In the past, when I have done plan terminations for the final year of a plan, I have applied amendments made during the plan year (but after the valuation date) to change the benefit formula to 0%. Therefore I was only funding for the benefits accrued to the end of the year, which lowered the minimum contribution.

However, this plan, of a sole proprietor, does not have an amendment decreasing the benefit formula to 0%. There is only an email, on 12/4/07, stating that the plan will be terminated 12/31/07.

Can the plan funding be based on the fact that the plan will terminate during the plan year, with the projected benefit being the benefit accrued at year end?

The plan will be underfunded, but if minimum funding requirements can be met in the last year, distributions to the sole participant can be made to the extent funded, since the plan is not PBGC covered.

I assume you are referring to the 2007 PY valuation. Can you change the funding method and accomplish your goal?

That sounds like a way around it - thanks!

But think that 2000-40 limits what you can do in year of termination (basically, only have permission for change to UC if plan is funded). Might want to research this point (see 6.01(5) of Rev. Proc. 2000-40).