Here's My Story -- It's Sad But True

[Andy the Actuary]

Have an almost frozen DB plan. About 110 participants, most inactive. No lump sums, not even if <=$5,000. Only one (union) participant is still earning benefits -- about $12/month in 2013.

At 2012, we had under MAP-21:

FT 1,610,000

Assets 1,700,000

FSCOB 835,000

MRC=15,900

FTAP= 45%

AFTAP=105%

Assets yielded about 10% during 2012 and there were no unusual demographic changes.

At 2013, we have:

FT 1,755,000*

Assets 1,695,000

FSCOB 900,000

MRC=138,000

FTAP=45%

AFTAP=45%

Consequently, must burn about 260,000 of FSCOB to get AFTAP to 60% so that one participant can earn $12/month.

Assets would have had to yield about 12.65% just to avoid the burn of the FSCOB (i.e., maintain AFTAP at 100%). Only hope is that employee still earning benefits quits. May I be retired as interest rates decline and assets suffer a loss. FSCOB will disappear real fast and contributions will skyrocket.

In short, this example illustrates how Congress has eroded the efficiency of DB plans. And the Big Guys at the EA meeting are so optimistic about DB plans!

*FT using 2011 assumptions=1,640,000

[FAPInJax]

Not sure about Congress BUT a perfect example of how MAP was not the answer - just a temporary bandaid as the range expands.

It does appear as though the client did not make a contribution and had quite a bit of benefit payments based on your facts (10% earnings but the assets go down AND the balance increases with earnings but then decreases by the prior year minimum). Possibly they should have considered contributing at least the benefit payments <GG>.

[Andy the Actuary]

FPJAX: For years, your suggestion is precisely how the sponsor funded the plan for years. In fact, that's how they built up a significant FSCOB. Then, they sold to an Asian company and have funded on a minimum basis ever since. While I intend to bring up the subject, I don't anticipate they will be in the mood to fund even a $60,000 contribution to increase the AFTAP to 100%.

[GMK]

As long as they don't give you the runaround or sue.

(apologies. Saw the title, and it's near the end of a long day.)

[Andy the Actuary]

And "I Wonder Why" "No One Knows" "Where or When." Just remember "Be Careful of Stones That You Throw" and "Don't Pity Me" "When You Wish Upon A Star" "In the Still of the Night" because I'm nothing more than just a "Wanderer." That would be "Majestic."