Funding T-H DB plans

[Guest meggie]

I read through the discussion relative to funding for projected top heavy benefits unde a DB plan.(6/8/2000)

I agree with the consensus; however, if discovery occurred 2 years later that a plan should have incorporated the top heavy minimum in its funding, is it absolutely necessary to assume the plan will remain top heavy for purposes of reworking the MFSA or can the MFSA for those missed years be recomputed taking into account the minimum accrued? (I know, in retrospect, this assumption doesn't make sense; however, if it were 2 years earlier, could that have been the assumption?) Is it purely an assumption as to whether or not to project the minimum T-H benefit for cost purposes?

The plan sponsor failed to provide complete data; that is the reason why we are going back 2 years to the date that T-H should have been reflected in costs.

[rcline46]

The only thing important is the BENEFIT. That must be fixed back to whenever. Funding? its all assumptions with limits on the up side. If you were into FFL before discovering TH, then the FFL would / could change (OBRA FFL most likely). I would not go back to fix funding, let it fix 'naturally' by having the correct current benefits.

Projecting TH is an assumption. Do as you please.

[david rigby]

"Projecting TH is an assumption. Do as you please."

I would be careful with this.

Assumptions should be reasonable, not as you please. However, in most situations, the top-heavy status won't change, at least not much in any one year. Usually, the most reasonable assumption is that the plan will remain top-heavy (or not top-heavy) if that is its current status.

[rcline46]

Always be careful, but...

If the retirement benefit will be more that the TH benefit, the most you will do raise the CLAB FFL slightly at the end of the year (next year will bump up automatically). If you are in FFL, the cost will rise a little. Changes in GATT lump sum values will be more dramatic, as will compensation changes.

Also, we do TH on participation and participation comps while normal benefit is on real comps and service, so the difference isn't that great.

[Guest]

I agree with "rcline46". Just make sure the benefit is correct and don't worry about the past funding. I would however assume the plan stays TH for funding for future funding, but I doubt that will make any material difference in your cost unless your effected by the CL FFL.