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There may be more elegant solutions, but if you want a step-by-step approach that is essentially self-explanatory, you would spin off the participating employer portion of the plan and terminate it. Except for the amendment to spin off and terminate, the particpating employer should not need additional plan documents. The trustee might insist on a separate trust document for the spun-off plan. A determination letter would be a good idea. It is a shame to terminate the spun-off plan. Someone should reconsider.

I don't know about recertification. The AFTAP is based on BOY numbers. However, you may have some flexibility in the assumptions since you "know" there are immanent layoffs. I think you have some room to value lump sums more directly in the AFTAP if you are going to pay out immediately. Also, look to see if this is an "unpredictable contingent event" and if that allows you to re-certify the AFTAP? If they really don't have enough money to fund the plan, they should contact the PBGC ASAP. The PBGC will want them to prove they really don't have the money, so you should let them know that up front, in case they are just bluffing. Ultimately they are going to have to put the money into the plan or demonstrate that doing so will bankrupt them.