AFTAP

[Guest Sus95]

I have a calendar year DB plan that an AFTAP was never completed as of 4/1/08. It's an EOY val date, so until further quidance is issued, I cannot do the 2008 AFTAP. However, I do have the information now to do the "lookback" AFTAP that should have been done by 4/1/08.

Plan is currently restricted due to failure to issue the lookback AFTAP by 4/1/08. Can I do the lookback AFTAP now, and be deemed unrestricted?

Thank you.

[Effen]

Its not only restricted, its frozen. Did they notify the participants?

Ignoring all the implications of the non-certification, I believe you can prepare the certification now and unfreeze it retroactively to the first day of the plan year. I don't remember whether you need to amend your plan to unfreeze it, or if it unfreezes automatically with the certification.

[zimbo]

Depending upon the terms of the PPA plan document will indicate whether the reinstatement is automatic or requires an amendment. At this point, I would guess you operate the plan in the way in which you would want the eventual PPA amendment to read. So, assume automatic reinstatement and then amend the plan in that manner some time before the end of 2009.

[Blinky the 3-eyed Fish]

You can definitely certify to the 2007 AFTAP now and the deemed AFTAP will be that less 10 percentage points. I even have a cite handy - Prop. Reg 1.436-1(h)(2)(iii).

I agree with Zimbo's comments about how the doc should work. It should freeze automatically so why wouldn't it be made to unfreeze automatically. To do otherwise just creates more work.

[Andy the Actuary]

(iii) Certification for prior year. If this paragraph (h)(2) applies to a plan, and the date of the enrolled actuary’s certification under paragraph (h)(4) of this section of the actual adjusted funding target attainment percentage for the plan year preceding the current year occurs on or after the first day of the 4th month of the current plan year, then, commencing on the date of that prior year certification and continuing until the earlier of the date the enrolled actuary issues a certification under paragraph (h)(4) of this section of the adjusted funding target attainment percentage for the plan year or the first day of the 10th month of the plan year as described in paragraph (h)(3) of this section— (A) The adjusted funding target attainment percentage of the plan as of the valuation date for the plan year is presumed to be equal to 10 percentage points less than the actual adjusted funding target attainment percentage of the plan for the preceding plan year; and (B) The date of the prior year certification is treated as a section 436 measurement date.

This is interesting language because when no certification was issued, as M. Effen states, the plan was frozen and notices became due April 30. Question: Suppose lump sum distributed in May 2008 but you now (July 18) certify 2007 AFTAP at 90% (retroactive to 1/1/2008 valuation date). So, was distribution permissible or impermissible? We're employee notices needed or not needed? Will Pauline be saved from the speeding train?

[Blinky the 3-eyed Fish]

(This is interesting language because when no certification was issued, as M. Effen states, the plan was frozen and notices became due April 30. Question: Suppose lump sum distributed in May 2008 but you now (July 18) certify 2007 AFTAP at 90% (retroactive to 1/1/2008 valuation date). So, was distribution permissible or impermissible? We're employee notices needed or not needed? Will Pauline be saved from the speeding train?

No question the distribution was not permissible and notices were needed. 4/1 was the first 436 measurement date --- restrictions apply. The date of the certification was the next 436 measurement date --- restrictions lifted if sufficient.

[Guest Sus95]

You can definitely certify to the 2007 AFTAP now and the deemed AFTAP will be that less 10 percentage points. I even have a cite handy - Prop. Reg 1.436-1(h)(2)(iii).

I agree with Zimbo's comments about how the doc should work. It should freeze automatically so why wouldn't it be made to unfreeze automatically. To do otherwise just creates more work.

This plan was effective in 2006, which is less than 5 years, so the freeze will not apply, only the lump sum restrictions.

Thanks for this cite, which I will read, and it will hopefully confirm that I do the 2007 lookback AFTAP now!

[Guest Sus95]

You can definitely certify to the 2007 AFTAP now and the deemed AFTAP will be that less 10 percentage points. I even have a cite handy - Prop. Reg 1.436-1(h)(2)(iii).

I agree with Zimbo's comments about how the doc should work. It should freeze automatically so why wouldn't it be made to unfreeze automatically. To do otherwise just creates more work.

I just read 1.436-1(h)(2)(iii) and it does NOT seem to apply to my situation. This section only applies if your prior year certification is either between 60-70% or 80-90%. The prior year AFTAP percent in my situation is over 100%. Why would the reg leave this range out??

Hence, I am back to my original question as to whether I have quidance on issuing the prior year AFTAP after 4/1/08 if the percent is over 100%, or just wait until technical corrections to provide us quidance on 2008 AFTAPs for end of year vals? I hate waiting since we do not know when the quidance will be issued!

Thoughts.....

[Blinky the 3-eyed Fish]

I am leaving and don't have time to look anything more up but I can tell you this for now. First, in the Overview and General Rules section G, it describes that the certification for the prior year is a 436 measurement date even if made after the first day of the fourth month. All I can say about the (h)(iii) applying to certain ranges, is that for any other AFTAP, the 10 percentage point adjustment wouldn't matter. Somewhere in the prop. regs. there has to be something more. But I will have to leave that for others to discover where.

[Andy the Actuary]

I just read 1.436-1(h)(2)(iii) and it does NOT seem to apply to my situation. This section only applies if your prior year certification is either between 60-70% or 80-90%. The prior year AFTAP percent in my situation is over 100%. Why would the reg leave this range out??

see: http://www.jpmorgan.com/cm/Satellite?c=JPM...l_Page_Template