Unit Credit & EOY Val

[Penman2006]

Unit credit method and end of year val date. Plan participant terminates during the year but worked more than 1000 hours and therefore accrued a benefit. Should this person have a normal cost? My initial reaction is "yes" but my valuation software company disagrees and says that for a participant that terminated during the plan year that the whole AB (as of the year end) goes into the AL, rather than the beginning of year AB for the AL and the benefit accrual going into NC. Their method creates an actuarial loss all else being equal. I can't find anything in a text book that would support their position, and I can't think of anything in the Code either. What I can come up with from the Code is that a method that inherently creates gains or losses is not "reasonable". It seems that would apply here. Opinions?

[Andy the Actuary]

What you contend makes sense, since the unit credit normal cost is the actuarial present value of benefit accrued during the year. More important, it is presumed that you, and not your software company, will sign the Schedule B. Have them provide you with their explanation and follow your best judgment before signing Schedule B.

[Penman2006]

I agree, the responsibility is on my shoulders.