Credit or offset due to overfunding?

[tuni88]

On the advice of our actuary, we each year waive the other small previous credits we had built up in the past for our DB plan.

Our pension investment guy (what a genius he is!) made a big bet that came through on a particular stock in late 2008 and, along with good results in the rest of the portfolio, got us a whopping overall return in 2009. If the gain turns out to be big enough to put us in a 100+% funded situation, will we get to use any of that overfunding to reduce the otherwise regular annual cost (normal cost) of the plan in 2010?

For example, say our normal cost comes in at $50,000 and we end up overfunded by $20,000. Will that dollar-for-dollar reduce our normal cost to $30,000?

[carrots]

On the advice of our actuary, we each year waive the other small previous credits we had built up in the past for our DB plan.

Our pension investment guy (what a genius he is!) made a big bet that came through on a particular stock in late 2008 and, along with good results in the rest of the portfolio, got us a whopping overall return in 2009. If the gain turns out to be big enough to put us in a 100+% funded situation, will we get to use any of that overfunding to reduce the otherwise regular annual cost (normal cost) of the plan in 2010?

For example, say our normal cost comes in at $50,000 and we end up overfunded by $20,000. Will that dollar-for-dollar reduce our normal cost to $30,000?

Under 430(a)(2), basically, if the assets exceed the funding target, the target normal cost is reduced by that excess. So, basically, yes.

[david rigby]

On the advice of our actuary, we each year waive the other small previous credits we had built up in the past for our DB plan.

Not your question, but I usually recommend the opposite, unless the amounts are too small to bother. The reason is to retain as much funding flexibility as possible.