I have an end of year valuation for a 12/31/2008 DB plan with the following data:

Target Liability: 253,789
AVA: 150,354
Pre-Contributions: 43,736
Interest on Pre-Contributions: 721
Carryover balance @ EOY: 74,043

With this data, the 2009 AFTAP will be certified at 47.59%. However, a deemed burn of $42,538 will bring the AFTAP to 60%.

I have two questions:

1. How does the deemed burn affect the 2008 valuation?, and
2. Is the deemed burn reported on the 2008 SB or the 2009?

Joseph Carolan

Your numbers don't seem to be consistent with your percentages, can you detail your calculations?

Under IRC 436, if burning any COB will eliminate a restriction, then the burn is not optional. Therefore, the AFTAP occurs after the burn, not before.

(AVA+Pre-Contributions+Interest on Pre-Contributions-COB)/Target Liability=AFTAP

(150,354+43,736+721-74,043)/253,789=0.4759

If the carryover balance is reduced to $42,538 (burning $31,505), the result is:

(150,354+43,736+721-42,538)/253,789=0.60

I see where I said I needed to burn $42,538, but really I need to burn enough of the FSCOB to bring it down to $42,538 at the end of the year