FASB valuation method

[FAPInJax]

When valuing an ancillary benefit (for example - vested termination liability from withdrawal) - does the lump sum value of the accrued benefit get valued at the greater of FASB assumptions or GATT??

[david rigby]

It depends. Sounds like part of your assumptions to me. For example, you may have an assumption that X% of those eligible for the lump sum will actually take it. Then you should probably determine the amount of those lump sums, using your best estimate, and then use the SFAS 87 discount rate to value them in today's dollars.

Any other opinions?

[MGB]

I agree with pax.

One clarification of the "best estimate" for the future value of the lump sum: If it is not limited by 415, then the expectation of 417(e) rates in the future at each decrement date will determine what this best estimate is (overridden by any plan feature using rates other than 417(e)). If it is limited by 415, then the future lump sum would be based on 417(e) rates (overridden by 5%, if applicable) at the date of the valuation; no assumption of future changes allowed.

[david rigby]

Not trying to be picky, but, in the context of SFAS 87, what do you mean by "...no assumption of future changes allowed"?

[MGB]

Sorry, I was in a fog. I had just gone through this a couple of weeks ago with our programmers and didn't sort out in my head that it wasn't a FASB discussion. The limitation to using current rates on 415 is only in the context of an ERISA valuation.