EOY Valuation and Plan Termination

[Hojo]

I have a small plan that uses an end of year valuation (typically 12/31), but is terminating the plan at the end of March (3/31). They use segment rates with a 3 month lookback from the valuation date to value the funding target. They expect to pay out the full assets by the end of August (8/31) within the same year.

Based on this, what would I use as the final valuation date to determine the minimum and file on the Schedule SB, 3/31/2012, 8/31/2012 or 12/31/2012? If not 12/31, how do I do the lookback to determine the segment rates?

[Guest AGreen]

I have a small plan that uses an end of year valuation (typically 12/31), but is terminating the plan at the end of March (3/31). They use segment rates with a 3 month lookback from the valuation date to value the funding target. They expect to pay out the full assets by the end of August (8/31) within the same year.

Based on this, what would I use as the final valuation date to determine the minimum and file on the Schedule SB, 3/31/2012, 8/31/2012 or 12/31/2012? If not 12/31, how do I do the lookback to determine the segment rates?

An arguement can be made to stay with 12-31, or to use 8-31-12, the date that will appear as the PYE on the 5500 and Schedule SB. I don't think there is much of an arguement to use 3-31.

If you choose 8-31, what is the problem with using the May funding segment rates?

In any case, hopefully there is not a MRC, because then the PYE chosen is no longer valid.

Allen

[Hojo]

If you choose 8-31, what is the problem with using the May funding segment rates?

In any case, hopefully there is not a MRC, because then the PYE chosen is no longer valid.

Ah, there's the rub. That's the issue to a point. I expect there to be a small minimum contribution. My hope is that I can do the valuation in June after the May rates come out and determine the minimum to have them pay in July and then pay out end of August.....

That is where I was leaning, but wanted to get some more opinions. Any other thoughts from the peanut gallery?

[frizzyguy]

My office has been through this arguement several times, including looking at switching to beginning of the year. We came to the conclusion of 8/31, it was end of year and therefore wasn't a switch in assumptions.

[Guest AGreen]

If you choose 8-31, what is the problem with using the May funding segment rates?

In any case, hopefully there is not a MRC, because then the PYE chosen is no longer valid.

Ah, there's the rub. That's the issue to a point. I expect there to be a small minimum contribution. My hope is that I can do the valuation in June after the May rates come out and determine the minimum to have them pay in July and then pay out end of August.....

That is where I was leaning, but wanted to get some more opinions. Any other thoughts from the peanut gallery?

But how can you do an 8-31 valuation in June, even knowing the segment rates? Yes, you can project the assets to 8-31, which will be zero since they will have been distributed. But what about the liability side? If distributions do not happen until August, how can you know in June whether assets are sufficient for all benefits? If they are, then assets and liabilities are zero for the val, and the MRC is zero. If not, any unpaid benefits will probably result in an MRC. But the point is you won't know any of this until you go to distribute.

Allen