Restricted Lump Sum Upon Plan Termination

[Pension RC]

A one-man plan has always had an AFTAP over 100%. However, the 2013 AFTAP wasn't certified and, shortly thereafter, the plan was terminated and the one-man received a lump sum distribution. Was that lump sum in violation of 436, since the AFTAP was deemed to be less than 60%, or is a plan termination different?

Thanks!

[Effen]

The instant he paid the distribution as a result of the plan termination, the 436 rules ceased to apply. Up until that point, the lump sum was prohibited.

Kind of meaningless in a one-life plan, but he was not allowed to receive a lump sum until he paid it, then it was ok because it was paid as a result of the plan's termination.

[Andy the Actuary]

It's important to note that accruals cease under 436 if AFTAP < 60% so should check applicability of this point to your situation.

Check this out: Assuming calendar year and 2012 AFTAP>100%, lump sums could be paid without restriction until 9/30/2013 which would have been point where deemed <60% because of no certification.