Presumed AFTAP<60%

[Dougsbpc]

1/1/2009 valuation data was sent to us late and we were not able to obtain certified AFTAP from actuary until after 10/1/2009. Actually done in January 2010 at 128%.

The presumed AFTAP of <60% applies to benefit restrictions. I believe it also applies to credit balances correct?

So for the 2010 year the MRC cannot be reduced by the pre-funding balance because of the late AFTAP. Correct?

Thanks.

[Andy the Actuary]

Thought whether or not can use credit balance depends only on the numbers as prescribed under 430 as of the preceding year valuation date and not by whether or not the plan is certified under 436. Is there some linkage between 430 and 436 that I have overlooked?

[My 2 cents]

Don't see any connection between the AFTAP (deemed or otherwise) for 436 purposes and the ability to elect to use Carryover Balance or Prefunding Balance in a plan year for 430 purposes. The law and the regs seem to peg the 80% limitation to the prior year's Funding Target vs assets minus prefunding balance (if that offset is applicable), with no mention of AFTAP.

Technically, you can't be sure of that ratio until the relevant values are formally certified in that year's Schedule SB. After all, it is still possible today (assuming that the 2009 5500 has not been completed) to elect to redo the 1/1/09 valuation to use the October 2008 full yield curve, significantly improving the 2009 funding percentages even if the AFTAP had already been certified (assuming no issues involving material changes affecting qualification, which would not apply, for example, if the plan had been frozen before 9/1/05).

A Schedule SB certification producing a surprise ratio below 80% for the prior year would invalidate any elections for the current year. A certification of Funding Target and actuarial asset values producing a ratio of 80% would validate any current year elections already made, and would enable such elections even if none had been made based on prior valuation results, although they could be late for quarterly purposes. Of course, if the change to a yield curve for 1/1/09 would result in a $0 minimum required contribution for 2009, then none of the 2009 or 2010 quarterlies could possibly be late, whatever the appearance may have been prior to the election to go to the full yield curve.

[Dougsbpc]

Thanks for your answers.

I went back and re-read 430 and 436 and indeed there seems to be no connection as you both mentioned.

This is good news.

I can toss a coin and get heads 50% of the time but when it comes to PPA funding, the bad result usually shows up 85% of the time. Not this time.

[Andy the Actuary]

I can toss a coin and get heads 50% of the time but when it comes to PPA funding, the bad result usually shows up 85% of the time. Not this time.

Andy t. a.'s law of probability: If there is a 50% chance (a coin toss) of acting correctly on a proposition, there is a 100% chance I will act incorrectly. Thus, if you drive with me, it is advised not to let me decide whether to turn left or right.