AFTAP For One-Person PLan

[emmetttrudy]

I am curious to know what others are doing for these types of situations...If a one person DB plan does not get the AFTAP certified until after the 10/1/ deadline, are you preparing a notice of benefit restriction and then another notice when the AFTAP is certified (say 10/15) letting it be known that the restrictions are lifted? Are there specific rules about wheher these notice requirements apply to one person plans?

[My 2 cents]

If a plan goes into limitations under Section 436 because no AFTAP was certified until after October 1, those limitations cannot ever be lifted during the remainder of the plan year. The percentage remains sub-60% through the end of the plan year irrespective of any subsequent AFTAP certifications for the year.

I have no reason to believe that it matters whether there is one participant or 10,000 participants. Section 436 does not take note of the number of participants.

Whether a notice must be given under a 1-person plan I leave to others.

[emmetttrudy]

Thanks. The notice issue is really what I'm curious about since the limitations (for example, no lump sums) don't really affect anyone other than the one owner and he's obviously not planning on taking a distirbution anyway.

[My 2 cents]

Being below 60% means having to freeze accruals. Could also impact non-qualified deferred comp.

How hard would it be to issue a notice in a 1-person plan? (if it is necessary)

[Andy the Actuary]

Thanks. The notice issue is really what I'm curious about since the limitations (for example, no lump sums) don't really affect anyone other than the one owner and he's obviously not planning on taking a distirbution anyway.

But, people do expire, in particular if they live in a city where the sports teams disappoint.

[Effen]

Being below 60% means having to freeze accruals.

May or may not be true depending on the 2008 ratio. I believe our esteemed congress gave one more year's "relief" on that provision.

[SoCalActuary]

Thanks. The notice issue is really what I'm curious about since the limitations (for example, no lump sums) don't really affect anyone other than the one owner and he's obviously not planning on taking a distirbution anyway.

But, people do expire, in particular if they live in a city where the sports teams disappoint.

Why do you add that? My town has not lost a professional football game in many seasons.

Are you offering pity to Boston?

Of course, if a one-person plan ends because there are no more participants, then the distribution restrictions are not something I would worry about.

[Calavera]

In addition:

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only limitation on lump sum is applicable for the first five years of the plan

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somebody may argue that this plan is not subject to ERISA and this particular notice is not required

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one participant really gave himself this notice by looking at a mirror and telling himself that he is going to work really hard, continue this plan until retirement and not planning to take a lump sum in a near future

[Andy the Actuary]

The bottom line with a lot of these questions regarding one-person plans is if the client is under government scrutiny (e.g., a physician for Medicare fraud), then these just represent more nails that can be driven into the coffin.