Gain/Loss:Immediate Gain Method

[Guest Don N]

I'm hoping someone can help with this one; my expected unfunded liability is -50 for the prior year & my actual unfunded from the current valuation is -100; do I set up an experience loss base of 0( by setting both to 0 ) or 50 (by only setting the actual to 0) ? Full Funding has never applied and there's no credit balance; I seem to remember from some notes in the past that expecteds can be less than 0 & only actuals have to be set to 0 (Rev.Ruling 81-213).

[david rigby]

Easy to remember:

The Unfunded Actuarial Accrued Liability can never be negative. There is no such restriction on the Expected UAAL. If the latter is negative, use it.

Note that the above is not simply a part of the definition of the funding method. Rather, it is part of the requirements contained in the regs under IRC Sec. 412.

[This message has been edited by pax (edited 01-07-2000).]

[John A]

What am I missing? If the expected unfunded is minus 50 and the actual unfunded is zero, isn't that a gain rather than a loss?

[Chester]

The actual unfunded is larger in magnitude than the expected unfunded, so you would have a loss. If the expected unfunded was +50 and the actual unfunded was zero, then you would have a gain. (If your unfunded goes down unexpectedly you have a gain; the opposite effect is a loss).

[John A]

Thanks, Chester, - temporary brain-lock!