In-Service Distribution

[Dougsbpc]

A small DB plan covers the company owner and 5 employees. Plan assets are invested very aggressively (not our recommendation). In early 2008 the plan had assets of $1.8m and liabilities of $1.4m. As of January 2009 assets of $200k and liabilities of $1.5m. As of today assets of $1.8m and liabilities of just under $1.7m.

The owner has reached NRA and we would like him to be able to take an in-service distribution of his entire benefit. This way he can satisfy his gambling addiction with his benefits and not affect employees.

I believe any reasonable method can be used in valuing benefits for determining whether plan assets will exceed remaining benefits by more than 110%. How about valuing benefits using funding segment rates (yes those same rates that make new DB plan benefits exceed assets by 20%)?

[Andy the Actuary]

Have been involved with Plans that have received d-letter where plan has been amended to replace "current liabilities" with "funding target as defined in IRC 430(d)(1)" in the 110% provision and have administered in-service distributions under this provision. This ties the test to the FT used for 430/436 and should not be construed that you can value FT under different assumptions at a determination date other than the actuarial valuation date.

[AndyH]

Agree.