Hi all,

How are you planning to handle things when an AFTAP freeze ends (i.e. when the AFTAP rises above 60% after an automatic freeze had occurred)? Will your document language provide for the automatic reinstatement of accruals that would have occurred during the freeze period? Or will such reinstatement require a special amendment signed by the employer?

I'm leaning toward the latter approach (assuming it's permissible). My thinking is that sponsors of severely underfunded plans may adopt "hard freeze" plan amendments sometime after the automatic freeze kicks in, and will not want to automatically reinstate benefits that would otherwise have accrued between the automatic freeze and the hard freeze dates.

What do you think?

TIA,
Scott

You may want to review your decisions in light of the 401(a)(4) conditions regarding grants of past service. If you reinstate by special amendment, you may be caught by 401(a)(4); if the reinstatement is automatic, you may not. You may need to pose this question to someone who signs his/her name followed by Esq.

The general discussion at ASPPA was that automatic reinstatement should not be done. This was put forth by Larry Deutsch and eventually Tom Finnegan came to agree after discussion.

What was their argument that it should be eschewed?

AA: If the concern is that 401(a)(4) may fail if accruals are not reinstated, wouldn't a -11(g) amendment usually handle the issue?

The concern was not about failing if accruals were reinstated; rather, the concern was if the plan were amended to reinstate accruals, then you might have to consider the issue of grants of past service.

This may be a technical concern, via regulation. I'm not sure it would be supported by the intention of the 436 statute.

By definition, the reinstatement takes into account at most one year of past service for a automatic accrual and since that is less than five years, I see no reason to look at timing issues. I have reverted to my initial position that most plans that freeze at 60% will do so due to the timing of the AFTAP certififcation noyt due to actually being less than 60% funded and, so shoould not actually be frozen.

As a result I don't want to have to amend to restore accruals and worry that I may have to make a 436 contribution to allow my accruals to resume. In essence you may wind up paying twice for the accrual in the year of restoration... Plans that are actually under 60% funded need more personalized attention than "what are you doing for your plans about restoration?"

Please help. Final pay plan. Plan frozen after 10 years because of AFTAP. One year later you would unfreeze. Then wouldn't you be using 11 years to calculate the new ab? I realize that you had already used 10 years prior to the Plan being frozen. But, would the amendment then cause you to have to look at the new benefit as granting more than 5 years of past service?

The amendment simply grants one year of past servixe...not a timing issue

As my firm approaches doing DB PPA amendments, my plan was to allow for the automatic increases. Seems to me we can control the effect of the automatic unfreeze before an AFTAP is certified showing sufficiency by simply hard freezing the plan by amendment.

The only downside I see occurs if the deadline for the AFTAP certification is nearing and it will be difficult to get the hard freeze signed in time. Also, I haven't explored the 204(h) aspects fully. I imagine though even if the plan is frozen via 436, the proper advance notice is required for a hard freeze.