AFTAP Needed?

[Andy the Actuary]

A 3 person DB plan terminated 12/31/2011. The D-Letter has been received and benefits (presumably all lump sum) will be distributed in October 2012. 2011 AFTAP was 91% so presumption since April 1 has been 81% and hence no restrictions apply to distributions for NHCEs. Since the Plan terminated in 2011, no valuation was prepared for 2012. Nonetheless, the presumption of >60% underfunding applies October 1. However, IRS regs. indicate these don't apply for carrying out the distribution of assets upon Plan termination. The Plan will likely not have sufficient assets so that owner/employee will take a hit.

I'm operating on the assumption that while presumption apply October 1, Plan would have until October 31 to notify participants of restrictions. However, by that time, all Plan assets will have been distributed.

In short, it seems pointless to prepare a valuation simply to determine an AFTAP for academic purposes.

Anyone believe this approach is fraught with disaster?

[Mike Preston]

No, it is normal.