Time for determination?

[Guest pensioneer]

Hi everyone,

I've been searching the posts and couldn't find anything that quite answered these two questions, so any help from the experts here would be greatly appreciated.

#1 - I have a single employer, small DB plan which, before PPA, defined the applicable interest rate as the 30-treasury rate on the first day of the plan year, with the stability period being the plan year.

Can anyone tell me if applying 417(e)(3) rates for lump sum distributions in 2009 (no actual amendment adopted yet) changes the "time for determination" of the applicable interest rate and therefore we need to meet the 411(d)(6) requirements by offering "better of" distributions as described in 2008-30?

#2 - We have a certified AFTAP this year of 79%. Can that be recalculated or re-certified to get it above 80% so that full lumps sums can be distributed this year?

much appreciated

[Andy the Actuary]

1. No, so long as same lookback month and stability period, though segment rates became effective for 2008 plan year.

2. Yes, though 79% AFTAP would affect distributions made before (additional contributions made and) recertification.

[Guest pensioneer]

1. No, so long as same lookback month and stability period, though segment rates became effective for 2008 plan year.

Wouldn't the new 417(e)(3) change the stability period and lookback in this case by default, since it says that the rates are determined by using the segment rates for the "month before the date of the distribution," whereas the plan ties the rate to the beginning of the plan year.

BTW, I can't find a specific lookback period defined in the plan. It just says rate is based upon the treasury rate on the first day of plan year. Any idea how that would work?

[Andy the Actuary]

1. No, so long as same lookback month and stability period, though segment rates became effective for 2008 plan year.

Wouldn't the new 417(e)(3) change the stability period and lookback in this case by default, since it says that the rates are determined by using the segment rates for the "month before the date of the distribution," whereas the plan ties the rate to the beginning of the plan year.

BTW, I can't find a specific lookback period defined in the plan. It just says rate is based upon the treasury rate on the first day of plan year. Any idea how that would work?

(1) Cannot put my fingers on it but there is written word regarding stability period/lookback month is same under PPA

(2) Your plan does not employ a lookback, which makes it inconvenient to determine lump sums for benefits payable during 1st day of plan year. For convenience and projection, the 5th preceding month (August for a calendar year plan) is suggested.

[Guest pensioneer]

Thanks Andy - I have been looking and have not found anything that mentions retaining the lookback and/or stability period. It seemed to me that the new 417(e)(3) states that the stability period is now one month with a one month lookback. So when I read Issue 3 in 2007-67, where it says "if the amendment changes the time for determining the interest rate, the requirements of § 1.417(e)-1(d)(10)(ii) must be satisfied", it got me thinking that the greater of calc. must be offered.

If the plan doc is not specific about the lookback, does that mean we can choose any of the preceding 5 months now?

[Andy the Actuary]

Thanks Andy - I have been looking and have not found anything that mentions retaining the lookback and/or stability period. It seemed to me that the new 417(e)(3) states that the stability period is now one month with a one month lookback. So when I read Issue 3 in 2007-67, where it says "if the amendment changes the time for determining the interest rate, the requirements of § 1.417(e)-1(d)(10)(ii) must be satisfied", it got me thinking that the greater of calc. must be offered.

If the plan doc is not specific about the lookback, does that mean we can choose any of the preceding 5 months now?

I found it -- IRS Rev. Rule 2007-67 indicates "the lookback months and stability periods established under the existing regulations under IRC §417(e) continue to apply for plan years beginning on or after January 1, 2008."

Your plan was specific about the month used to determine the rate. You use the 417(e) segment rates as of the first day of the plan year. You could amend the plan to use any of the preceding 5 months but would have to employ the transition grandfather as before.

[Guest pensioneer]

Thanks Andy - I have been looking and have not found anything that mentions retaining the lookback and/or stability period. 2007-67 indicates that stability and lookback rules still apply, but I don't read that meaning that the same periods apply.

It seemed to me that the new 417(e)(3) states that the stability period is now one month with a one month lookback. So when I read Issue 3 in 2007-67, where it says "if the amendment changes the time for determining the interest rate, the requirements of § 1.417(e)-1(d)(10)(ii) must be satisfied", it got me thinking that the greater of calc. must be offered.

If the plan doc is not specific about the lookback, does that mean we can choose any of the preceding 5 months now?

[Andy the Actuary]

I'm sorry. I can't assist any further.

[Guest pensioneer]

I'm sorry. I can't assist any further.

Sorry, I some how posted twice, before I saw your latest answer. I see now, I wasn't sure that part of 2007-67 meant.

thanks

[Andy the Actuary]

I'm sorry. I can't assist any further.

Sorry, I some how posted twice, before I saw your latest answer. I see now, I wasn't sure that part of 2007-67 meant.

thanks

see attached

Lump_Sum_Intrerest_Rates.pdf

[Guest pensioneer]

Excellent -thanks! that clarifies it better.

Now I am only a little concerned about the lookback month itself, as it seems we have used a two month lookback in previous distributions, but as you pointed out, the plan seems to say the lookback month should be the plan start month. Is that going to mean we have to grandfather the transition?

Uhhg, this stuff is a hurts my head.