Frozen DB Plan Question

[Stash026]

This may be a little too general of a question, but I got handed a DB Plan that was frozen 1/1/15 and don't have much experience with them. Basically, they froze the benefits as of 1/1/15 and already had a $60,000 credit balance on the Schedule B (after using a portion of it to lower the required contribution in '14).

They are now asking me what, if any, is the required contribution for '15.

Is there an easy way to calculate this or is the question too abstract?

Thanks in advance for any help/guidance!

[Mike Preston]

Are you an actuary? If not, find one.

[Lou S.]

This may be a little too general of a question, but I got handed a DB Plan that was frozen 1/1/15 and don't have much experience with them. Basically, they froze the benefits as of 1/1/15 and already had a $60,000 credit balance on the Schedule B (after using a portion of it to lower the required contribution in '14).

They are now asking me what, if any, is the required contribution for '15.

Is there an easy way to calculate this or is the question too abstract?

Thanks in advance for any help/guidance!

You might want to talk to the actuary who signed the 2014 SB, especially if he's still going to be signing the 2015 SB.

[My 2 cents]

If one freezes a defined contribution plan, there is no further need in general to make any further contributions. This is NOT the case for a defined benefit plan!

Your question brings to mind the following: Someone asks you (presuming that you are not a medical professional) what to do about another person running a fever of 103.5 degrees. What is missing is both the necessary expertise and credentials to provide any useful advice.

Whoever is/was the enrolled actuary for the 2015 plan year (and someone must be the plan's enrolled actuary) is the person who can say what the required contribution is for 2015. The fact that the plan is frozen certainly does not eliminate the need to continue making contributions (even if they may be at a lower level)! Knowing nothing more than (a) the plan froze 1/1/15 and (b) after using some of the credit balance for 2014, $60,000 was the remaining credit balance as of 1/1/14, the minimum cash contribution for 2015 could range from $0 (if, for example, the minimum required contribution for 2015 is less than the accumulated value as of 2015 of last year's credit balance - which could be more or less than $60,000 - and the sponsor elects to apply it for the 2015 minimum contribution) to $10,000,000 (or more!).

The 2015 contribution will consist of the Target Normal Cost (which, given the freeze, is likely to equal the anticipated expenses to be paid from the fund in 2015) plus any amounts due for shortfall amortizations.

Really and truly, only the plan's enrolled actuary can answer such a question! Has an actuarial valuation report for the plan year beginning January 1, 2015 been prepared? You may be able to get something of an idea from that. If not, there is no possible alternative but to obtain one from the plan's enrolled actuary.