Excess Credit Balance Election

[Andy the Actuary]

The 2009 MRC for a calendar year plan was $20,000. On January 1, 2010 election was made to apply $20,000 of the FSCOB to cover 2010 quarterly contributions of $5,000 each. In July 2010, the valuation is performed and it is determined the 2010 MRC is $0.

So, what happens to election? Is approximately $20,000 of FSCOB effectively burned, or is $0 burned since there were no quarterly contributions due for 2010?

It would seem that in establishing such an election the appropriate wording would be to state "to the extent required." I presume this is doable since I took the quote directly from the reg.?

[Mike Preston]

Let's start with one overriding principle: there is no such thing as an election to apply $X of the FSCOB or the PFB to cover quarterly contributions. There is, however, an election to apply $X of the FSCOB or the PFB to reduce the RMC.

So, your question is modified to: "On January 1, 2010 election was made to apply $20,000 of the FSCOB to reduce the RMC. In July 2010, the valuation is performed and it is determined the 2010 MRC is $0. So, what happens to election?"

Now is the language from the reg clear on what happens?