OBRA & RPA Full FUnding Limit Caculation

[Hoard1]

Our valuation systems is calcuating interest for full funding limit for OBRA and RPA at the OBRA|RPA interest rate to bring the values forward to the end of the year but is increasing assets at the valuation rate. Is this correct? Is there a cite? I understand it may be part of an IRS announcement but I can not locate it.

[Chester]

I don't have a cite for you, but I do know that is the correct way to do the calculation. Your liabilities are projected forward using the interest rate used in the liability calculation, and the assets are brought forward assuming the assets earn interest at the assumed valuation interest rate--it makes perfect sense to me. It is also the way our valuation system works.

[david rigby]

I agree with Chester.

The FF test could be done at BOY or EOY (theoretically) but only makes sense at EOY because that is the time for determining the 412 and 404 amounts.

Also, if you have a new plan (OK stop laughing) with no prior service, then all the BOY numbers are zero, which looks like full funding. By projecting to the end of the year, then you have a valid comparison of assets and liabilities.

[Hoard1]

To answer my own question Rev Proc 90-49 has a worksheet attached to the end of it prepared by Jim Holland which goes through the caculation using valuation interest rate to increase assets to the end of year.