AFTAP -- Frequently A Total Waste of Time

[Andy the Actuary]

Today is National Venting Day so let me be the first kid on the block to whine.

In following the AAA's approach, I've notified the client to request me to certify the 2010 AFTAP for a plan that was frozen 12/31/2009. The plan is sponsored by an extremely profitable not-for-profit organization. The plan's AFTAP has always been above 100% (In fact, they dumped a lot of money into the plan so they could make lump sum distributions to a couple HCEs). It is now 122%.

It appears PPA's effect is to punish everyone whether or not a crime has been committed.

[david rigby]

It appears PPA's effect is to punish everyone whether or not a crime has been committed.

Not restricted to PPA.

[SoCalActuary]

Frequently A Total Waste of Time - hmmmm.... sounds like most of our requirements, also like a lot of legal procedures, waits in the doctor's office, and others you can fill in.

The only salvation for this foolish need: you can tell the client that your billing reflects Congressional mandates. You must do it.

[My 2 cents]

I think the idea that one should obtain direction before issuing an AFTAP certifcation is so the actuary, by issuing an AFTAP certification in a situation where that certification will affect plan administration (e.g., making Section 436 limitations apply or cease to apply) will not be considered to have taken any actions on his or her initiative that could be construed as fiduciary in nature.

When do you issue an AFTAP? As soon as possible so the plan can stop making lump sum payments (or so the plan can resume making them)? As late as possible so the plan can continue making lump sum payments (or so the plan can continue to reject requests for lump sums)? Doesn't that become a decision for a plan fiduciary?

If the plan has been above 100% and remains above 100%, the only decision is whether to issue one at all (if one waits long enough, even a really well-funded plan can deny lump sum payments!). Otherwise, who cares?

[Andy the Actuary]

I think the idea that one should obtain direction before issuing an AFTAP certifcation is so the actuary, by issuing an AFTAP certification in a situation where that certification will affect plan administration (e.g., making Section 436 limitations apply or cease to apply) will not be considered to have taken any actions on his or her initiative that could be construed as fiduciary in nature.

When do you issue an AFTAP? As soon as possible so the plan can stop making lump sum payments (or so the plan can resume making them)? As late as possible so the plan can continue making lump sum payments (or so the plan can continue to reject requests for lump sums)? Doesn't that become a decision for a plan fiduciary?

If the plan has been above 100% and remains above 100%, the only decision is whether to issue one at all (if one waits long enough, even a really well-funded plan can deny lump sum payments!). Otherwise, who cares?

I both understand and agree with this analysis. However, the situation I described is one where the Plan sponsor wants to pay its lump sums. In fact, I would likely resign if they failed to request a certification as this would truly be flouting the law.

[Ron Snyder]

How can you call guaranteed employment for actuaries a "total waste of time"?

[Andy the Actuary]

I'm an idealist. I prefer to think that my clients pay me for something of value. How naive of me!!!!

[david rigby]

How can you call guaranteed employment for actuaries a "total waste of time"?

Huzzah! Huzzah!

[Andy the Actuary]

Our grandchild has decided she wants to become a pension actuary so I bought her these:

[Jim Norman]

It appears PPA's effect is to punish everyone whether or not a crime has been committed.

Not restricted to PPA.

Indeed it's not.

"It is the invariable habit of bureaucracies, at all times and everywhere, to assume...that every citizen is a criminal. Their one apparent purpose, pursued with a relentless and furious diligence, is to convert the assumption into a fact. " - H. L. Mencken

[Andy the Actuary]

It appears PPA's effect is to punish everyone whether or not a crime has been committed.

Not restricted to PPA.

Indeed it's not.

"It is the invariable habit of bureaucracies, at all times and everywhere, to assume...that every citizen is a criminal. Their one apparent purpose, pursued with a relentless and furious diligence, is to convert the assumption into a fact. " - H. L. Mencken

Wonderful quote, thank you. May have been ghost-written by Will Rogers.