PPA Ancillaries

[FAPInJax]

The IRS has kind of described the calculations necessary for valuing death benefits - permitting the recognition at the BOY for funding target purposes of the death benefit.

Termination benefits would take the benefit payable at termination and determine a present value and multiply by the probability of withdrawal from the plan. The law refers to valuing benefits accrued or earned during the year. There is no reference to vesting. Should vesting be applied during the the valuation?

[Andy the Actuary]

The IRS has kind of described the calculations necessary for valuing death benefits - permitting the recognition at the BOY for funding target purposes of the death benefit.

Termination benefits would take the benefit payable at termination and determine a present value and multiply by the probability of withdrawal from the plan. The law refers to valuing benefits accrued or earned during the year. There is no reference to vesting. Should vesting be applied during the the valuation?

[x] Yup [ ] Nope

Otherwise, you will have overstated liabilities (and deductions). While Sec. 430 speaks of benefits accrued (and not vested benefits), it is reasonable to infer present value incorporates vesting as it would eligibility for an unreduced early retirement benefit (which does not alter the amount of benefit accrued but merely the payment).

[SoCalActuary]

I agree with Andy. If there is a decrement that produces a zero liability, as with a termination before vesting or with a death for an unmarried participant in some plans, then the benefit for that decrement is zero.