FIL Method-Assumption Base

[JAY21]

I once knew this but have forgotten due to infrequent use of this funding method. If I change assumptions do I have to set up a 412 base for the assumption change (assume it's a charge base) under the FIL ? I'm clear on the initial base (UFIL) and how gains/losses are treated (spread gains) but don't remember assumption bases per se. I'm thinking if I don't set a base up then my UFIL won't balance/equal my 412 bases-CB-ARA, right ? Anyway, any clarification would be appreciated.

[Blinky the 3-eyed Fish]

You do amortize assumption changes. See Rev. Proc. 2000-40 for a description of the method. This is often helpful for such questions.

[Guest Steve C]

Normally you would set up a 412 base for assumption change under FIL. In fact, it is required under the method description provided in Rev Proc 2000-40 (automatic approval for method change). You might want to look at Approval 6 or 7 in that Rev Proc.

You can define an FIL variant that doesn't set up an assumption change base. In that case the impact of assumption change would flow through future normal cost rather than a distinct amortization. One downside, though, is that automatic approval would then be unavailable.

[david rigby]

Both answers look good. Note that you already answered your own question (sort of) by observing the equation of balance. Simply put, it must balance.