New MAP-21 DB/WIN Features

Size: px

Start display at page:

Download "New MAP-21 DB/WIN Features"

Derek Underwood
5 years ago
Views:

1 New DB/WIN Features By Aaron Venouziou, EA, MAAA, MSPA, ACOPA President, DATAIR Employee Benefit Systems, Inc.

2 On July 6, 2012, President Obama signed the Moving Ahead for Progress in the 21st Century Act ("") On September 11, 2012, IRS issued Notice Provides guidance on the special rules relating to pension funding stabilization for single-employer defined benefit plans made by 2

3 Provides modified segment rates based on a 25- year trailing average as of September 30 th Subjects modified segment rates to widening corridors for plan years beginning in 2012 Published rates for September 30, 2011 for use with 2012 plan years in Notice

4 Rates for Plan Years Beginning in year Average Segment Rates First Second Third Segment Segment Segment Permissible Values Within % Corridor First Second Third Segment Segment Segment

5 Where do rates apply? Rates apply only to the following: Target Normal Cost Funding Target PV of Existing Shortfall Bases Amortization Amount on New Base Effective Interest Rate Limitation on Assumed ROR when Determining Average Value of Assets 5

6 Where do rates NOT apply? Rates don t apply to the following: Maximum deductible amount under 404(o) Minimum present value (including lump sum) under 417(e)(3) Standard or alternative premium funding target for PBGC Variable-rate Premiums Amount of excess assets that can be transferred to retiree health accounts under 420 Calculation of FTAP to determine if information must be reported to PBGC under 4010 of ERISA 6

7 rates shown on Plans Assumptions Post-Ret (PL-3-2) 7

8 rates are OPTIONAL for 2012 minimum funding 8

9 rates are OPTIONAL for 2012 AFTAP 9

10 liabilities shown on Plans DB Min/Max (PL-5-1) 10

11 However, you cannotuse unadjusted rates for minimum funding and rates for AFTAP in All available options outline below: Minimum Funding Unadjusted AFTAP Unadjusted Unadjusted Sponsor Election Yes Yes No 11

12 Options for the application of rates in

13 Plans using the full yield curve do notreceive any funding relief from, BUT Change from the full yield curve to segment rates to obtain relief under with automatic approval Election must be made for the first year rates apply and signed by June 5, 2013 in order to be eligible for automatic approval Election can be made for 2012 minimum funding and delayed until 2013 for AFTAP 13

14 elections for 2012 plan year are available and required if unadjusted rates are used for both funding and AFTAP or just for AFTAP Elections must be signed by actual 2012 Form 5500 filing date or due date including extensions 14

15 15

16 Using Sample DB Plan, the chart shows the impact of using rates to lowermrc and increaseaftap percent Unadjusted Rates Rates MRC $181,607 $142,690 AFTAP 82.30% 90.00% AFTAP using rates allows for norestrictions during the periods of presumption in

17 Using Sample EOY DB Plan, the chart shows the impact of using rates to increase AFTAP Unadjusted Rates Rates 2012 AFTAP 73.74% 80.22% AFTAP using rates allows for no restrictions 17

18 End of year valuations No guidance for AFTAP with or without rates DATAIR provides the option to compute the 2012 AFTAP using the 2011 valuation results with rates based on September 30, 2011 published rates NOTE: Funding Election Form for 2012 must be manually checked if unadjusted rates are used for both minimum funding and AFTAP or just AFTAP Others indicate you cannot compute the 2012 AFTAP using the 2011 valuation results since you do not have rates as of September 30,

19 Can the AFTAP be Recertified? Certifications made after 9/30/2012: Presumed to be done with knowledge of and Notice AFTAP cannot be redone to take into account Material change and irrevocability rules apply 19

20 Can the AFTAP be Recertified? Certifications made on or before 9/30/2012: May OPT to be redone using rates by 12/31/12 Irrevocability rules do not apply 20

21 Can the AFTAP be Recertified? Certifications made on or before 9/30/2012 May OPT to be redone using rates by 12/31/12 Irrevocability rules do not apply HOWEVER You must take action Either recertify or obtain an election from the Plan Sponsor 21

22 What happens if AFTAP is recertified? Presumption rules not changed (1st of plan year and 4 th month) If AFTAP already certified before 9/30/2012, new certification may be applied using rates: Retroactivelyto the date of the original certification, or Prospectively, to the earlier of 10/01/2012, or the date of the re-certification Election required and past operations may need to be corrected if applied retroactively Deemed immaterial change* if recertified by 12/31/2012 and applied prospectively *see Notice , Q&A T-3 and T-4 22

23 Questions? 23

MAP-21 Segment Rates. Supplemental reading: Revenue Notice PBGC Technical Updates 12-1 and 12-2

MAP-21 Segment Rates. Supplemental reading: Revenue Notice PBGC Technical Updates 12-1 and 12-2 MAP-21 Segment Rates Supplemental reading: Revenue Notice 2012-61 PBGC Technical Updates 12-1 and 12-2 Determination of MAP-21 adjusted segment rates o Each of the 3 segment rates is adjusted (if necessary)