Funding Election Form Requirement

[Young Curmudgeon]

For 2010, was the election form required? I have one actuary saying it was optional and elections weren't required (he didn't attach them) and another saying it was required and we were out of compliance on the plans for which it wasn't completed. I can't find anything definitive. Was it required for 2010?

[Andy the Actuary]

Please describe what you mean by "funding election form"

a.t.a aka "old curmudgeon"

[Young Curmudgeon]

Please describe what you mean by "funding election form"

a.t.a aka "old curmudgeon"

It's an election form produced by Datair.

Title: Funding Election Form 430(f/h)

Then, six numbered elections regarding the following.

1. Applicable Month (Sch SB line 21b) - 1st, 2nd, 3rd, or 4th mont prior

2. Interest Rates (Sch SB line 21a) - segment rates or yield curve

3. Plan Assets (Sch B line 2b) - fair market versus averag

4. Voluntary Reduction of Carryover and Prefunding Balance (Sch SB line 12) - reduce or not reduce

5. Apply Reduction to Minimum Required Contribution (Sch SB line 35) - use of the carryover or prefunding balance for contribution

6. Increase Prefunding Balance for Next Plan Year - what amount if any is to be used to increase the PFB for the following year

[frizzyguy]

I think 1, 2 and 3 should have been elected already so you shouldn't need to do it again if not already done for 2008. That being said, I think it couldn't hurt to do them every year. We have them on our election form because it's easy to do. If you were changing them then you would need a new election. I don't know much about that though, we have a lot of clients and we have never had one change these assumptions.

Without an election for 2008 and subsequent years, the IRS has defaults. I believe they are a 0 month look back on segment rates and assets at market value. I have seen three audits where this form was not completed and non-defaults were used and the IRS has been very lenient and allowed them.

Numbers 4, 5 and 6 are really only needed if you are reducing the carryover, using the COB or PFB, or having excess contributions increase the PFB. Those same three audits also had issues with these. All three were "forgiven" and they allowed us to use them. I was told that for 4, 5 and 6 that there are many instances of this not being done and for 2008 and 2009 (those were the years under audit) that the IRS was going to be forgiving but going forward that the IRS was going to start taking a more firm stance.

It sounds like your situation is a takeover and the new actuary is saying they are non-compliant and that the old actuary is saying they are compliant. Have fun with that.