AFTAP and Restrictions on benefit withdrawals

[Guest Carol Caruthers]

I have a client with a defined benefit plan that has been frozen for many years. When the owners reached NRA (age 65), they established 414(k) accounts for themselves.

Along comes 2008, and one of the HCE's must take an RMD because he's reached age 70 1/2. When the AFTAP is computed including the 414(k) accounts as assets of the plan, we get 92%, which means that the owner is okay to take out his RMD. However, when we take the 414(k) balances out of the equation, the AFTAP results are 64%.

What to do? Does AFTAP penalize non-owners but not owners in this situation? Should the 414(k) accounts be considered for AFTAP percentages at all?

Any thoughts would be appreciated.

[ak2ary]

How many years has it been frozen for? Is it a true, hard freeze? If continuously frozen since mid 2005 it is not subject to the 436 benefit restriction