AFTAP for Terminated Plans

[zimbo]

If a plan has a termination date prior to 2008, is any AFTAP required for 2008? We know that such a plan is able to distribute based upon pre-PPA applicable rates and mortality, but the 436 and 430 regs seem silent on the AFTAP issue.

Any thoughts?

[Mike Preston]

Jim Holland has stated over and over that if you terminate before the effective date of a law, the law doesn't have any impact.

[Andy the Actuary]

Jim Holland has stated over and over that if you terminate before the effective date of a law, the law doesn't have any impact.

Has he done so in writing or has he been quoted in print?

There have been incidences where he has reversed his position.

[Blinky the 3-eyed Fish]

I have never, and I mean EVVVVEEEERRRRR, heard another interpretation and gladly so. It is entirely too logical to think that law changes would not apply to a plan after it had been terminated.

(If anyone gets the source of that quote from my first line, I will be impressed.)

[Andy the Actuary]

I have never, and I mean EVVVVEEEERRRRR, heard another interpretation and gladly so. It is entirely too logical to think that law changes would not apply to a plan after it had been terminated.

(If anyone gets the source of that quote from my first line, I will be impressed.)

Interesting. I am told by an attorney that a Plan that terminated 12/31/2007 must be amended to comply with PPA. Is this contrary to your understanding. (By the way, I don't disagree with you.) I cannot, however, advise my client to the contrary based upon heresay.

Best,

andy t.a.

[GMK]

Just asking:

The amendments to Andy t.a.'s plan that terminates 12/31/2007 would list the effective dates required by PPA, and the changes that were effective before 2008 would apply and those effective after 2007 would be listed but have no effect.

Yes, no, maybe?

[Andy the Actuary]

Just asking:

The amendments to Andy t.a.'s plan that terminates 12/31/2007 would list the effective dates required by PPA, and the changes that were effective before 2008 would apply and those effective after 2007 would be listed but have no effect.

Yes, no, maybe?

This is essentially what I've been told. I keep emphasizing that lump sums will need to be calculated using 94GAR and 30-year treasuries. Attorney agrees but then contends he must include PPA lump sum language or he believes the IRS will not approve the restatement. I've thrown up my hands and simply gotten the attorney to state that lump sums will be computed on the old basis even though the Plan will contain PPA languange and I will get the client to agree to the same. I'm not an attorney, do not prepare plan documents or amendments, and am not listed with a power of attorney in respect of the 5310 submission.

[Blinky the 3-eyed Fish]

Does the attorney really believe he needs to amend the plan for provisions effective post-plan term? If so, may wisdom be suddenly bestowed upon him. If not, and he is submitting to the IRS, why wouldn't he amend the plan how he feels it should be amended and if the IRS doesn't like it, he can change it. That is one of the perks of the submission after all.

[Andy the Actuary]

Your suggestions are well-put and have been thought of and some argued. I've decided to stay on my own side of the fence on this one. If there's an issue, the attorney can deal with it. I'm too entrenched reading about Client 9 from Outer Space.

[Andy the Actuary]

Some old thoughts leaked out this a.m. as I was reminded of a Plan many years ago where the attorney dragged his derrierre filing with the PBGC and the PBGC revoked the termination. Had PPA applied and no certifications were given then there could have been poop to pay. So the question would be: Should a certification be given on a pre-2008 termination to cover the possibility that the PBGC could revoke the termination? By the way, I had never before or since heard of the PBGC revoking a termination so consider this an unlikely occurrence.

[ak2ary]

436 restrictions only apply to plans subject to 412. A plan is only subject to 412 until the enfd of the plan year containing the plan termination date, (1.412(b)-(4)). Thus a plan that has a termination date in 2007 is not subject to 412 in 2008 and thus is not subject to 436 or 430 in 2008.

[Andy the Actuary]

436 restrictions only apply to plans subject to 412. A plan is only subject to 412 until the enfd of the plan year containing the plan termination date, (1.412(b)-(4)). Thus a plan that has a termination date in 2007 is not subject to 412 in 2008 and thus is not subject to 436 or 430 in 2008.

Unless the attorney/actuary foul up and forget to file timely with the PBGC and the PBGC responds by revoking the plan termination date.

[JAY21]

Also a plan termination is a revokable action by the employer (of course they'd have to do it before distributions paid).