Target Normal Cost

[emmetttrudy]

If an amendment was adopted 10/1/2009 changing the cash balance credit from $500 to $1,000, effective 1/1/2009, does the Target Normal Cost take this into account for the 1/1/2009 valuation? Or am I understanding correctly that the TNC calculation is not forward looking like it was pre-PPA, and the TNC should not take into account the change from $500 to $1,000.

[emmetttrudy]

Just to clarify what I am asking, is the TNC computed without taking into account a plan amendment that is adopted after the plan's valuation date?

[Blinky the 3-eyed Fish]

You have a choice. The preable in the final regs says:

Except as otherwise provided, the determination under the regulations of a plan’s funding target and target normal cost for a plan year are determined based on plan provisions that are adopted no later than the valuation date for the plan year and that take effect during that plan year.

Skip ahead a few paragraphs to:

Thus, if an amendment is adopted after the valuation date for a plan year (and no later than 21⁄2 months after the close of the plan year) but takes effect during that plan year, the full increase in liability is taken into account as of the valuation date for that plan year if a section 412(d)(2) election is made, and none of the increase in liability is taken into account as of the valuation date for that plan year if no section 412(d)(2) election is made.

Of course you are in 2009 and either operating on good faith or electing to apply the final regs.

[Mike Preston]

Don't have time to cite the reg, but remember that a 412(d)(2) election is mandatory if the amendment would otherwise be restricted under 436©(2). Hence, you can't increase the TNC for the year if the effect of including it in FT would have been that the amendment can't be adopted. I think the impact of this provision is to require a 436 contribution, not to actually modify the FT (although it does do that).

Ciao from DC.

[AndyH]

How about a report on the new facility Mike?

[FAPInJax]

The new facility is very nice. Nice large meeting rooms with tables (lots of walking between sessions). All the resturants in the hotel have excellent food. The rooms are nice (when you are in them <G>).