Cash Balance Funding - SB

[cohendrake]

Reviewing my first Cash Balance SB so sorry if this question is simplistic.

Val date: 12/31/11; second year of plan

FT: $56,000

TNC: $52,000

Assets: $55,000

Contribution made 12/31/11: $85,000

Have only done regular DB plans so maybe I'm missiing something. An answer to the following questions would help a lot:

How are the Funding Target and and the Target Normal Cost determined for the SB for cash balance plans?

What relation do the Pay Credit and Interest Credit have to the FT and TNC?

Where do the segment rates come in?

[SoCalActuary]

Interesting questions: you do want to get the Cash Balance Answer Book, or educational materials from SOA or ASPPA.

Quick response: The FT and TNC are both developed under the general actuarial model, where you project forward the expected benefit payments to be made from the plan, allocated between the portion due to benefits at the beginning of the year and the portion due to benefits earned during the year.

This requires that you project forward the cash balances to the expected dates of payment in your model, separately for the beginning balance and for the hypothetical contribution.

The Interest Credit rate is critical to that calculation. The segment rates are defined under your funding method as elected by the plan sponsor, including all the same rules as traditional DB plans.

One final point: don't take assignments for which you are not trained.

[ubermax]

Karl,

SoCal's final point is a good one but to your question I've attached final regulations that were published in '09 - example #13 at the top of page 53045 is instructive - the target normal cost would be developed in a way similar to the funding target in this example but based on the pay credit for the year - you would naturally have to substitute the segment rates, accumulation rate, and any other assumptions for your particular case.

I know this isn't a direct answer to your question but together with other information available from sources like ASPPA , etc. you should be well on your way to gaining some insight.

Good Luck !!!!!!!

E9-24284.pdf