Includible Contributions and 2008/2009

[AndyH]

DB client establishes plan in 2008 and funds before 9/15 but after tax return due date.

Client intends to double up in 2009.

How is the 2009 maximum computed? Used to be the 2008 amount plus the 2009 minimum, I think. I know we have no regs.

This is a cash balance plan, so funding the 2009 minimum plus 2008 won't cover the total account balances, I am expecting.

Opinions please?

[Andy the Actuary]

Why wouldn't you calculate 2009 maximum by backing 2008 discounted contribution out of assets and then letting the chips fall where they may -- that is you'd have one asset value for 430 and 436 and another for 404? Reg 1.404(a)-14(d)(2)(i) prescribed this. Don't these regs still apply to the extent they are not superseded by PPA?

This could get to be fun if you are using average market value!!!!

[SoCalActuary]

DB client establishes plan in 2008 and funds before 9/15 but after tax return due date.

Client intends to double up in 2009.

How is the 2009 maximum computed? Used to be the 2008 amount plus the 2009 minimum, I think. I know we have no regs.

This is a cash balance plan, so funding the 2009 minimum plus 2008 won't cover the total account balances, I am expecting.

Opinions please?

Don't forget the at-risk rules for deductions. What is the probability in your best estimate that participants will terminate and take their full cash balance as a payment? You should be able to measure that under the at-risk rules as if they would take their payments at the earliest possible time.

[AndyH]

Why wouldn't you calculate 2009 maximum by backing 2008 discounted contribution out of assets and then letting the chips fall where they may -- that is you'd have one asset value for 430 and 436 and another for 404? Reg 1.404(a)-14(d)(2)(i) prescribed this. Don't these regs still apply to the extent they are not superseded by PPA?

This could get to be fun if you are using average market value!!!!

Agree this is possible but we don't know the status, except that it needs to be updated. Also, (d)(1) says the same funding method must be used for 412 and 404, whatever that means since (d)(2) implies that this is an aggregate method calculation.

Thanks for the comments.

[AndyH]

DB client establishes plan in 2008 and funds before 9/15 but after tax return due date.

Client intends to double up in 2009.

How is the 2009 maximum computed? Used to be the 2008 amount plus the 2009 minimum, I think. I know we have no regs.

This is a cash balance plan, so funding the 2009 minimum plus 2008 won't cover the total account balances, I am expecting.

Opinions please?

Don't forget the at-risk rules for deductions. What is the probability in your best estimate that participants will terminate and take their full cash balance as a payment? You should be able to measure that under the at-risk rules as if they would take their payments at the earliest possible time.

This approach would work if we ignored the first year contribution (i.e. had no asset for 404 purposes). Otherwise, wouldn't the 404 limit merely be the account balances less the undeducted first year contribution? What would be the justification for using no asset for 404 purposes, the "old rules"? Perhaps the principle of the regulation cited by Andy? Thanks for the feedback.