PFB and Excess contributions for EOY plans

[Guest AP914]

I am trying to get an clear picture on what effective interest rates to use for EOY plans. The only example I have from Mr. Holland did not address an existing PFB. Here are my examples please let me know if you agree or disagree and if you disagree please explain why and how you think it should be done.

Example 1: what would be the PFB for doing calculations (determining Shortfall, burn, etc), for a 12/31/2010 EOY valuation.

PFB existing at 12/31/2009 = $2000

Excess contributions for 2009 plan year at 12/31/2009 = $800

EIR for 2009 = 5%

EIR for 2010 = 6%

So I am thinking the PFB for determining shortfall, etc would be:

(a) Existing PFB brought forward at the current year EIR to be $2,120

(b) Excess contribution for 2009 at 12/31/09 brought forward to 12/31/10 at prior to be $840

Sum of a and b = 2,960.

Example 2: Or do you think it should be $2000 plus $800 brought forward at 6% to get 2,968?

The way I read the final regs I think it would be Example 2. What do you think.

[SoCalActuary]

Where is your actual return on plan assets?

The COB and the prior year PFB are both adjusted for actual return. Follow the math on the SB.

[Guest AP914]

Where is your actual return on plan assets?

The COB and the prior year PFB are both adjusted for actual return. Follow the math on the SB.

Ignore COB for now, say it is zero. As for the ROR for the PFB, I am referring to how the shortfall amortization and burn is calculated, which would occur before bringing forward at the ROR. In the final regs it states (and I am paraphrasing)...

(4) Valuation date other than the first day of the plan year (i) in general...... the plan's prefunding balance are increased from the first day of the plan year to the valuation date using the plan's effective interest rate under section 430(h)(2)(A) for the plan year.

The part I am concerned with is "for the plan year".

Hope this helps clarify my question.

[SoCalActuary]

If I understand your question correctly, your 12-31-09 PFB was the 2008 excess contribution, adjusted for the actual return on assets during 2009, using the second column calculations on page two of the 2009 SB.

So in your example, both the two items are adjusted to the beginning of 2010 as the addition of the two parts.

That new balance at the beginning of 2010 is adjusted forward at the 2010 EIR.

[Guest AP914]

I actually found what I was looking for. Examples 10, 11, 12 in the final regs answered the question.

Thanks for your help. Sure wish the credit balances were a little easier to deal with for EOY plans.