revising AFTAP Cert

[Effen]

Let’s say I a client with a funding shortfall, and a large credit balance. Their required contribution for 2007 was $0, but they told me (in writing) that they would be depositing $50,000 for 2007. So, I prepared the 2008 valuation and certified the AFTAP based on the client's written direction that they would deposit $50,000 for 2007.

Well surprisingly they did not actually make the deposit. However, because the plan was underfunded, they were forced to burn a large portion of their CB to reach the 60% AFTAP and the fact that they didn't make the $50,000 contribution only increased the amount of the forced burn. From a practical stand point the fact that they didn't deposit the $50K for the prior year had no impact on their required 2008 contribution either since I wasn't able to use the COB to offset the requirement. (Try to explain that one to the client. So the plan is more underfunded that you thought, but that doesn't mean I have to put more in?)

Since only the numbers used to determine the AFTAP changed (and not the actual percentage), do I need to re-certify the 60% or can I just say "I certified the 60%, it is still 60%, and how I got there is not relevant".

[Andy the Actuary]

You should have two pieces of paper - a commitment from client to make 50k contribution and your AFTAP certification. What did they say? Was the client commitment noted in your AFTAP certification?

[Effen]

Their email stated that they intended to deposit $50K for the 2007 plan year prior to 9/15/2008.

My AFTAP cert did not mention the contribution receivable (I know it should have, but it didn't)

Partly my question comes down to, what exactly am I certifying when I certify the AFTAP?

[Andy the Actuary]

Their email stated that they intended to deposit $50K for the 2007 plan year prior to 9/15/2008.

My AFTAP cert did not mention the contribution receivable (I know it should have, but it didn't)

Partly my question comes down to, what exactly am I certifying when I certify the AFTAP?

I would suspect that not mentioning the contribution receivable may allow you to handle the certification without change. It certainly does not rectify the situation. See attached for how ye olde cya-er approached this, which is simply what I concocted in absence of any guidance.

temp1.doc

[Blinky the 3-eyed Fish]

I think you do need to recertify since you certified to a percentage that is no longer true. The certification doesn't factor in the credit balance burn. The burn happens after the certification.

[Andy the Actuary]

I think you do need to recertify since you certified to a percentage that is no longer true. The certification doesn't factor in the credit balance burn. The burn happens after the certification.

So, then the AFTAP was less than 60% as of April 1 and participants should have been notified that no lump sum payments (assuming the client notified them that only 50% could be paid) could be paid. As of April 30, notices were in arrear. The client now is libel for up to $1,000 day per participant fine and potentially bankrupt. The actuarial bill will not be paid and Blinky will have company at the bottom of the sea.

The good news is eventually everyone will have a client who reneggs on his commitment so no matter how hard we cya, we'll all be at the bottom of the sea with the Blinkster.

[Effen]

The burn happens after the certification.

I don't think I agree with that. The burn happens because without it it would have been < 60%, but ultimately I am certifying the AFTAP to be 60%. Granted, the COB is lower than I said it was the first time, but the percentage (the "P" in AFTAP) is still 60%.

[Blinky the 3-eyed Fish]

You are certfiying to a percentage based on a set formula of liabilities vs. assets. Based on that certified percentage, the CB is burned or not. I disagree you are certifying simply to a percentage. I believe all the examples in the proposed regs. follow this methodology.