Walk Through a Year of PPA I hope you have your hip waders

1. Walk Through a Year of PPA�I hope you have your hip waders� Joseph A. Nichols, ASA, EA, MAAA, ACOPA McCloud & Nichols, Inc. Liberty, Missouri

2. Pension Protection Actof 2006 Wikipedia Definition This legislation requires companies who have underfunded their pension plans to pay higher premiums to the PBGC and extends the requirement of providing extra funding to the pension systems of companies that terminate their pension plans. It also requires companies to analyze their pension plans' obligations more accurately, closes loopholes that previously allowed some companies to underfund their plans by skipping payments, and raises the cap on the amount employers are allowed to invest in their own plans. This will allow employers to deduct more money using the pension tax shield in times of high profits. It requires actuaries to use the equivalent of the projected accrued benefit cost method for determining annual normal cost.

3. Sponsors and Co-Sponsors Rep. Boehner of Ohio Rep. Camp of Michigan Rep. Kline of Minnesota Rep. McKeon of California Rep. Thomas of California

4. My New Hero �This pension reform is the worst of every possible world.� Rep. George Miller of California

5. PPA 2006 Voting Results House of Representatives 279 Yea, 131 Nay Senate 88 Yea, 11 Nay Debate in the House was a total of 1 hour, 10 minutes

6. PPA � Good Provisions Extended 404 limits Elimination for PBGC covered plans 6% employer profit sharing Legitimization of cash balance plans EGTRRA Permanency 5500 EZ exemption increased to $250,000

7. PPA � Good Provisions PBGC variable premium cap for small plans Lump sum relief

8. PPA � Not so Good Provisions One funding method Code mandated interest rates Restrictions for use of credit balance PBGC Premium Changes Timing for EOY valuations Continuation of funding deficiencies

9. PPA � Insane Provisions Two separate credit balances Section 436 Where do I start? Funding notices Definition of Minimum Required Contribution Quarterly contributions Use of Carryover and Prefunded Balance 436 restrictions not reflected in valuation

10. Guidance With Which We Were Blessed Many interest rate and mortality regulations and notices Schedule SB instructions Benefit accruals for cash balance plans 404 � Notice 2007-28 � no regulations

11. Guidance With Which We Were Blessed 430 � Mostly interest rate notices 430(a)(d)(f)(g)&(j) proposed regulations 436 limitations - proposed

12. Regulations For Which We are Waiting Almost anything with EOY valuations 404 � Not high on the IRS list Technical corrections on technical corrections Re-work of most proposed regulations

13. PPA Questions Are there deemed burns on the first day of the plan year? Should late quarterly contributions be discounted using the additional 5% for next year�s 430 asset value? Why are 436 contributions not included in valuation assets?

14. PPA Questions What is the AFTAP for a new plan? When must the 1.430(f)-1(e) election be made? If last day of plan year, what about EOY valuations?

15. PPA Ironies Due to new PBGC interest rates, premiums are lower than they used to be. Minimum contributions decreased in 2008 for many small defined benefit plans. If the PBGC is truly worried about benefits they are responsible for, why collect premiums for owners they will never pay for?

16. I�m Mad as Hell and I�m Not Going to Take it Anymore! I�m tired of the IRS saying �We do not have legislative authority� unless it is to change a rule they do not like. I�m tired of the PBGC flexing it�s muscles for really insignificant items.

17. IRC 436 � ASPPA Comment Letter 4/3/09 Benefit restrictions not reflected in valuation �1.436-1(h)(1)(i) defines the first day of the plan year as a �436 measurement date if a restriction on benefits was applicable for the preceding plan year.

18. Client Correspondence Workflow packets Form to waive COB or PFB prior to end of plan year Quarterly contribution notice (4) Missed quarterly contribution notice Valuation

19. Client Correspondence (cont.) PBGC premium filing Election to use COB or PFB Contribution verification Election to add to PFB AFTAP 436 participant notices

20. Client Correspondence (cont.) Form 5500 Annual funding notice Oh yeah, if you have time, and if they are not sick of you, some consulting

21. Phone Call with Actual Client

22. Top Ten Things to Change about PPA Make all 436 requirements based on prior year�s valuation Eliminate effective interest rate and use middle segment rate Base quarterly requirements on 80% thresh hold Exclude significant owner�s liabilities from variable rate premium calculation

23. Top Ten Things to Change about PPA All employer elections part of the SB filing Full 436 exemption for first three years Form 4010 exemption for plans under 100 Eliminate funding deficiency if plan later becomes fully funded Drop restricted lumps sum to at least 100% of target liability � based on prior year

24. Top Ten Things to Change about PPA Lower fees and penalties unless proof of willful misconduct or gross negligence.

25. Ten Year Projection

26. Questions 5 minutes left to catch the end of Tom�s workshop