RPA'94 CL AT B.O.Y. FOR LINE 2B OF SCHEDULE B.

[himt4]

I am doing an e.o.y. 12/31/04 val for 2004. The instructions for Schedule B say to use Beginning of year numbers for line 2b. I noticed that my software system is including current liability amounts for participants who entered the Plan 7/1/04. This seems strange. The instructions for Schedule B does have this passage for line 2b instructions:

"If the current liability figures are derived from a valuation that follows the first day of the plan year, the participant and beneficiary count entries should be derived from the counts used in that valuation in a manner consistent with the derivation of the current liability reported in columns (2) and (3). "

I find the wording to be very confusing in this passage. But, anyway, my question is whether my software is on solid ground with adding in current liability amounts for 7/1/04 entrants for line 2b? And, if so, is it the above passage that justifies it?

A follow-up question is: Would it be a problem if I don't include in amounts for the 7/1/04 entrants?

[Guest dsyrett]

Question: is your software subtracting out the CL accrual for the year and reporting that separately from the BOY CL?

[Blinky the 3-eyed Fish]

Is the benefit formula based on service instead of participation, so that a person has a current liability upon entering the plan? The point of the instructions is that you counts are going to be those in the valuation, including those that entered during the year.

[himt4]

Yes, the formula is based on service and as soon as those 7/1/04 entrants enter they have an accrued benefit. So you interpret that instruction to say that you include them in the counts, that's fine. But should you also be adding in some CL for them at BOY when obviously they had no CL at 1/1/04?

[Blinky the 3-eyed Fish]

But they did have current liability at 1/1/04. Here is an example:

Person hired 3/1/03, plan has a 1 YOS wait, so he enters 7/1/04. If the benefit is based on service and he had a YOS in 2003, well he has a CL as of 1/1/2004.

You are getting hung up on the fact that they weren't participants as of 1/1/2004. The instructions are clear this is immaterial as you are deriving the counts as of the valuation date and correspondingly, you are determining the CL as of the BOY for those participants as of the valuation date.

[mwyatt]

A sidebar to this situation, Blink. Always been a little thrown off here w/ EOY valuations in the situation of someone who was active at the beginning of the year but terminated during the year (with possible reduction due to partial vesting). I know the item 1 liabilities reflect your valuation status (calculated @ EOY), but how do you treat these shifts in status from BOY to EOY?

[Blinky the 3-eyed Fish]

The status is the same as on the valuation date, i.e. terminated in your case.