No 4/1/08 AFTAP Done?

[Guest Sus95]

We have a 1 person/owner takeover DB plan. The prior firm did not certify to the AFTAP by 4/1/08 so the plan is "deemed" to be restricted in accordance with section 436, ie, no benefit accruals after 1/1/08 and no lump sums allowed.

The problem is that the plan is close to being overfunded and we need to distribute assets as soon as possible. The AFTAP would have been well over 90%(-10) to allow for no restrictions if certified timely. We are in the position now to certify the 2008 AFTAP at this time, which is also well over the threshhold for benefit restrictions.

Questions:

1. If we certify to an AFTAP now for 2008, how does the plan become "unfrozen" and allowed to accrue and payout? For a deemed freeze on 4/1/08, is there an amendment required to reflect this? If yes, do I now do 2 amendments, one for the freeze on 4/1/08, and one for the "unfreeze" now?

2. Can his payout after the new AFTAP reflect a benefit accrual retroactive for 2008 year, and the 2008 COLA?

Any comments would be appreciated.

Thank you.

[AndyH]

Is there a 2007 AFTAP?

[Guest Sus95]

Is there a 2007 AFTAP?

No, the prior firm did NOT do a 2007 AFTAP.

[AndyH]

Can't you do one based on the 2007 Sch B and use that less 10% for 2008, or at least until 9/30/08? Or get the prior actuary to do the same? How could you take over a plan with no current or prior AFTAP without expecting to generate one?

[Guest Sus95]

Is there a 2007 AFTAP?

[Guest Sus95]

Can't you do one based on the 2007 Sch B and use that less 10% for 2008, or at least until 9/30/08? Or get the prior actuary to do the same? How could you take over a plan with no current or prior AFTAP without expecting to generate one?

This is not my problem. I can generate an AFTAP, but since there was none certified at 4/1/08, the plan is "deemed" to be frozen and no lump sums.

I certainly can do one NOW, but I still have questions on how to handle this from an amendment point of view, and an accrual point of view, as indicated in my original questions.

[AndyH]

If you can produce a 2007 AFTAP that says it is 100% funded, then it is presumed funded at 90% until 9/30/2008 and you had no freeze, notice, or amendment. That was my point.

Otherwise, you have blown the notice date that took effect 4/1/2008, to begin with.

[zimbo]

I have not seen formal guidance on this but at a May ASPPA NY Benefit Council meeting, Sal Tripodi indicated that PPA language in the plan will provide basically 2 options: One option is that any benefit accrual that was limited due to 436 benefit restriction will be recredited automatically when such restriction is lifted. The other option is for the removal of the freeze to only be prospective in nature.

Of course, the automatic re-crediting of previously frozen benefit accruals due to the lifting of 436 restrictions is considered an increasing plan amendment (if the benefit freeze period exceeds 12 months) and cannot be done until the AFTAP is at least 80%.

Assuming these rules are correct, then I would guess that we could operate the plan now in accordance with the PPA language that will eventually be written by the end of the 2009 plan year.