A client has a plan with no active participants. The funding method is Individual Aggregate. What is permissible for valuation purposes??

1993 - IRS stated, one acceptable method, that for an Aggregate funding method that assuming the deferred vested were still active (compute the funding period to their expected retirement age)

What if all the partcipants are actually retired??

Obviously, IF the plan is fully funded, it is no big deal (Contribution is zero and get on with life!).

This client has a plan where they are short assets (by several 100,000) and they want no cost.

A switch in funding method would enable the monies to be amortized over a period of years but they can not change funding method (they already did within the last couple of years).

Any ideas??

Thanks in advance for any and all input.

One of the tenets of the reasonable funding regulations are that costs be reasonably allocated between past and future service. Only immediate gain methods that can put all of the liability into past service are reasonable in this situation.

No argument from my with respect to reasonable funding.

Now, how is the shortage dealt with under the Individual Aggregate funding method? The method could easily produce one of two simplistic answers - the full shortage funded in 1 year (the IRS appears to take a dim view of this method based on their answer in 1993) OR zero by not funding anything (I have a problem with this from the participant's point of view - the trust is obviously short money and no contribution is required). However, it would appear that 10 year amortization of the shortage might be possible (it would work if the plan was terminated).

Maybe I should send an email to IRS and ask they would suggest handling the situation?

Based on the facts given, the method can be changed even though it was changed within the last 5 years. See 4.01(5) of Rev Proc. 2000-40. See also, this discusion.
http://www.benefitslink.com/boards/index.p...ST&f=22&t=19350

You did not say if you wanted immediate funding - which is now permitted thanks to EGTRRA, or if you wanted periodic funding.

IRS really doesn't know what to do here. That is obvious because all we have is musings, nothing solid to go on.

Best bet - convert to (group aggregate) FIL and amortize over 10 years.

Pax, I am not so sure the automatic change under 4.01(5) is available. Frank didn't say the plan was frozen, only that there were no active employees. I read that passage to require the plan to be frozen, not that there are circumstances where no one accrues a benefit.

Hmmm. OK, I'll buy that argument.