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Showing results for tags 'valuation assumptions'.
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Hi all, Wanted to start a discussion on what future interest crediting rates would be considered reasonable assumptions for funding valuations for Market Based Cash Balance Plans. These plans are designed to reduce risks of underfunding but if the assets are aggressively invested and, depending on the method of determining a future return assumption, the assumed future interest crediting rate could be higher than the relief funding rates resulting in minimum required contributions greater than the pay credits. Is anyone aware of any regs or approved methods for determining a reasonable future interest crediting rate that would not result in unreasonable underfunding results and minimums greater than actual pay credits? It seems applying a 6% cap on the projected ICR would be reasonable considering the new legislation in Secure 2.0 but this is still high. Curious if anyone ties the projected ICR to a segment rate similar to how the future ICR would be determined at plan termination for market based rates? Goal is to avoid underfunding results when the plan sponsor is funding the annual pay credits and the plan has a more aggressive asset mix. -
I believe there is a Revenue Procedure that specifies that if a participant had less than 1,000 hours in the prior year (and therefore no benefit accrual according to terms of the plan ), you MUST assume they will have 1,000 hours in the current year. This is for purposes of a BOY actuarial valuation. I thought it was in RP 2017-56 or 2017-57, but I cannot seem to find it. I’m asking because client (of owner only plan) wants to minimize cost for 2020 and if they confirm <1,000 hours in 2019 we can assume same for 2020 and not have a normal cost.