Increasing Benefits to reduce contribution

[Guest RBlaine]

In year's past we could make post PY amendments (before 2.5 months) to lower a contribution if we were using IA.

Now that ER's are now coming to the realization they can't make their 2008 contributions, they don't understand why they can't still make those same elections.

What can be done (if the current formula is low enough) is to amend the plan to increase benefits for service through 12/31/2007 to create a funding shortfall and reduce the TNC for 2008 and freeze the plan. We don't reduce the AB below what it is now.

One of the 436 restrictions is that, if the AFTAP is <80%, benefits can't be increased. This is also true if the AFTAP would be < 80% taking into account the benefit increase. However, under 436(g) this limitation does not apply if the plan is less than 5 plan years.

Therefore, for a plan with >100% AFTAP at 01/01/2008, it seems as if there is no reason that the employer couldn't adopt an amendment to create a 75% FT at 01/01/2008. Anyone disagree?

[AndyH]

Is a retroactive amendment permitted to be recognized for valuation purposes under PPA?

[Guest RBlaine]

Is a retroactive amendment permitted to be recognized for valuation purposes under PPA?

The section changed from 412©(8) to 412(d)(2)

[iRC §412] `(d) Miscellaneous Rules-

`(1) CHANGE IN METHOD OR YEAR- If the funding method, the valuation date, or a plan year for a plan is changed, the change shall take effect only if approved by the Secretary.

`(2) CERTAIN RETROACTIVE PLAN AMENDMENTS- For purposes of this section, any amendment applying to a plan year which--

`(A) is adopted after the close of such plan year but no later than 2 1/2 months after the close of the plan year (or, in the case of a multiemployer plan, no later than 2 years after the close of such plan year),

`(B) does not reduce the accrued benefit of any participant determined as of the beginning of the first plan year to which the amendment applies, and

`© does not reduce the accrued benefit of any participant determined as of the time of adoption except to the extent required by the circumstances,

shall, at the election of the plan administrator, be deemed to have been made on the first day of such plan year. No amendment described in this paragraph which reduces the accrued benefits of any participant shall take effect unless the plan administrator files a notice with the Secretary notifying him of such amendment and the Secretary has approved such amendment, or within 90 days after the date on which such notice was filed, failed to disapprove such amendment. No amendment described in this subsection shall be approved by the Secretary unless the Secretary determines that such amendment is necessary because of a temporary substantial business hardship (as determined under subsection ©(2)) or a substantial business hardship (as so determined) in the case of a multiemployer plan and that a waiver under subsection © (or, in the case of a multiemployer plan, any extension of the amortization period under section 431(d)) is unavailable or inadequate.

[Andy the Actuary]

shall, at the election of the plan administrator, be deemed to have been made on the first day of such plan year.

Oh goody -- another election!

[Guest RBlaine]

shall, at the election of the plan administrator, be deemed to have been made on the first day of such plan year.

Oh goody -- another election!

The schedule R has the checkbox on whether this election is made, but what do you do for an EZ filer that doesn't have a schedule R? Or have you always use a seperately noted election?