AFTAP and Plan Amendments Effective 1/1/07

[Guest s.c.semler]

Our office is converting many EOY valuations to BOY effective for the 2007 plan year in order to calculate the AFTAP in a (semi) timely manner. For most plans, the 12/31/06 accrued benefit will be the same as the 1/1/07 accrued benefit and the RPA 94 current liability can simply be calculated based on those accrued benefits.

If a plan has an amendment which would impact the 2007 valuation, does the amended formula have to be used when calculating the AFTAP?

My feeling were it would since it would affect the 1/1/07 accrued benefit however I don't know if there is some exception buried somewhere.

A colleague also posed the situation where the 2007 benefit formula may be amended within two and one-half months after the end of the plan year and the certification was prepared based on a different formula. What then?

Thank you for your thoughts.

[Mike Preston]

Interesting issue.

I'm sticking to my guns that we deal with things as we always have dealt with things unless it is clear from the context that we should not do so.

In this case, we have Revenue Ruling 77-2 to guide us as to what should be included in the valuation as of a specific date. The pre-effective date guidance has been scant so you can hardly be blamed for doing something reasonable.

Keep in mind that there are consequences to one's actions in this arena that actuaries have not previously had to deal with too frequently. I would encourage anybody who has a plan where restrictions are a potential to engage an ERISA attorney OF THEIR OWN to help sift through the issues.