What a Mess ! AFTAP

[Andy the Actuary]

Would appreciate comments on whether or not I'm getting this correct:

No credit balances are maintained.

A client plans to contribute the last piece of their 2009 calendar year plan contribution - $100,000 - on 9/15/2010

The plan sponsor (i.e., plan administrator) has elected to determine the actuarial value of assets as average value.

So, for purposes of computing the 2010 minimum contribution (officially after 9/15/2010), we determine the fair market value of assets on 1/1/2010 by including the discounted value of the $100,000, which in turn is used to determine the average value.

However, suppose I will certify the 2010 AFTAP in May 2010. We cannot include contributions that have not been made as of the certification date. Consequently, for purposes of calculating the AFTAP, I must not include the (discounted value of the ) $100,000 in determining the fair market value that is used to determine the average value.

Consequently, I must determine two average asset values as of 1/1/2010 !!!

Worse, the AFTAP determined in May will be 79%. If I am requested (and I will be) to recalculate the AFTAP in September after the plan sponsor makes the $100,000 contribution, the AFTAP will be 81%. The 2009 AFTAP was 73%.

So, lump sums will be restricted to 50% effective April 1 through September whenever and thereafter unrestricted (other than for HCEs). Further, (unless I plan to croak before October 1) there is no purpose in certifying the AFTAP in May since it is already presumed to be less than 80%.

[dmb]

Would appreciate comments on whether or not I'm getting this correct:

No credit balances are maintained.

A client plans to contribute the last piece of their 2009 calendar year plan contribution - $100,000 - on 9/15/2010

The plan sponsor (i.e., plan administrator) has elected to determine the actuarial value of assets as average value.

So, for purposes of computing the 2010 minimum contribution (officially after 9/15/2010), we determine the fair market value of assets on 1/1/2010 by including the discounted value of the $100,000, which in turn is used to determine the average value.

However, suppose I will certify the 2010 AFTAP in May 2010. We cannot include contributions that have not been made as of the certification date. Consequently, for purposes of calculating the AFTAP, I must not include the (discounted value of the ) $100,000 in determining the fair market value that is used to determine the average value.

Consequently, I must determine two average asset values as of 1/1/2010 !!!

Worse, the AFTAP determined in May will be 79%. If I am requested (and I will be) to recalculate the AFTAP in September after the plan sponsor makes the $100,000 contribution, the AFTAP will be 81%. The 2009 AFTAP was 73%.

So, lump sums will be restricted to 50% effective April 1 through September whenever and thereafter unrestricted (other than for HCEs). Further, (unless I plan to croak before October 1) there is no purpose in certifying the AFTAP in May since it is already presumed to be less than 80%.

FWIW, i see no reason to certify 2010 AFTAP in May. You would only be certifying to same 60-80 range as 2009 and there would be no change in operation of plan even after reducing 2009 AFTAP by 10%. No reason not to wait util 9/15/10 to certify 2010 AFTAP.

[Andy the Actuary]

FWIW, i see no reason to certify 2010 AFTAP in May. You would only be certifying to same 60-80 range as 2009 and there would be no change in operation of plan even after reducing 2009 AFTAP by 10%. No reason not to wait util 9/15/10 to certify 2010 AFTAP.

Thank you but real question is not answered by your response and I apologize for not asking more specifically: If you did certify in May, would you have to compute a preliminary average asset value that necessarily would differ from the average asset value used to determine the minimum contribution?

[Mike Preston]

I don't consider the fact that some asset values include receivables and others don't much of a catastrophe. For those of us who have to complete 5500's, as well as produce Schedules B and SB, there have always been circumstances where asset values differed. Now, there are more circumstances. No big deal.

A small, picky, itsy-bitsy comment to dmb who wrote: "there would be no change in operation of plan even after reducing 2009 AFTAP by 10%". In this case, the 2009 AFTAP is not reduced by 10% as of 4/1/2010 because such a reduction only takes place if the prior year's AFTAP is in the range of 60-69.99% or 80-89.99%. That is, the reduction only takes place if, after the reduction, there would be a change in the plan's restrictions (you end up going from 80% or above to something less than 80% or from 60% or above to something less than 60%). This is critical to understanding how other things work under the regulations such as automatic burns or how big a 436 contribution must be.

[Andy the Actuary]

I agree with you Mike that it's no big deal. The only difference is now we could have different AFTAP's floating around. E.g., that which is certified and that with appears in the Annual Funding Notice.

[Mike Preston]

Don't we already have different AFTAP percentages for the AFN foisted upon us by the PBGC requiring different calculations for the AFN than for the SB?

[Andy the Actuary]

Don't we already have different AFTAP percentages for the AFN foisted upon us by the PBGC requiring different calculations for the AFN than for the SB?

No question -- the PBGC did it foist !