 35+ years of this stuff, have never even seen such a situation even considered. The employee having to start over on the the vesting schedule would be terminally adverse p.r. A sponsor who would perpetrate (to use Sieve's words) this subterfuge would likely loose all but his unemployable employees.

[Guest Sieve]

Actually, A.T.A., "subterfuge" was your word . . . And, bad p.r. or not, if it's something the employer can do within the rules, then it's certainly the employer's choice. I've seen worse things done by an employer from a p.r. perspective, but all within the rules--and that's a pure and simple business decision.

So, AndyH, I guess we'll have to agree to disagree on this one, I guess. And that's ok.

Again, here's the words at the start of the Rev. Rul.'s conclusion: "The freezing of accruals under a qualified retirement plan, so that a partial termination of the plan occurs, does not constitute a plan termination for purposes of determining whether service for the plan sponsor after the plan was established may be disregarded toward vesting if accruals resume under the plan. Accordingly, all years of service for the plan sponsor following the establishment of the previously frozen plan must be taken into account for purposes of vesting."

Now I'm done (on this thread, at least . . .)

[tymesup]

By and by, in 35+ years of this stuff, have never even seen such a situation even considered. The employee having to start over on the the vesting schedule would be terminally adverse p.r. A sponsor who would perpetrate (to use Sieve's words) this subterfuge would likely loose all but his unemployable employees.

Other pr issues - What about the missing year? What was wrong with the old plan? Why is money going into the old plan? Why isn't money going into the old plan? Why am I getting two SAR's?

On the plus side, you might be able to increase fees to that sponsor by 10%.

[AndyH]

I must admit to being shocked at my inability to convince you'all. Please look at the ERISA Outline Book. It is copyrighted so I cannot copy and paste.

Sieve's quote:

Again, here's the words at the start of the Rev. Rul.'s conclusion: "The freezing of accruals under a qualified retirement plan, so that a partial termination of the plan occurs, does not constitute a plan termination for purposes of determining whether service for the plan sponsor after the plan was established may be disregarded toward vesting if accruals resume under the plan. Accordingly, all years of service for the plan sponsor following the establishment of the previously frozen plan must be taken into account for purposes of vesting."

Accordingly, all years of service for the plan sponsor following the establishment of the previously frozen plan must be taken into account for purposes of vesting. If you read the full revenue ruling, all this says is that you must credit vesting in the frozen plan for all years if you unfreeze it. It says nothing about crediting of vesting service in a new plan, unless yuo later merge the two, in which case all prior service must of course be credited.

For purposes of a new plan, there is no predecessor plan because the first plan was not terminated and such service may be disregarded for vesting in the new plan.

[Blinky the 3-eyed Fish]

Sieve, here is the conclusion to that Revenue Ruling. It addresses vesting under the first plan, and it addresses vesting if the first plan is terminated, and it addresses vesting if a new plan is established and the first plan is merged into the second plan. it does not, in my opinion, anywhere state that prior service must be credited in a second plan if the first plan is not terminated or merged. (I view a merger as having the same effect as a termination anyways).

It seems to me to leave the door open to different vesting service years in the case where two plans are maintained, one frozen. The bold is my emphasis.

HOLDING

The freezing of accruals under a qualified retirement plan, so that a partial termination of the plan occurs, does not constitute a plan termination for purposes of determining whether service for the plan sponsor after the plan was established may be disregarded toward vesting if accruals resume under the plan. Accordingly, all years of service for the plan sponsor following the establishment of the previously frozen plan must be taken into account for purposes of vesting. If, instead, the accruals are earned under a new plan maintained by the same employer and the new plan is merged with the frozen plan, then this holding also applies, so that, after the merger, service after the frozen plan was established must be taken into account for purposes of vesting in any benefit accruals under the new plan.

I agree with Andy's take on this. I don't see RR 2003-65 on point to this problem as described above.

I also don't see a new plan as an unfreeze of the first plan as Sieve suggested, being they are two separate plans.

I doubt Andy cares about whether or not this is a good PR move. Remember it's an exam question that he got wrong, not a real-life situation.

What happened to Effen's post? I guess he changed his mind?

[AndyH]

Effen quoted the same paragraph as Sieve, both of which are not relevant to a new plan; they are relevant to a "unfrozen plan" and to a new plan if the two plans are merged.

BTW, there is a gray book question 2003-31 that says the same thing as Sieve and Effin's quote. It does not address the situation of the vesting of a second plan when the first is not terminated. The EOB does. The DB Answer Book does.

This service is not required to be credited.

[AndyH]

One last shot, and then I'm through . . .

So, AndyH, since the test question's new plan is a DB plan, you don't see the new plan as basically "unfreezing" the old frozen plan, thus putting it squarely within the first half of the Rev. Rul.'s conclusion that unfreezing a frozen DB plan requires inclusion of all years of service for vesting? (Notice that the unfrozen plan in the Rev. Rul. was even accruing benefits under a different formula.)

Why is unfreezing the old plan the same as starting a new plan? They are two different things. Kind of like you have a PS plan with a formula you don't like but there is no condition on allocations. The "end around" is to set up a new one. Same thing here with vesting.

[Guest Sieve]

Me, again, for an aside: This is the kind of lively discussion that this board is all about . . .

Pulled back in to answer AndyH -- (And, I do not doubt your conviction at being right. You certainly may well be, and have plenty of authority behind you.)

Vesting in a plan is different from an allocation formula in a DC plan. You have no right to a DC plan allocation formula until you've accrued that right--beginning the plan year as an employee, working 1,000 hours in the year, whatever it is that the plan requires. And, you do not have an expectation--certainly, you have no right under IRC Section 411(d)(6)--to a continuing allocation formula going forward. Same even for a benefit formula under a DB plan going forward, or a mandatory employer contributoin formula in a MPPP going forward.

But, messing with a vesting schedule is different. Starting a new DB plan--or a new DC plan, for that matter--which excludes prior years of service for vesting but does nothing other than continue the old plan in lion's clothing, is, I think, exactly what the vesting regs are trying to prevent: serial amendments which effectively change the employee's vesting schedule and produce through indirection what you cannot do directly. In a current plan, you cannot change the vesting schedule downward if that results in a reduction of the vested percentage--and you cannot force an individual with 3+ years of service (I think it is) to move to another vesting schedule--and, under new proposed (?) regs re: the Heinz decision (I believe that's it), you cannot even reduce the vesting schedule with respect to benefits not yet vested but already contributed to the plan so that a new vesting schedule can only apply, if at all, to new DC money. So, freezing a plan (but being very careful, of course, not to terminate it) allows you to get around all of those new rules in an identical (or substantially identical) replacement plan. Should you be able to? Isn't this form over substance?

This is not as big a deal as it used to be when we had 10-year cliff or 4-40 vesting (for those who don't remember, that was full vesting after, I think, 12 years). But, with a 5-year cliff under a DB plan, this type of permissive vesting amendment (through a new plan following a frozen plan) could wreck havoc with rank-and-file vesting. At some point, an employee (really, most employees) will terminate (forget retirement, because they'd be fully-vested at that point), and in that plain vanilla termination in one of the "new" plans the employee would lose the accured benefit in the last 3 or 4 years of his/her working life (with a whole string of frozens plans sitting out there). Same with a DC plan with, e.g., matching contributions--although the vesting schedule is much more pro-employee than in a DB plan, and the "loss" would be just $$ rather than a large accrued benefit. And, of course, the owner, HCEs, key employees, whatever, who continue working, will be fully vested at all times (because we'll just freeze the plan when they leave, causing a partial termaintion and 100% vesting, or we'll actually terminate the plan when we close the company, or something like that).

Are all freezes followed by new identical plans subterfuges (a new favorite word?)? No. Do they bypass the intent of the statute and regs? Yes. Why else is there a new plan rather than an unfreezing--or rather than a termination of the old plan? And here's an interesting question--what if you freeze, do not include all years of service in the new plan, and then the old plan eventually IS terminated. Don't you now have, as I think Tripodi suggests, the new plan as a successor plan, and don't you now have to count all service as a result of the termination, and how do you do that with people who terminated with a 20% vested interest 10 years ago?

I know I'm making arguments to support my point of view. In fact, I'm making those arguments as an advocate would for a participant. And, frankly, I'm not sure my position is the correct answer. But I sure see the form over substance issue as an important one that cannot be overlooked, and then you decide to do what you will. I'm sure there are courts that would say that this is not form over substance, that the new plan can, by regulation, ignore prior service. I, personally, would be slow to give that advise to a client.

Lots of controversy about a hypothetical, ehh.. Assuming anyone is still reading this, has anyone done exactly what the test question suggests, i.e. not counting prior service from a prior frozen DB plan in a new DB put in place for the same employees?

[AndyH]

BTW, I'm not trying to argue for something that I am uncertain about or don't feel entitled to. I feel 100% convinced that the official answer is wrong. Blinky and ata expressed my point more effectively I think. Sal Tripodi and Neff McGhie topped us all. I may have to hire Sal at this point.

I'm still waiting for some more feedback before I go official with this.

p.s. We haven't heard from any of our regular lawyers, oddly enough. Please join in.

[Guest Sieve]

Didn't know lawyers could be regular.

[AndyH]

Lots of controversy about a hypothetical, ehh.. Assuming anyone is still reading this, has anyone done exactly what the test question suggests, i.e. not counting prior service from a prior frozen DB plan in a new DB put in place for the same employees?

Point 2 has gotten no discussion, which is that these are not the "same employees". In the Exam question, the first plan covered only salaried employees. The second plan covers all employees. What is wrong with that? And what requires if I am wrong the plan to credit all service for all employees in the second plan, even if not covered in the first plan? Nothing IMHO.

[Guest Sieve]

Point 2 got a bit of discussion here & there (e.g., posts 6 & 13), but certainly was overlooked in the grand scheme of things. My form over substance lecture sure didn't take that into account at all. (And you're right that, at worst (best?), you'd only have to credit those who participated in the first/frozen plan.)

When you take "official" action on this, please come back to this string & let us know (I assume the string won't otherwise be active for more than another 17 days!!). At least now you are more sure of your answer than I think you were yesterday. Mission accomplished. Good luck with it.

[AndyH]

If anyone is still not fully convinced of my argument that the official answer (True) to question 4 is wrong, I would ask you to take a look at ERISA Outline Book Chapter 4 Section IV 2.a.5 including 2.a.5)a).

The official answer is also wrong for a second reason. Even if for some reason the first plan was deemed a predecessor plan (which it is not) , it covered only salaried employees whereas the new plan covered all employees. In such case, EOY Chapter IV 2.a.2) which clearly states that only vesting service for salaried employees would need to be credited prior to the effective date of plan 2, not all employees.

The official answer is wrong for each of these two reasons.

The circumstances of the Revenue Ruling which I believe is being widely misinterpreted are dealt with in EOB 1.c. and 2.a.3) .

They are different fact patterns with a different conclusion.

Mike and Effen, I am confident this will change your opinions if you would do me a favor and look at the EOB coverage of this topic, in particular these sections. Sal's interpretation is clearly identical to mine (and others).

Thanks again.

[AndyH]

Although I don't have immediate access to Code or Reg for confirmation, my first guess would to answer True.

BTW, if the JBEA decides that the question is invalid (for any reason), I think the protocol will not give you the point. Instead, they will throw out the question, for everyone.

David, would you explain this please? The exams have already been graded and everybody who answered Yes got 1 point and the no's got 0. if I am right, why would I not get a point? They can't regrade downwards now.

If I argue my point #2, which is that (if anyone) only salaried people, not everyone, needs to get service back to the start of the first plan, that would make the question either wrong or invalid. I don't see how they woudn't need to give everyone the point.

And nobody has yet disagreed with me on that point.

[david rigby]

David, would you explain this please? The exams have already been graded and everybody who answered Yes got 1 point and the no's got 0. if I am right, why would I not get a point? They can't regrade downwards now.

Hmmm, you have a point. My point applies when a defective Q&A is discovered before grading is complete. Nevertheless, it may be hasty to assume the only course of action will be to give you a point (assuming you win your argument).

[tymesup]

From the Joint Board website:

"In preparing the examinations, great care is taken so that each question has one and only one correct answer based on the data given. Each question is reviewed by all members of the Advisory Committee on Actuarial Examinations and by representatives of the sponsoring organizations. Nevertheless, because mistakes can occur, a request for consideration of an alternative answer to a given question, or for disregarding a question, will be entertained by the Joint Board but only under the following conditions:

An appeal must be made in writing and postmarked not later than six months after the examination

was administered. The appellant must describe in detail the fault found with the question and an alternative answer if one is claimed. In the case of claimed ambiguity, credence will be given to an alternative interpretation only to the extent that such interpretation is one that might be reasonably made and is not strained in the light of attendant circumstances. This policy is of positive benefit to most candidates; otherwise, it would be necessary to burden each question with numerous qualifications and stipulations that the qualified practitioner does not require and which would make the question more difficult to read."

I'm assuming grades have been issued. Changing a true/false question will result in a whole bunch of additional passers, not a happy result for the Joint Board.

(Sorry, I edited this by mistake instead of replying). I'm doing my best to restore it. AH

[AndyH]

"I'm assuming grades have been issued. Changing a true/false question will result in a whole bunch of additional passers, not a happy result for the Joint Board. (I'm assuming they will have to give all the no's a better score - they could have used the same logic as our colleague and/or they will all appeal)".

I actually have issues with a couple of questions, one a five pointer and this a one pointer. This is 1 of 100. I doubt it would mean pass or fail for anybody but me. A five pointer would affect many people (not that either consideration should affect the committee's decision).

Maybe some day I'll post the 5 pointer just for the fun of it, but not if I don't get this one changed because this is a matter of principle; my answer was correct on two counts and there is no other correct answer. On the other one I feel there are two correct answers but I can understand a differing opinion on that one

[tymesup]

Grant that 1/100 isn't a big jump, there must be folks on the cusp. I got a 5 on Exam M where I'm pretty sure one more question (out of 40?) would have pushed me over. There was a guy on one of the other boards who got 5 or 6 consecutive 5's - he said, they should determine the passing grade by just adding one to my score.

Have you run this question past Rick G?

[AndyH]

Indirectly through another message board. Rick hasn't commented yet, nor has Dave Farber, who's study guide I got my answer from! The exam was released so late that they are into the next test cycle, another aggravation many of us have had to deal with. There is another board where people share their scores and grades and nobody else has said they need only 1 point, although a lot of people are 3-4 points away.

I "missed" by one point, not one question. One question can be 1-5 points, so I missed by 20% of one question, if that helps explain how it feels. (But I don't think I actually missed at all). And since I did not finish I guessed at a few and I got none of my guesses right - that defies the odds - Ugghh.

[AndyH]

I just got one of the opinions I was waiting for. I'm a go (for an appeal) now, although I still have inquiries pending in many places, including the IRS. Thanks to everybody who commented and put up with my ranting.

http://www.actuarialoutpost.com/actuarial_...mp;postcount=11

[Guest Sieve]

Good work so far, Andy. Go get 'em . . .

[tymesup]

I must admit to being shocked at my inability to convince you'all. Please look at the ERISA Outline Book. It is copyrighted so I cannot copy and paste.

Sieve's quote:

Again, here's the words at the start of the Rev. Rul.'s conclusion: "The freezing of accruals under a qualified retirement plan, so that a partial termination of the plan occurs, does not constitute a plan termination for purposes of determining whether service for the plan sponsor after the plan was established may be disregarded toward vesting if accruals resume under the plan. Accordingly, all years of service for the plan sponsor following the establishment of the previously frozen plan must be taken into account for purposes of vesting."

Accordingly, all years of service for the plan sponsor following the establishment of the previously frozen plan must be taken into account for purposes of vesting. If you read the full revenue ruling, all this says is that you must credit vesting in the frozen plan for all years if you unfreeze it. It says nothing about crediting of vesting service in a new plan, unless yuo later merge the two, in which case all prior service must of course be credited.

For purposes of a new plan, there is no predecessor plan because the first plan was not terminated and such service may be disregarded for vesting in the new plan.

Note that 2003-65 is on the current syllabus and, I assume, was on for May 2008.

Here is the last sentence of the HOLDING:

If, instead, the accruals

are earned under a new plan maintained

by the same employer and the new plan is

merged with the frozen plan, then this holding

also applies, so that, after the merger,

service after the frozen plan was established

must be taken into account for purposes

of vesting in any benefit accruals under

the new plan.

Note the Holding says service after the frozen plan was established must be counted under the NEW plan.

My interpretation of 2003-65 is this:

1 - If you terminate a plan, you don't have to count years after a termination

2 - If you freeze a plan, a partial termination has occurred - a different animal than a termination

3 - Therefore, you still have to count years after the freeze/partial termination

The Revenue Ruling could have addressed the test scenario - frozen accrual, new plan, no merger. Instead, they chose to save paper, just as they are now doing with regulations under PPA.

AndyH, I think your appeal will be denied, but there's little harm in trying, sure beats studying again. Good luck.

[Andy the Actuary]

Maybe someone should write a book entitled, "Two Actuaries, Three Four Opinions." Try for five?

[Guest Sieve]

(1) FWIW, I'm a convert (I think). I now believe (I think) that the Rev. Rul. stands for what AndyH says it does, and the test's answer was incorrect. (Doesn't mean the rule makes sense. Doesn't mean the appeal will be successful . . . )

(2) The rule of the Rev. Rul & the regs doesn't seem to make any sense (I think).

(3) We are all pretty intellingent people (I think), and yet we can't even agree what the Rev. Rul. says. Must be the author's fault.

(4) Tymesup -- as to your point #3, that's correct, but, according to the Rev Rul, only if the plan is unfrozen. I don't think it stands for the proposition that a new plan has to credit that service, and the reason is because the old plan was not termianted. (Subterfuge might be a different story--I think.)

(5) AndyH -- do you know if they'll give an explanation of the answer, or will they just accept or deny your appeal?

[AndyH]

(Addressed to tymesup before I saw the last two posts)

Hmm. Just when I though we were unanimous.

tymesup, I don't see how your 3 can be derived from 1 and 2.

Here is what is happening: People are reading the HOLDING without looking at the ISSUE it is addressing, which is making the quotes out of context. The HOLDING is addressing the ISSUE, not the fact pattern in the Exam question.

Save paper? No, different question.

Also, just found out that our legal counsel feels that the Revenue Ruling is completely irrelevant to the question and agrees with me. Add that to three actuaries in my office also agreeing with me. And I think we even convinced Sieve!. I'm very comfortable with my answer now.

It appears that Dave Farber, not surprisingly, had the best insight, that there was an attempt to test knowledge of the Revenue Ruling, but something got lost somewhere. There are multiple reasons why the answer is false.

[AndyH]

I'm confident that they're good people and will address the matter fairly.