Multiemployer Funding 431

Question 1

What is the actuarial balance equation for Multiemployer Plans? UAL =

Answer 1

O/S Bases - Credit Balance + Debit Balance - ARA

Question 2

How is the Actuarial Equation of Balance different for The Aggregate method?

Answer 2

No UAL, so no ARA

Question 3

What are the only bases that could exist under the aggregate cost method?

Answer 3

Funding Waiver Bases

Question 4

For multiemployer plans, the minimum required contributions are the difference between the charges and the credits. What are the charges and credits?

Answer 4

Charges:

• Normal Cost
• Amortization Charge
• Debit Balance

Credits:

• Contributions
• Full Funding Credit
• Credit Balance
• Waived funding deficiency

Question 5

For multiemployer plans, when is the minimum required contribution calculated as of? When is the last date to pay a contribution?

Answer 5

Always the last day of the year.

Same as single employers - 8.5 months after end of plan year

Question 6

For multiemployer plans, what is the excise tax on missed contributions and when can it be waived?

Answer 6

It is 5% and is waived if the plan is in endagerd or critical status.

Question 7

How is the ARA rolled forward?

Answer 7

It is multiplied by (1+i)

Question 8

What is the amortization period for the bases for multiemployers?

Answer 8

1. 15 years always for Gain/Loss Bases and 10 years for change in funding method
2. Else, 15 years after 2008 and 30 years before 2008
   
   1. IAL before 1/2/1974 is 40 years

Question 9

For multiemployer plans, what is the initial accrued liability base if the plan does not credit past service?

Answer 9

$0

Question 10

For multiemployer plans, when is the initial accrued liability base 0 if the plan credits past service? I.e. which cost methods?

Answer 10

• Individual Level Premium
• The Aggregate
• Aggregate Individual

Question 11

For multiemployer plans, when is the plan amendment amortized over the length of benefits paid?

Answer 11

When benefits are not paid as a life annuity and are paid on a period shorter than 15 years.

Question 12

How would a multiemployer plan extend their amortization period by 5 years?

Answer 12

Automatic approval if meet:

1. Without extension, expect funding deficiency in current or next 9 plan years
2. Sponsor has adopted a plan to improve the plan’s “funding status”
3. Plan will have sufficient assets to pay benefits plus expenditures over extension period
4. Sponsor has provided advance notice under 431(d)(3) (Same as waiver for single employer)

Question 13

How would a multiemployer plan extend their amortization period by 10 years?

Answer 13

Submit application - not automatic approval

1. Extension provides adequate funding for plan
2. Failure to grant extension results in risk of plan termination/reduction in benefit levels or employee compensation
3. Failure to grant extension is adverse to interests of plan participants

Question 14

How do you reamortize a multiemployer base using a new interest rate?

Answer 14

Determine the outstanding amount using the current interest rate and then amortize the outstanding amount over the same number of years using the new interest rate.

Question 15

If contributions for multiemployer plans are made after the plan year ends, how are they adjusted with interest to be added to the MRC calculation?

Answer 15

They are not adjusted.

Question 16

What adjustment needs to be made for withdrawal liability payments in the balance equation?

Answer 16

No special adjustment - treated as a normal contribution.

Question 17

Do you use the ERISA FFL or the RPA ‘94 FFL?

Answer 17

Whichever is larger.

Question 18

ERISA Full Funding Limit Definition

Answer 18

(1+i)*(accrued liability + normal cost - [Min(AVA, MVA),
reduced by credit balance])

1. Cannot be negative

Question 19

How are credit balances and debit balances reflected in the ERISA Full Funding Limit.

Answer 19

• Credit balances are used to reduce the assets
• Treat debit balance as zero credit balance

Question 20

Which cost method do you use for the ERISA FFL?

Answer 20

1. Use the valuation cost method
2. If valuation cost method is aggregate type cost method, then use the Entry Age Normal method

Question 21

Which benefits are included in the AAL for the ERISA FFL?

Answer 21

Accrued liability only includes benefits that are non-forfeitable upon plan termination

Question 22

FFL RPA ‘94 Definition

Answer 22

90%*[(1+i^CL)(NC^CL+AL^CL) - BP(1 + i^CL/2)] - [(1+i)(AVA) - BP (1 + i/2)]

1. i^CL, NC^CL, AL^CL are based on current liability interest rate
2. Assets are always adjusted with interest at valuation rate

Question 23

Full Funding Limit Credit Definition

Answer 23

FFL - Accumulated Funding Deficiency

Question 24

If a plan gets the full funding credit, what also happens?

Answer 24

The bases are wiped out Next Year.

Question 25

In the year after a plan gets the full funding credit, all the bases are waived. How are bases calculated in the next year?

Answer 25

Force the UAL = Debit Balance - Credit Balance + O/S Bases - ARA

Amortize the O/S Base over 15 years.

Question 26

For multiemployer plans, what is the limiting corridor on the AVA?

Answer 26

• Lesser of 85% AMV and 80% MVA
• Greater of 115% AMV and 120% MVA

Question 27

For multiemployer plans, what is the average value method of determining the AVA?

Answer 27

Adjust prior assets values (not to exceed prior 5) with all items except the unrealized and realized gain/losses.

Question 28

For multiemployer plans, what is the smoothed value method of determining the AVA?

Answer 28

Same as the single employer AVA smoothing method, except you can use up to 5 years.

Question 29

What is the interest rate for current liability under RPA ‘94?

Answer 29

• Based on insurance company settlement rates
• Permissible range as 90% to 105% of the 4 year average yield on 30 year Treasury securities

Question 30

What is the interest/mortality for ERISA current liability?

Answer 30

Valuation Assumptions

Question 31

When can the valuation be for multiemployer plans?

Answer 31

It can be any date within the current plan year or up to one month prior.

Can use any val date within prior year if AVA > 100% current liability. But the initial year of the change in valuation date, the threshhold is 125%.

Question 32

How is the accumulated Funding Deficiency calculated?

Answer 32

• Balance of the MFSA
  
  • ignore credit balance
  • ignore employer contributions for the year.

Question 33

T/F You must adjust for significant differences in the number of participants if you use a valuation date in the prior year for multiemployer plans.

Answer 33

True

Question 34

If a multiemployer plan gets a funding amortization extension, what is the restriction on amendments?

Answer 34

No amendments except de minimis amendments.