FIL & Fully Amortized Bases

[Guest Don N]

The prior year actuarial report for a takeover DB plan has the following cost method description: Frozen Entry Age Actuarial Cost Method(level % of salary)and for IRC Sec. 412 purposes, "In any year in which all amortization bases under IRC Sec. 412 are considered fully amortized, or in which the only amortization bases for 412 purposes are due to the 150%(or 155%) of Current Liability Full Funding Limitation Credit,the Unfunded Frozen Actuarial Liability will be set to zero and the Normal Cost will be determined as it is under the Aggregate Actuarial Cost Method(level % of salary)- I question the 2nd part of the criteria to set UFAL to 0 ; I thought if OBRA bases exist you need to maintain them?? If anyone has any insights I'd like to read them.

[david rigby]

Does not make sense to me. Actually, it sounds like a funding method change.

[Guest Don N]

Your right pax! there was a funding method change and the plan is at Full Funding; the UAL did become 0 ; I just didn't understand why under FIL, in general, the UAL would be set to 0 if there were only OBRA bases existing.

[david rigby]

I have reread the original item in quotes and believe that it is not funding method at all. More specifically, I would categorize it as a condition under which the method would be changed from FIL to Aggregate. It also appears that the goal may be to utilize Aggregate without formally acknowledging the change, thus enabling the use of FIL in a subsequent year without having to get IRS approval for that subsequent change.