2008 AFTAP

[Blinky the 3-eyed Fish]

Boy val with a 2007 AFTAP around 65%. The sponsor has some participants that they want to pay out lump sums so we are working on getting the 2008 AFTAP done. Let me know if you find fault with this logic.

1/1/08 funding target: 500,000

1/1/08 assets (not including 2007 receivable): 300,000

12/31/07 CB (without 2007 receivable): 0

Client contributes 100,000, creating a 12/31/07 CB of 100,000.

AFTAP would be: (400,000 - 100,000) / 500,000 = 60%

However, the 100,000 CB is required to be burned to bring up the assets to 80% and lump sums can be paid.

Sound right?

[FAPInJax]

You might consider moving this to the DB section instead of the 401(k) section. OOPS, WASN'T PAYING ATTENTION WHERE I POSTED. BUT IT'S MOVED NOW --- BLINKY.

I believe I agree with you (as I just posted a similar question).

There is an exception to the 436 if you plan is reasonably well funded (which your example is not).

Therefore, the calculation you have proposed appears to be OK. The client makes the contribution and creates the credit balance allowing the mony to be recognized and then subtracted (what a great plan <GG>). You then burn the credit balance to get back to where you want to be!!

[Penman2006]

I agree. Also, if instead your CB happened to be 110,000, you would only be required to burn 100,000, just enough to avoid the restiction.