To Burn or Not To Burn, That Is the Question

[Andy the Actuary]

2008 AFTAP=.65 and employer contributed 300,000 in 2008. 2009 FT = 1,000,000 PFB=300,000 Assets=900,000; calendar year plan; benefits still accruing but does not pay lump sums

FTAP=(900,000 - 300,000)/1,000,000 = .6. This is fine since Plan does not pay lump sums.

But, cannot use PBF to offset contributions next year (2010). However, if burn 200,000 in 2009, then

FTAP= (900,000 - 100,000)/1,000,000 = .8 so can use remaining 100,000 PFB to offset minimum in 2010.

Ideally, would like to wait until 2010 to decide whether or not to burn a portion of the 2009 PFB. My, understanding, however is that election to reduce 2009 PBG must be made by 12/31/2009.

So, consulting choices are:

(a) Try to communicate this discombobulation

(b) Burn now -- then you can say for sure how 2010 will work. I.e., what good is having a PFB if you can't use it?

© Decide now not to burn (because of WRERA, 2009 AFTAP will be at least .65). Hey, assets may recover an then you will have burnt credit balance for no purpose. However, you still won't be able to use PFB in 2010.

(d) wait until later in the year. Question: What how do you make certification 4/1 if you don't know how much your're going to burn. My understanding - which may be wrong - is you don't get to use the greater of 2008 and 2009 AFTAP until you certify 2009 AFTAP.

Any other choices? Am I understanding the issues correctly?

What are thoughts on the appropriate consulting and cya practice. In the world in which I reside, (b) is the only rational choice. Trying to caveat this is tantamount to (a).