FSCOB - Any benefit to maintaining?

[Guest jmrodrig]

Hi all,

I am hoping someone could offer some insight to this question.

I have a plan that is looking to terminate in the next few years. Plan is currently frozen. Aftap is around 85% for plan year 2008. FSCOB stands at 100,000 for 2008. The MRC for the 2008 plan year is zero.

Say the employer decides they would not like to use any of the FSCOB in the 2008 year. They just want to let it ride. Are there any benefits to this?

I understand if the actual rate of return of the plan is positive, the FSCOB for the 2009 plan year will be increased. However, is there another angle that I am missing?

Also, say under a different scenario we tell the employer the maintain the FSCOB and to contribute excess contributions for the 2008 plan year...maybe 50,000. Of course this will not add to the FSCOB, but could be elected to be added to the PFB. Or they can just toss the 50,000 excess into the assets.

Good idea, bad idea? I am not very sure.

Help greatly appreciated.

[david rigby]

The 50K goes into the assets, no matter what you do with the COB and/or PB.

The "angles" are numerous. Many actuaries (me among them) will say, "Keep your balance(s) as long as you can, until you are better off to use and/or waive", but that is not a unanimous opinion.

In this case, the big picture is that the plan is underfunded. Therefore, the plan needs cash from some source. BTW, an AFTAP of 85% is overstated if you are talking about plan termination liability.