Formaldehyde looks as though ...

Formaldehyde looks as though it shouldn't be difficult in breaking down because it is an organic molecule.  However it is also a biocide, inhibiting bacterial growth and is also a chemical, which can have a detrimental effect on the protozoa.  On experiments tried on a plant where formaldehyde was used and needed to be removed, there was a difficulty in obtaining good growth and there appeared times when growth became inhibited.  When growth did occur, the floc was weak and easily disrupted, which meant that a conventional settlement tank wouldn't work well.  This site did not have water with other nutrients, so there was little opportunity to dilute the formaldehyde with other materials.

Based on this, if I was to build a plant, I would want a high dilution, to prevent formaldehyde from becoming toxic to the biology.  You will have to feed the plant with a nitrogen source and if ammonia is present, it will be a problem because ammonia oxidising bacteria are inhibited by formaldehyde.  Almost certainly you will have to use membrane separation rather than settlement tanks and a method to clean the membranes because of the fine floc.

The other difficulty is the stress response.  Despite there being the correct nutrients and oxygen, there may be difficulties in the floc being sticky due to the stress of the formaldehyde causing some bacteria to generate polysaccharides.  These would end up blinding membranes.  Formaldehyde may also inhibit phosphate absorption from the water and may be part of the cause of the generation of sticky polysaccharides.

Whatever, the plant will need to use fine bubble aeration.  This is not only due to the better oxygen transfer but will prevent  formaldehyde from being driven off in the vapour.  So you will need to avoid such systems as jet mix aeration, or oxygen systems using a venturi.

The pH will need to be maintained at pH 7.2-7.6, so lime dosing or caustic dosing may be needed with tight monitoring.