Deemed Election

[Dinosaur]

I am preparing a 1/1/2009 valuation. I first calculate an FTAP (after subtraction of the COB/PBF) balances of 65%. I can get an AFTAP of 100% if I there is a deemed election of all the COB and part of the PFB. Must the deemed election go only to 80% or all the way to 100%?

Or if I am at 93.5% must a deemed election be done to get to 100%?

[david rigby]

Deemed waiver of COB/PB is based on whether the plan provisions are impacted by the restrictions in IRC 436. If no restriction applies, then no deemed waiver applies. After determining mandatory waiver, if any, you might get to the question of a voluntary waiver.

[Dinosaur]

Deemed waiver of COB/PB is based on whether the plan provisions are impacted by the restrictions in IRC 436. If no restriction applies, then no deemed waiver applies. After determining mandatory waiver, if any, you might get to the question of a voluntary waiver.

I've read that you would have a deemed election to get to 60%,80% or 100%. If you are at 80% then there are no restrictions under 436 (as far as I know). When would you do a a deemed election to get to 100% if there are no restrictions if you are 80%?

[Andy the Actuary]

I've read that you would have a deemed election to get to . . . 100%.

Where did you read this???

[Dinosaur]

I've read that you would have a deemed election to get to . . . 100%.

Where did you read this???

1.436-1 under 5i (Deemed election to reduce funding balances).

I think it's saying that if there is a benefit limitation under paragraph (d) (which is accelerated benefit payments) then you reduce the COB/PFB as necessary to get to the applicable threshold (60, 80 or 100) in order for the benefit limitation not to apply.

[david rigby]

See IRC 436(f)(3). I see references to 60% and 80%, but not to 100%.

[Dinosaur]

See IRC 436(f)(3). I see references to 60% and 80%, but not to 100%.

I agree that the reference I found regarding 100% does not make sense.

[SoCalActuary]

I am preparing a 1/1/2009 valuation. I first calculate an FTAP (after subtraction of the COB/PBF) balances of 65%. I can get an AFTAP of 100% if I there is a deemed election of all the COB and part of the PFB. Must the deemed election go only to 80% or all the way to 100%?

Or if I am at 93.5% must a deemed election be done to get to 100%?

No deemed election. You must choose to make a voluntary reduction, subject to approval of the plan administrator.

[Andy the Actuary]

I've read that you would have a deemed election to get to . . . 100%.

Where did you read this???

1.436-1 under 5i (Deemed election to reduce funding balances).

I think it's saying that if there is a benefit limitation under paragraph (d) (which is accelerated benefit payments) then you reduce the COB/PFB as necessary to get to the applicable threshold (60, 80 or 100) in order for the benefit limitation not to apply.

Yup, it says 100 but am unable (like David, SCA, and you) to see any restriction in (d) that is tied to 100%. Sounds like technical correction time.

[Dinosaur]

So, looks like deemed election to 80% and a voluntary election (by plan sponsor) after that.

Thanks everyone.

[Guest Steve C]

I've read that you would have a deemed election to get to . . . 100%.

Where did you read this???

1.436-1 under 5i (Deemed election to reduce funding balances).

I think it's saying that if there is a benefit limitation under paragraph (d) (which is accelerated benefit payments) then you reduce the COB/PFB as necessary to get to the applicable threshold (60, 80 or 100) in order for the benefit limitation not to apply.

Yup, it says 100 but am unable (like David, SCA, and you) to see any restriction in (d) that is tied to 100%. Sounds like technical correction time.

The 100% comes into play in a bankruptcy (436(d)(2)).

[Dinosaur]

Thanks Steve. I forgot about that.