Multiple DB Plans

[Guest naveen]

A former client has a medical practice, which terminated their defined benefit plan (sole participant) in 2006, distributed lump sum benefits and filed final forms for 2007.

Upon advice from another TPA, the business sponsored another defined benefit plan with an effective date of 01/01/2006. This plan covered the doctor and some other newly hired employees. However, the actuary of new plan did not consider the benefits accrued by the owner in the prior plan for their valuation. Maybe, the new actuary was not informed of the prior DB plan. Now, this client wants to come back to our firm.

I am at my wit's end as to how to deal with this situation and seek advice as to our approach with such a situation.

[AndyH]

Are there any issues such as 415 or 404? Maintaining two plans by itself doesn't necessarily violoate anything that I can think of, but there are many things to watch for such as vesting, integration, and big picture things like the nondiscriminatory timing of amendments and past service grants.

Having said that, I'm not sure many people would want this type of client.

[Andy the Actuary]

A former client has a medical practice, which terminated their defined benefit plan (sole participant) in 2006, distributed lump sum benefits and filed final forms for 2007.

Upon advice from another TPA, the business sponsored another defined benefit plan with an effective date of 01/01/2006. This plan covered the doctor and some other newly hired employees. However, the actuary of new plan did not consider the benefits accrued by the owner in the prior plan for their valuation. Maybe, the new actuary was not informed of the prior DB plan. Now, this client wants to come back to our firm.

I am at my wit's end as to how to deal with this situation and seek advice as to our approach with such a situation.

Would you please be more specific as to your question. It's unclear (at least to me) whether your question is technical, ethical, business, etc.

[SoCalActuary]

A former client has a medical practice, which terminated their defined benefit plan (sole participant) in 2006, distributed lump sum benefits and filed final forms for 2007.

Upon advice from another TPA, the business sponsored another defined benefit plan with an effective date of 01/01/2006. This plan covered the doctor and some other newly hired employees. However, the actuary of new plan did not consider the benefits accrued by the owner in the prior plan for their valuation. Maybe, the new actuary was not informed of the prior DB plan. Now, this client wants to come back to our firm.

I am at my wit's end as to how to deal with this situation and seek advice as to our approach with such a situation.

It is possible that the client did not give full disclosure of the prior plan information, and highly possible that the new actuary did not research any prior plans of the same employer. That may be a valid reason to leave that firm on the basis of careless or negligent practice.

More likely, they did not get along well.

Why do you want them back? <insert snarky comment about tiger & elin> Is it worth it?

You need to disclose clearly the extent of any 415 limit violations that may have occurred, and to advise if there are any other problems you see, but you need your facts straight. I would look at the time needed to analyse the issues and charge my normal $0.50 hourly fee <grin> for writing up those problems. If the client won't pay for that analysis, then I won't take them back.