Elimination of Reconciliation Account

[LIBOR]

DB practitioners know that, in addition to amortization bases, the reconciliation account is eliminated when the ERISA FFL is reached ; but how do we know that ?

officially that is ?? Anybody have a cite ??

[Guest DFerrare]

According to Question 7 from the 1994 Enrolled Actuaries Gray Book, "the reconciliation account should be eliminated only when the ERISA full funding limit applies and there is a full funding credit."

David

[david rigby]

Here is Gray Book 94-7

Disposition of Reconciliation Account Balance - 412

Can any of the components comprising the Schedule B Reconciliation account ever be eliminated and, if so, under what circumstances? For example, if a plan becomes fully funded for Current Liabilities, can the accumulated additional funding charges due to section 412(l) (Schedule B item 9(p)(i)) be transferred to the plan's credit balance? Similarly, can any or all of the Reconciliation account be eliminated or transferred to the credit balance when the 412©(7) full funding limit applies?

RESPONSE

The reconciliation account should be eliminated only when the ERISA full funding limit applies and there is a full funding credit. In no event should the reconciliation account be added to the credit balance.

Copyright © 1994, Enrolled Actuaries Meeting

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Another possibility might be to use simple arithmetic. The first sentence of the Line 9q instructions for the Schedule B read as follows:

“The reconciliation account is made up of those components that upset the balance equation of Treasury Regulation section 1.412©(3)-1(b).”