Ethical Dilemma

[LIBOR]

If a takeover DB plan is not safe-harbor and has never passed the general test, should the enrolled actuary sign the Schedule B? Or even before it gets to that point - should a valuation be done before the plan defects are corrected?

I'm just curious how other administrators or enrolled actuaries would handle this situation.

And also let's assume the prior actuary is deceased.

A related question would be - If this plan were ineligible for a favorable determination letter, would it nevertheless be appropriate for the actuary to sign the Schedule B; after all, the statement above the signature line on the B doesn't require the plan to be "qualified" ???

Any thoughts are appreciated !!!!!!!!!!!!!

[david rigby]

Not sure I understand all you are asking.

I would have a hard time signing the Schedule B where the valuation was completed by someone else in a different firm.

If you completed the valuation, signing the B does not (at least I hope) mean that you are stating the plan is qualified. Looks to me like this is an issue of qualification first, valuation second.

Any other thoughts?

[LIBOR]

I'm not sure I have a clear picture of your answer; is your opinion that an actuary can ethically sign a Schedule B for a non-qualified plan since the legitimacy of the B is independent of qualification or are you saying the plan needs to be qualified before a B is signed.

[david rigby]

How do you know the plan is not qualified? Is there a determination letter?

When you say that the plan is "not safe-harbor and has never passed the general test", do you mean it has failed the safe harbor test, or do you mean it has never been tested?

If the actuary believes the plan is not qualified, then it's time to get the lawyers involved.

[AndyH]

My thoughts echo pax's. How do you know it's not qualified? I'd tell the client the plan needs to be tested, and that there's no guaranty of passing. Get the test fee committed to. Then test it. If it doesn't pass, require the client to engage an ERISA attorney, and have the plan amended to a safe harbor design right away, with a benefit increase, not a decrease, to the extent needed to have it pass the safe harbor standards.

Almost anything of this nature can be corrected through the IRS's correction program without disqualification, so I don't think you can reach the conclusion that it's not qualified.

I've run into a number of these situations (too many for my preference).

I'm not an actuary, so I can't comment on the Schedule B question with authority, but having said that, I don't know of any reason why you couldn't sign a Schedule B if these steps are being taken.