Jegan

Thanks Tom! The software we use also using the second formula. So not 100% sure when we are suppose to use the 1st formula. The document is available in below path. Refer page no 8. http://www.irs.gov/pub/irs-pdf/p6389.pdf A separate account may be established or an account balance must be maintained for the employee's interest in the plan as of the time of the distribution and at any relevant time in the future. A participant's vested interest in a separate account cannot be less than the amount determined by the first of the following formulas: (1) X = P (AB + [R x D]) - (R X D) X is vested interest at relevant time. P is vested percentage at relevant time. AB is account balance at relevant time. D is amount of the distribution. R is the ratio of the account balance at the relevant time over the account balance after distribution. The relevant time is the time at which the vested percentage in the account cannot increase. (2) x = P(AB + D) - D may be used instead of the above formula. A separate account is not needed with this formula.

The IRS documentation says upon any withdrawal the adjusted vesting calculation would be either of (1) X = P (AB + [R x D]) - (R X D) X is vested interest at relevant time. P is vested percentage at relevant time. AB is account balance at relevant time. D is amount of the distribution. R is the ratio of the account balance at the relevant time over the account balance after distribution. (2) or X = P (AB+D) - D The difference is, in 2nd formula the value of R is 1. My question is when we can use formula 1? Under what circumstances we need to use formula 1? Any thoughts.