Use of FSA 2007

[Andy the Actuary]

This request seems so obvious but I am seeking my "lifeline's" confirmation nonetheless. Client wants to avoid restricting lump sums to 50%.

2008 FT = 7 million

Assets = 5 million

2007 FSA CB (Before contributions) = 1 million

AFTAP 2008 = (5 - 1) / 7 = 57%

If CB burned, AFTAP = 5 / 7 = 71%

If CB burned, amount Needed to bring AFTAP to 80% = 630,000

Contribute $630,000 for 2007 but do not add to FSCOB

Result is no FSCOB [we threw $1.6 million in the fire] and 80% AFTAP.

Is there a way to accommodate this transaction and either contribute less or still retain some FSCOB?

[SoCalActuary]

The simple issue is this:

You need 80% of $7m to get out of the notice.

Every dollar contributed is deducted, and is permanently gone (not available as a future credit/offset to funding).

If you give up the COB, that is exactly what is needed, because the alternative is the notice.

So the client makes the choice of notice or not... and pays the price sooner or later.

[ak2ary]

It seems that if they contribute 1.44 million instead of 630,000; they will be 92% funded and eligible for the transition relief and not have any restrictions apply and not have to burn any credit balance (total credit balance 2.44 million) ..but next year they'll have to get to 94% then 96% then 100% over the next three years..then if they keep it at 100% funded (including credit balance), they are ok

[Andy the Actuary]

Thank you.