EOY Cash Balance Interest Crediting Rate

[frizzyguy]

We were discussing an EOY Cash Balance Valuation today. We use the 30 yr treasury for the ICR (November). For the actual interest credit rate that get the EOY Balance we use the rate preceeding the plan year. We are now in a debate on whether we should use that same rate for projecting balances out for the FT and NC or should we use the next novembers rate.

There are good arguement both ways, I guess I'd just like to get other's opinion.

[carrots]

What decision did you make? Shouldn't you actually use whatever rate(s) represent your best projection - such as, say, 4% or 5%?

[frizzyguy]

What decision did you make? Shouldn't you actually use whatever rate(s) represent your best projection - such as, say, 4% or 5%?

We decided to use the prior november interest crediting rate for the projection. I think you are fine using either method but the signing actuary felt more comfortable with that rate. It was a fun debate but that pesky "I'm signing the report" is a pretty solid discussion ender! That is what we normally do but I just wanted to rock the boat a bit.

So you use a stable rate? What is the ICR that your plans normally use?

[carrots]

Similar to your case, most of the calendar year Cash Balance plans that I deal with use the 30 year Treasury Rate from December of the previous year.

But it seems to me that the projection to NRD for the FT and TNC should really reflect "expected" interest crediting rates going forward, rather than the historical rate from one particular month in the past.

Are there any regs on this?