Benefits Restriction After Plan Termination

[Andy the Actuary]

Case 1. 2014 AFTAP = 80%. Plan terminated 12/31/2014. Final distributions anticipated in 2016. Assets 12/31/2014 depreciate 25% from 12/31/2013. A NHCE terminates in 2015. Can he receive an unrestricted lump sum distribution prior to the final termination distribution?

Case 2. 2014 AFTAP = 78%. Plan liabilities under IRC 430/436 are determined as of 1/1/2015. An AFTAP of 83% is determined and certified. Subsequently, a NHCE terminates in 2015. Can he receive an unrestricted lump sum distribution prior to the final termination distribution?

I'm unaware where remeasurement, presumed funding, or AFTAP certifications apply after 12/31/2014. So, unless someone can suggest other guidance, life is fixed until final termination distributions.

[AndyH]

"life is fixed until final termination distributions"

Agree.

[Andy the Actuary]

Second part of question.

Suppose Plan has HCEs who are to receive a lump sum distribution in 2015. It would appear irrespective of the Plan's funded status in 2014 (even > 110%), an actuarial valuation would have to be performed in 2015 under the same methods and assumptions in accordance with the Plan under which the 110% test was conducted before the Plan is terminated. At such time, the Plan sponsor could elect to make additional contributions if needed to satisfy the pre-termination restrictions on distributions.

Agree or disagree?

[AndyH]

Agree. Not a formal valuation but yes a calculation.