AFTAP H_LL - NEED HELP UNDERSTANDING

[HarleyBabe]

Can someone explain what the difference is between the 4/1/2008 cert and the one due 10/1/2008? I think I understand that the one due 4/1/2008 is preliminary, basically for 08 based on 2007 numbers. I'm using the sample letter and cert that Jim Holland gave in his webcast. Does anyone have an example of one they are using for the certs due 10/1/2008? I assume that if we have all of the 2007 data and the client has made the 2007 cont, we can go ahead and certify 2008 now and only have to do 1, is that correct? Also, we can definitely use the credit balance, correct?

By the way, who the heck thought of these dates they were due by, 10/1/08, like we're not doing anything else at that time.

[ak2ary]

For 2008, you must certify the plan's AFTAP. If you do not yet have the data to certify 2008, or if the results are better you can certify the 2007 AFTAP. Beginning April 1, the 2007 AFTAP-10% would serve as the 2008 AFTAP until the 2008 AFTAP is certified.

The 2008 AFTAP is (1/1/2008 assets + last 2 yrs annuity purchases for NHCEs) / (1/1/08 Funding Target + last 2 yrs annuity purchases for NHCEs).

The 2007 AFTAP is (1/1/2007 assets + last 2 yrs annuity purchases for NHCEs) / (1/1/07 Current Liability+ last 2 yrs annuity purchases for NHCEs)

In both cases, the calculation is done by reducing the assets by the credit balance. However, if the result would be at least 90% for 2007 if credit balances remain in assets, you can leave the credit balance in the assets. If the result would be at least 92% for 2008 if credit balances remain in assets, you can leave the credit balance in the assets.

If you are using the 2007 AFTAP - 10% as a proxy for 2008 AFTAP, you must also perform a certification by 10/1 of the actual 2008 AFTAP

If you certify the 2008 AFTAP, there is no need to certify the 2007 AFTAP

If the AFTAP (either 2007 or 2008) is not certififed by 4/1 the plan is deemed to be less than 60% funded. All benefit accruals are frozen, no amendments can be adopted which increase benefits and accelerated distributions are eliminated

If the AFTAP (either 2007 -10% or 2008) is certified as between 60 and 80%, no amendments can take effect which increase the funding target, accelerated benefit payments are limited but not eliminated and the plan must give notice to participants of the impact of the benefit restriction.

If the AFTAP (either 2007 -10% or 2008) is certified as between 80 and 100%, no restrictions apply

As of 10/1/08, you can no longer use 2007 - 10% as a proxy for 2008. Thus, if the 2008 AFTAP is not yet certified, the plan is deemed as less than 60% funded. All benefit accruals are frozen, no amendments can be adopted which increase benefits and accelerated distributions are eliminated. This status will last until THE LATER OF January 1, 2009 or the date that the 2008 AFTAP is actually certified.

I am not aware of any IRS provided standard certification form. The proposed regulations under Section 436 set forth some requirements for content, while the actuarial standards of practice set forth additional requirements for certifications and statements of actuarial opinion

[tuni88]

The 2007 AFTAP is (1/1/2007 assets + last 2 yrs annuity purchases for NHCEs) / (1/1/07 Current Liability+ last 2 yrs annuity purchases for NHCEs)

Is a lump sum distribution the same as an annuity purchase?

[ak2ary]

no

[HarleyBabe]

Thank you, that was great and very helpful.

quote name='ak2ary' post='160709' date='Mar 28 2008, 03:03 PM']For 2008, you must certify the plan's AFTAP. If you do not yet have the data to certify 2008, or if the results are better you can certify the 2007 AFTAP. Beginning April 1, the 2007 AFTAP-10% would serve as the 2008 AFTAP until the 2008 AFTAP is certified.

The 2008 AFTAP is (1/1/2008 assets + last 2 yrs annuity purchases for NHCEs) / (1/1/08 Funding Target + last 2 yrs annuity purchases for NHCEs).

The 2007 AFTAP is (1/1/2007 assets + last 2 yrs annuity purchases for NHCEs) / (1/1/07 Current Liability+ last 2 yrs annuity purchases for NHCEs)

In both cases, the calculation is done by reducing the assets by the credit balance. However, if the result would be at least 90% for 2007 if credit balances remain in assets, you can leave the credit balance in the assets. If the result would be at least 92% for 2008 if credit balances remain in assets, you can leave the credit balance in the assets.

If you are using the 2007 AFTAP - 10% as a proxy for 2008 AFTAP, you must also perform a certification by 10/1 of the actual 2008 AFTAP

If you certify the 2008 AFTAP, there is no need to certify the 2007 AFTAP

If the AFTAP (either 2007 or 2008) is not certififed by 4/1 the plan is deemed to be less than 60% funded. All benefit accruals are frozen, no amendments can be adopted which increase benefits and accelerated distributions are eliminated

If the AFTAP (either 2007 -10% or 2008) is certified as between 60 and 80%, no amendments can take effect which increase the funding target, accelerated benefit payments are limited but not eliminated and the plan must give notice to participants of the impact of the benefit restriction.

If the AFTAP (either 2007 -10% or 2008) is certified as between 80 and 100%, no restrictions apply

As of 10/1/08, you can no longer use 2007 - 10% as a proxy for 2008. Thus, if the 2008 AFTAP is not yet certified, the plan is deemed as less than 60% funded. All benefit accruals are frozen, no amendments can be adopted which increase benefits and accelerated distributions are eliminated. This status will last until THE LATER OF January 1, 2009 or the date that the 2008 AFTAP is actually certified.

I am not aware of any IRS provided standard certification form. The proposed regulations under Section 436 set forth some requirements for content, while the actuarial standards of practice set forth additional requirements for certifications and statements of actuarial opinion