436 restrictions

[Gary]

If say as of 1/1/2009 the AFTAP is < 60% and benefits are frozen as of 1/1/2009.

Say the plan is calendar year and for the 1/1/10 valuation my understanding is that the funding target is based on the frozen benefit as of 1/1/2009, but that there is a target normal cost for an accrual during 2010.

Is this correct?

I'll go through the regs more, but just wanted a preliminary opinion.

Personally it seems that if there is a 436 freeze than there would be no accrual for a target normal cost.

thanks

[My 2 cents]

I seem to recall that the funding calculations for 2010 are based on two things after Section 436 forces a freeze as of the start of the 2009 plan year:

a. No accrual for 2009 taken into account

b. Yes future accruals for 2010 forward are reflected as though the plan were not frozen in 2010

You do not take into account the fact that accruals are currently frozen due solely to the workings of Section 436 but you do take into account the fact that in one or more already completed past years there were no accruals.

Also, consider whether the recently enacted relief legislation would come into play.

[FAPInJax]

You might want to consider having your client institute a 'hard freeze' by amendment to avoid the extra cost. Once they get the existing benefits adequately funded a decision can be made as to what additional benefits will be funded.

[My 2 cents]

Since a hard freeze is, presumably, always an option for the sponsor (CBA plans excepted), we always approach 436 limitations as something the sponsor wants to avoid.