Use of Full Yield Curve

[Dougsbpc]

Are there any restrictions to using the full yield curve for a 1/1/2009 DB valuation?

For the 2009 year, I believe we can go back 3 months before the start of the plan year. October 2008 would provide the most relief.

This plan had enormous losses in 2008 but have gained back all that was lost. A reduced minimum for 2009 would sure help.

Thanks.

[Effen]

Well good morning. For 1/1/2009 valuation you can use any of the 4 look back months. For 2010, you can't.

Biggest issue at this point in the year would be a potential material change to your AFTAP that would potentially disqualify your plan. If the AFTAP based on the yield curve is in a different restriction category than the one you certified prior to 10/1/09, then you have a material change and your plan is disqualified. Since I assume this would happen if the employer elected to use the yield curve now, it is probably a missed opportunity.

Then again, 2009 is a good faith year and it might be worth the risk.

The IRS released a memo on 9/25 stating you had another "free" change on funding assumptions for 2010 valuations. Personally I think it is/was very unreasonable for the IRS to release guidance on the using the yield curve 5 days before AFTAPs had to be certified. However, the rules as currently written would most likely call this a material change and therefore probably not an option at this time.

[Mike Preston]

What if there was no AFTAP issued, at all?

[Dougsbpc]

Yes...If no AFTAP was issued then I dont think you could have a material change as the presumed AFTAP would be less than 60% and would stay that way until 2010. If you now change the 2009 val by using the full yield curve, you havent changed the less than 60%.

Also, I think the final regs allow us to switch between beg and end of year valuations without obtaining approval for 2008, 2009, and 2010. Since many plans have recovered losses, this might also be a solution.

What if you had a plan certified at 98% for 2009 but changed to the yield curve now and that brought the AFTAP up to 107%? At 98% there were no restrictions so I would think this would not be considered a material change.

[Mike Preston]

Agreed.

[Guest RBlaine]

Yes...If no AFTAP was issued then I dont think you could have a material change as the presumed AFTAP would be less than 60% and would stay that way until 2010. If you now change the 2009 val by using the full yield curve, you havent changed the less than 60%.

Also, I think the final regs allow us to switch between beg and end of year valuations without obtaining approval for 2008, 2009, and 2010. Since many plans have recovered losses, this might also be a solution.

What if you had a plan certified at 98% for 2009 but changed to the yield curve now and that brought the AFTAP up to 107%? At 98% there were no restrictions so I would think this would not be considered a material change.

This is cool, because if you were Johnny-on-the-spot and issued AFTAP's as soon as possible just like the IRS wants you to, and congress passes some legislation or the IRS adds rules allowing you to reduce your contribution for the year, you can't use it because you did what they wanted you to do in the first place.

Did anyone else hear Holland say something along the lines of changing the AFTAP from 85% to 95% for 2009 might be a material change because if it changes plan operations at 04/01/2010 when it would have been reduced by 10% and restricted at that point (assuming no 2010 AFTAP certified before that date)? I couldn't tell if that is what he said or if he was saying something else and I misunderstood.

[Effen]

i think you heard right