2009 AFTAPs < 80%

[Guest DBPension]

(1) Is anything in the works (under discussion in the IRS or Congress) to perhaps lessen the Lump Sum restrictions that will result when 2009 AFTAPs falls below 80% ?

(2) Is there any way to bring into the 2009 AFTAP calc the INCREASES in asset values since 1/01/09 .... to avoid a 2009 AFTAP< 80% ?

[Andy the Actuary]

(1) Is anything in the works (under discussion in the IRS or Congress) to perhaps lessen the Lump Sum restrictions that will result when 2009 AFTAPs falls below 80% ?

(2) Is there any way to bring into the 2009 AFTAP calc the INCREASES in asset values since 1/01/09 .... to avoid a 2009 AFTAP< 80% ?

(2) No, but if you haven't yet, you might want to consider asset smoothing. This will likely give you assets for AFTAP purposes of 110% of MV. Also, if client has made any contributions in 2009, you may be able to credit them as 2008 contribution which gets counted before the calculation of average market value.

[Effen]

At the Enrolled Actuaries Meetings it was made clear that "Congress thinks they fixed it" when they passed WRERA and are not likely to do anything more.

Anyway, don't hold your breath.

[dmb]

(1) Is anything in the works (under discussion in the IRS or Congress) to perhaps lessen the Lump Sum restrictions that will result when 2009 AFTAPs falls below 80% ?

(2) Is there any way to bring into the 2009 AFTAP calc the INCREASES in asset values since 1/01/09 .... to avoid a 2009 AFTAP< 80% ?

(2) No, but if you haven't yet, you might want to consider asset smoothing. This will likely give you assets for AFTAP purposes of 110% of MV. Also, if client has made any contributions in 2009, you may be able to credit them as 2008 contribution which gets counted before the calculation of average market value.

Would you then not want to add to the Prefunding balance the excess created by designating 2009 contributions to the 2008 plan year?? Otherwise the assets are being reduced by the credit balances (unless the Assets/FT is at least 94%) and those excess contributions would just be subracted out of the assets.

[Andy the Actuary]

Or, you could add and burn. The deal is that if you can counted as of 1/1/2009 the discounted value of contributions made after 1/1/2009 (now attributed to 2008), you enjoy 110% of such amount in the average value -- at least ostensibly for 2009.

[david rigby]

You could. But a PFB is voluntary; any excess may be added to the PFB but there is no requirement to do so.

[Andy the Actuary]

(1) Is anything in the works (under discussion in the IRS or Congress) to perhaps lessen the Lump Sum restrictions that will result when 2009 AFTAPs falls below 80% ?

Hot off the presses: http://www.watsonwyatt.com/us/pubs/insider...ArticleID=21132

As my Granny Garple used to say, "Spit in one hand and wish in the other and see which one fills up faster." Only, she didn't say "spit."

[Andy the Actuary]

At the Enrolled Actuaries Meetings it was made clear that "Congress thinks they fixed it" when they passed WRERA and are not likely to do anything more.

Anyway, don't hold your breath.

Yes, indeedy. Congress fixed the system as witnessed by, "Chrysler's pension plans are $9.3 billion underfunded. The company likely won't have to make a contribution for about two years, because of the intricacies of pension funding rules, says Charles E.F. Millard, director of the PBGC until this past January." So, here's a Company that because of the new system designed to protect [someone?] gets a two year free pass, when they in theory should be contributing toward reducing the underfunded [whatever that number really is].

[tymesup]

At least PBGC will know that our small plans missed their quarterly contributions.

[Guest RBlaine]

Or, you could add and burn. The deal is that if you can counted as of 1/1/2009 the discounted value of contributions made after 1/1/2009 (now attributed to 2008), you enjoy 110% of such amount in the average value -- at least ostensibly for 2009.

Since the election to add excess contributions to the PFB doesn't have to be made until the Schedule SB is filed and when the AFTAP is certified, it is certified only with elections made by that date, couldn't you certify the AFTAP as if the PFB doesn't exists and recertify if they later choose to apply the excess contributions to the PFB? I believe that changes to the AFTAP based on later elections is deemed immaterial and that any restrictions would apply from the date of the election forward, right?

[Andy the Actuary]

Unfortunately, this is likely not to fly because you will need to recertify the AFTAP and it may be a material change. This is in one of the more confusing sections of my favorite proposed confusing reg from August 2007. See yellow highlighted area on page 11.

IRS_Proposed_Regulations___Underfunded_Pension_Plans.pdf

[Guest RBlaine]

Unfortunately, this is likely not to fly because you will need to recertify the AFTAP and it may be a material change. This is in one of the more confusing sections of my favorite proposed confusing reg from August 2007. See yellow highlighted area on page 11.

Ahh, thanks. It must have been the next section that I was remembering:

"is the result of additional contributions for the preceding year that are made by the plan sponsor after the date of the enrolled actuary’s certification or results

from the plan sponsor’s election to reduce the prefunding or funding standard carryover balance after the date of the certification"