A PBGC covered Plan that was frozen in 1993 is 75% funded and is going through the standard termination process. The Plan Sponsor has committed to fund the Plan to cover 100% of benefits liabilities. The Plan is filing for a D-Letter and will not make distributions, other than business-as-usual distributions, until the D-Letter is received. The Plan Sponsor will fund the Plan once the D-Letter is received.

A NHCE terminates employment. The Plan distributes a lump sum. An HCE terminates employment. Is the Plan required to respect the pre-termination restrictions of 401(a)(4) and not distribute the HCE's benefit in a lump sum unless the Plan sponsor would make the Plan 110% funded? Obviously, once the D-Letter is received, the Plan would become 100% funded and all distributions could be made.

What is the AFTAP? If less than 80% the NHCE should have also been restricted.
Edit: Never mind, I see now the plan was frozen before PPA took effect.


I think the IRS's current position is that restrictions stay in place until the instant the assets are distributed.

I think that's true, but what about previously non-restricted plans?.

For example, a plan terminates 6/30/2010 and had a 7/1/2009 AFTAP of 95%. It drops by default I think to a presumed 85% effective 7/1/2010 (post termination date), which expires (I think) 3/31/2011. Does this create a restricted condition on 4/1/2011?