PFB for EOY val date

[Guest AP914]

Example

Contrib made 3/1/09 for the 2008 plan year of 10,000 (effective rate for 2008 was 5%). To calculate the PFB at 12/31/2009 for the 2009 plan year (end of year val date) would I take the 12/31/2008 PFB (which is zero) increase at the 2009 investment return and then add in the 10,000 discounted to 12/31/2008 at 5% (9,919), then subtract the MRC at 12/31/2008, which was 8,000, to get (1,919) then increase this at the 2009 effective rate (let's say it is 5.5%) to 12/31/2009, to get 2,025?

Does this seem like the correct process?

[Guest RBlaine]

I think if the 03/01/2009 contribution is a 2008 contribution, it is discounted back to 12/31/2008 (the valuation date)using the effective rate. The result is compared to the minimum required contribution and, if higher, the excess is considered Excess Contribution. Well, technically, it has be designated so by the employer. This is the same as if a BoY valuation date is used.

The designated Excess Contribution amount is brought forward to the end of the Plan Year using the 2008 effecitve interest rate. Since your valuation date is the PYE, designated Excess Contribution = PFB at 12/31/2008.

Now, for the 12/31/2009 valuation, you bring this 12/31/2008 PFB to 12/31/2009 using the 2009 effective rate to determine how much can be used to offset the 2009 MRC. Whatever is not used is discounted back to 12/31/2008 using the 2009 EIR and then brought forward to 12/31/2009 using the Actual Rate of Return.

Any 2009 contributions made in 2010 would be discounted back to 12/31/2009 using the 2009 EIR and any amount designated as Excess Contributions would be added to the PFB.

[Guest RBlaine]

I should have included #'s.

10k contributed on 03/01/2009 discounted to 12/31/2008 (5% EIR using Yearfrac function in Excel) = 9920. Assuming $5k MRC on 12/31/2009 (edit- this was supposed to be 12/31/2008), the maximum Excess Contributions = 4920. For whatever reason, the employer only designates $4,000 as Excess Contributions and the PFB = $4,000

Lets say that for the 12/31/2009, the EIR is 6%, the MRC is $3k, the actual rate of return is -10% and the employer wants to use the PFB to offset the MRC.

The $4k increased to 12/31/2009 = $4,240.

$3k is used to offset the MRC and the remainder is discounted back to 12/31/2008 at 6% = $1,170.

This is then brought forward with the -10% earnings for a 12/31/2009 PFB of $1,053.

Did I do all that correctly?

[Guest AP914]

I should have included #'s.

10k contributed on 03/01/2009 discounted to 12/31/2008 (5% EIR using Yearfrac function in Excel) = 9920. Assuming $5k MRC on 12/31/2009, the maximum Excess Contributions = 4920. For whatever reason, the employer only designates $4,000 as Excess Contributions and the PFB = $4,000

Lets say that for the 12/31/2009, the EIR is 6%, the MRC is $3k, the actual rate of return is -10% and the employer wants to use the PFB to offset the MRC.

The $4k increased to 12/31/2009 = $4,240.

$3k is used to offset the MRC and the remainder is discounted back to 12/31/2008 at 6% = $1,170.

This is then brought forward with the -10% earnings for a 12/31/2009 PFB of $1,053.

Did I do all that correctly?

Ok that all makes sense to me, except the 2nd paragraph. Did you mean "Assuming $5k MRC on 12/31/2008"? If so then all is good. Thanks for the help!

[Guest RBlaine]

I should have included #'s.

10k contributed on 03/01/2009 discounted to 12/31/2008 (5% EIR using Yearfrac function in Excel) = 9920. Assuming $5k MRC on 12/31/2009, the maximum Excess Contributions = 4920. For whatever reason, the employer only designates $4,000 as Excess Contributions and the PFB = $4,000

Lets say that for the 12/31/2009, the EIR is 6%, the MRC is $3k, the actual rate of return is -10% and the employer wants to use the PFB to offset the MRC.

The $4k increased to 12/31/2009 = $4,240.

$3k is used to offset the MRC and the remainder is discounted back to 12/31/2008 at 6% = $1,170.

This is then brought forward with the -10% earnings for a 12/31/2009 PFB of $1,053.

Did I do all that correctly?

Ok that all makes sense to me, except the 2nd paragraph. Did you mean "Assuming $5k MRC on 12/31/2008"? If so then all is good. Thanks for the help!

Sorry, that is what I meant, yes.