AFTAP and caryover balance burn

[chc93]

Calendar year plan. Company normally funds plan year contribution during the plan year, such that contribution is fully paid by Dec 31. For 1/1/08 AFTAP, I have the following:

--funding target: 10,000,000

--assets: 8,500,000

--carryover balance: 650,000

--assets less caryover: 7,850,000

--AFTAP: 78.5%

--burn carryover balance: 150,000

--adjuste4d AFTAP: 80%

--AFTAP certification in April 2008

Now in May 2008, we find the company paid an additional $100,000 contribution for the 2007 plan year. I think we are "allowed" to consider receivable 2007 contributions paid after 12/31/07 for the 1/1/08 AFTAP, but I don't think we have to. If we don't consider the receivable, the AFTAP is as shown above. If we do consider the receivable, the AFTAP is:

--funding target: 10,000,000

--assets: 8,600,000

--carryover balance: 750,000

--assets less caryover: 7,850,000

--AFTAP: 78.5%

--burn carryover balance: 150,000

--adjusted AFTAP: 80%

The 2007 Schedule B will show a credit balance of 750,000. If we don't change the 2008 AFTAP, is the remaining carryover balance still $500,000 or is it now $600,000. If $600,000, do we need to change the 2008 AFTAP. Or, is this addressed in the "new" 2008 Sch SB.

[Guest Dan Moore]

Calendar year plan. Company normally funds plan year contribution during the plan year, such that contribution is fully paid by Dec 31. For 1/1/08 AFTAP, I have the following:

--funding target: 10,000,000

--assets: 8,500,000

--carryover balance: 650,000

--assets less caryover: 7,850,000

--AFTAP: 78.5%

--burn carryover balance: 150,000

--adjuste4d AFTAP: 80%

--AFTAP certification in April 2008

Now in May 2008, we find the company paid an additional $100,000 contribution for the 2007 plan year. I think we are "allowed" to consider receivable 2007 contributions paid after 12/31/07 for the 1/1/08 AFTAP, but I don't think we have to. If we don't consider the receivable, the AFTAP is as shown above. If we do consider the receivable, the AFTAP is:

--funding target: 10,000,000

--assets: 8,600,000

--carryover balance: 750,000

--assets less caryover: 7,850,000

--AFTAP: 78.5%

--burn carryover balance: 150,000

--adjusted AFTAP: 80%

The 2007 Schedule B will show a credit balance of 750,000. If we don't change the 2008 AFTAP, is the remaining carryover balance still $500,000 or is it now $600,000. If $600,000, do we need to change the 2008 AFTAP. Or, is this addressed in the "new" 2008 Sch SB.

COB = $600K.

If you did an 80% range certification, I don't see any need to re-issue it. The AFTAP didn't change because of the extra $100K contribution.

As Schedule SB will be due 4/30/2009, we probably will get a first draft with incomplete, inconsistent instructions at the EA meeting in April 09. This issue will almost certainly not be addressed.

[Andy the Actuary]

[As Schedule SB will be due 4/30/2009, we probably will get a first draft with incomplete, inconsistent instructions at the EA meeting in April 09. This issue will almost certainly not be addressed.

Your optimistic pessimism is realistic!

[WDIK]

From the IRS website:

Under the PPA, separate actuarial information schedules were developed for 2008 plan year filings for single-employer plans (Schedule SB) and multiemployer plans (Schedule MB). The Schedule B thus will not be a valid schedule to file with a plan's 2008 Form 5500 Annual Return/Report. A caution added to the 2007 instructions (see page 4, When To File) advises that filers required to file a Schedule B cannot use the 2007 forms to satisfy their 2008 filing requirements, and that short plan year filers who must file a Schedule SB or Schedule MB and/or a supplemental attachment to Schedule R for 2008 will have an automatic extension to file their complete Form 5500 until 90 days after the 2008 forms are available to use for filing. The Agencies anticipate providing additional guidance in early 2008 for filers affected by these PPA-related changes.

[chc93]

COB = $600K.

If you did an 80% range certification, I don't see any need to re-issue it. The AFTAP didn't change because of the extra $100K contribution.

Thanks for your reply. We did a "final" 2008 AFTAP certification, and not a range certification. So, I it sounds like we should re-issue the "final" 2008 AFTAP... but only if we decided to include the 2007 plan year contribution of $100K paid after 12/31/07... to reflect the correct COB?

[Andy the Actuary]

COB = $600K.

If you did an 80% range certification, I don't see any need to re-issue it. The AFTAP didn't change because of the extra $100K contribution.

Thanks for your reply. We did a "final" 2008 AFTAP certification, and not a range certification. So, I it sounds like we should re-issue the "final" 2008 AFTAP... but only if we decided to include the 2007 plan year contribution of $100K paid after 12/31/07... to reflect the correct COB?

Does your your AFTAP certification refer to the COB? Is the certification required to? That is did your certification cover other aspects not legally required by 436?

[Guest Dan Moore]

COB = $600K.

If you did an 80% range certification, I don't see any need to re-issue it. The AFTAP didn't change because of the extra $100K contribution.

Thanks for your reply. We did a "final" 2008 AFTAP certification, and not a range certification. So, I it sounds like we should re-issue the "final" 2008 AFTAP... but only if we decided to include the 2007 plan year contribution of $100K paid after 12/31/07... to reflect the correct COB?

I know you can elect not to create or increase a pre-funding balance due to 2008 or later plan year contributions in excess of the MRC, but I didn't think you could elect to exclude a 2007 contribution in determining the carryover balance. You might want to check that. You could immediately burn it, of course.

[chc93]

Thanks for the responses.

1. The only information provided in the AFTAP certification were as shown at the beginning of this thread. I guess the "final" COB would be implied as the COB less the amount burned. I used the sample provided in Levinrad/Gucciardi webcast in Feb 2008.

2. I agree that the receivable 2007 contribution of $100K has to be included in the final COB... but will be immediately burned as you indicate. However, since the 2008 AFTAP does not need to include the extra $100K, and the original 2008 AFTAP certification did not include it, does the 2008 AFTAP need to be re-issued, if only for the fact that the "final" COB as implied in the certification will be the correct COB.

[Andy the Actuary]

I asked the question about the content of the certification because when I read the proposed reg., all it appeared to require is that you certify the AFTAP. It did stipulate the AFTAP must contain w, x, y, and z. Since you included information that was subsequently changed, you may wish to restate it just to keep the records straight.

[chc93]

Since you included information that was subsequently changed, you may wish to restate it just to keep the records straight.

Thanks Andy... We'll at least change it in our files, and probably send a copy to the client... just to keep everything straight

Hopefully, the "new" Schedule SB will have something for this...