So Where's the Protection?

[Andy the Actuary]

Pre-PPA, a plan had routinely a minimum contribution requirement in the $100K area. In 2008, Plan dumped in about 70K extra 2007 to get 2008 AFTAP to 80%. In 2008, PPA contribution was about $65K, which employer made. Then, when WRERA came along, contribution was revised to about $48K. So, Plan had excess contributions that were cheerfully added to PFB. Since 2008 funded at least 80%, PFB will be used to reduce 2009 minimum even though assets tanked in 2008. Use of PFBh will be reduce minimum to about $50K because of asset smoothing and switching the segment rate basis.

What has happened? My fees have increased, the amount of paper has increased, the confusion has increased, but contributions have decreased at a time when the intention of PPA was for them to be stepped up.

But there is some comfort that the valuation process now reflects continuallly up-to-date mortality tables -- that is, provided the general health of the participants follows the government prescribed one-size-fits all law of mortality.

[dmb]

Pre-PPA, a plan had routinely a minimum contribution requirement in the $100K area. In 2008, Plan dumped in about 70K extra 2007 to get 2008 AFTAP to 80%. In 2008, PPA contribution was about $65K, which employer made. Then, when WRERA came along, contribution was revised to about $48K. So, Plan had excess contributions that were cheerfully added to PFB. Since 2008 funded at least 80%, PFB will be used to reduce 2009 minimum even though assets tanked in 2008. Use of PFBh will be reduce minimum to about $50K because of asset smoothing and switching the segment rate basis.

What has happened? My fees have increased, the amount of paper has increased, the confusion has increased, but contributions have decreased at a time when the intention of PPA was for them to be stepped up.

But there is some comfort that the valuation process now reflects continuallly up-to-date mortality tables -- that is, provided the general health of the participants follows the government prescribed one-size-fits all law of mortality.

That sounds about right. Have you heard any talk of possibly making credit balance elections revocable for 2008 and maybe even 2009 due to relief?? Some clients have made credit balance elections for 2008 when thanks to WRERA and subsequent relief and guidance they wouldn't have needed to make those elections.

[Blinky the 3-eyed Fish]

I bet larger plans who had assumptions routinely above the segment rates are seeing higher contributions. For my small plans, the minimum contributions are generally smaller. I see this as a fortunate results, although probably not even a thought when PPA was drafted.

Dmb, why did you have this problem? I assume you are talking about only voluntary FSCB waivers. They had until the end of the year to make the waiver yet WRERA came out before year-end. I know we were in a holding pattern until the last minute on any waivers.

[dmb]

[quote name=Dmb, why did you have this problem? I assume you are talking about only voluntary FSCB waivers. They had until the end of the year to make the waiver yet WRERA came out before year-end. I know we were in a holding pattern until the last minute on any waivers.

I'm not talking about waiving FSCB, i'm talking about applying the FSCB to mininum funding, more specific to meeting quarterly contribution requirements for 2008 plan year. Plan with a large FSCB at 1/1/08 and expected large funding requirement applied necessary amount of FSCB to meet quarterly contribution requirement. The thinking was based on their budgeted cash contribution, the entire FSCB would be applied plus the cash contributions to meet funding requirement for 2008, however, with WRERA and subsequent relief, there will be excess contributions but since they already applied FSCB, the excess will not be able to be added to PFB.