Failure to Issue Timely Certification

[Andy the Actuary]

The IRS Final 436 regs. warn in effect that the IRS is unhappy with plan sponsors who in the IRS eyes are failing to obtain certifications to deny distribution of lump sum benefits. They cite referance to 1.411(d)-4, Q&A-6(b) which basically says funding is within the control of the employer so this may not be used to deny 411(d)(6) protected benefits.

I would take this to mean that the restrictions on HCEs a la 404(a)(4) are permitted so long as the plan specifies the criteria. Of course, with all the dilly dalling which now allows at-will changing of interest rates and asset valuation methods, the employer may elect to make changes or not elect to make changes that would alter the plan's funded % to above or below 110%, or above or below 80% for that matter.

The issue is PPA is pretty clear about 436 restrictions and the IRS is attempting to work around it. This will be interesting because to my knowledge there is no legal requirement that an actuarial valuation (say of a calendar year plan) must be performed before October 1 so that it's feasible that the AFTAP cannot be certified by October 1 because the work hasn't been completed. This could arise unintentionally say if the actuary of record has departed before completing the actuarial valuation and/or issuing the certification and is not replaced by October 1.

[david rigby]

This could arise unintentionally say if the actuary of record has departed before completing the actuarial valuation and/or issuing the certification and is not replaced by October 1.

Or could arise intentionally for other reasons.