Deemed Burn and SB Reporting

[Guest Jcarolan]

In a beginning of year valuation, the 2011 AFTAP is going to be certified as 71.42%, but there is enough credit balance to burn in order to bring the AFTAP to 80%.

1. Does the deemed burn get reported on line 12 of the 2011 SB?

2. If the deemed burn does get reported on line 12 of the 2011 SB, do you rerun your 2011 valuation since the change in the credit balances could affect your shortfall amortization?

In an end of year valuation, the 2012 AFTAP is going to be certified as 71.42% using 2011 valuation results, but there is enough credit balance to burn in order to bring the AFTAP to 80%

1. Does the deemed burn get reported on line 12 of the 2011 SB or the 2012 SB?

2. If the deemed burn necessitated by 2012 AFTAP being low does get reported on the 2011 SB, do you rerun your 2011 valuation?

Any regulatory cites would be appreciated

[Andy the Actuary]

Apologize in advance but don't understand the question. It would appear that there may be a deemed burn either on 1/1/2011 (depending upon the 2010 AFTAP) or 4/1/2011. Are you certifying now? Because if so, then as of 10/1/2011 the AFTAP was deemed to be less than 60%.

[Mike Preston]

I have a different take. In the first example, the 1/1/2012 valuation will reflect the deemed burn. You ask whether the valuation should be "re-run". I think the valuation should be done initially with the deemed burn. Why are you doing it twice?

In the second example, you report the 1/1/2012 deemed burn on the 2012 Schedule B.

You should know the deemed burn on 1/1/2012 before you run either your 1/1/2012 valuation or your 12/31/2012 valuation.