plan assets, quarterly contributions

[Gary]

I know there have been posts related to this, but I present this fact set with question or verification.

Numbers used are for simplicity and not necessarily precise.

To my knowledge regs do not address quarterly interest adjustments for end of year val dates, but software provider does make an adjustment for min funding in connection with late quarterlies for end of year val.

Val date 12/31/2010

Actual assets 12/31/2010 = 1,000,000

Plan contribution of 100,000 for 2010 plan year made 12/1/2010 (before val date)

Contribution applied to minimum funding:

Such contribution would be discounted back (2010 eff rate + 5%) to the due dates of quarterlies and then credited to 12/31/2010 at eff rate.

So result of contribution credited was $98,000 for 2010 minimum.

That technique is pretty straight forward.

Calculation of 12/31/10 actuarial assets:

My impression is that val assets would NOT be 1,000,000 less 98,000 = 902,000, but would be along the lines of:

contribution of 100,000 at 12/1/2010 would be increased to 12/31/2010 at eff rate to say 101,000

Valuation assets would thus be 1,000,000 less 101,000 = 899,000

Moral of story is that contributions are adjusted to include quarterly interest penalty for minimum funding crediting, but are not adjusted with quarterly interest penalty when determining plan assets for the valuation.

Is that correct?

Thank you.

[FAPInJax]

Yes, it is correct that the penalty interest is only recognized for purposes of determining whether an employer has satisfied minimum funding standards. It is NOT recognized for purposes of valuation assets.

[Gary]

thanks fapinjax