Cash Balance EOY Valn and First Plan Year

[rew]

I do not think I have a good handle on EOY Valuations.

Facts:

CB plan established 1/ 1/2014

EOY Valn 12/31/2014 (also first plan year)

4 participants (2HCEs 2NHCEs)

1. Funding Target = $ 0
2. Target Normal Cost = $ 47,766 = MRC
3. Assets 1/ 1/2014 = $0; Assets 12/31/2014 = $55,000 (all receivable and for 2014 plan year) and at Market Value
4. Employer Contributions totaled $55,000 deposited in Jan and Feb 2015
5. Discounted Employer Contributions = $ 54,727
6. Increase in Prefunding Balance = $ 6,961 (i.e. $54,727-$47,766)

Q1. What is FTAP and AFTAP at 12/31/2014?

A1. 100.00% (which is $0 FT divided by $0 assets since contributions are all receivable)

A2. 114.57% (which is $ 54,727 discounted contributions divided by $ 47,766 TNC)

A3. 100.00% (which is ($ 54,727 - $6,961) divided by $47,766)

Is this the percentage that is entered in line 14 and 15 of 2014 Sch SB? My initial thought is 114.57%.

Q2. My reading of the 2014 Sch SB instructions lead me to believe that line 2a and 2b (Asset Values) are $0. Item 3 Funding Target is also $0. Is this correct?

[Hojo]

I do not think I have a good handle on EOY Valuations.

Facts:

CB plan established 1/ 1/2014

EOY Valn 12/31/2014 (also first plan year)

4 participants (2HCEs 2NHCEs)

1. Funding Target = $ 0
2. Target Normal Cost = $ 47,766 = MRC
3. Assets 1/ 1/2014 = $0; Assets 12/31/2014 = $55,000 (all receivable and for 2014 plan year) and at Market Value
4. Employer Contributions totaled $55,000 deposited in Jan and Feb 2015
5. Discounted Employer Contributions = $ 54,727
6. Increase in Prefunding Balance = $ 6,961 (i.e. $54,727-$47,766)

Q1. What is FTAP and AFTAP at 12/31/2014?

A1. 100.00% (which is $0 FT divided by $0 assets since contributions are all receivable)

A2. 114.57% (which is $ 54,727 discounted contributions divided by $ 47,766 TNC)

A3. 100.00% (which is ($ 54,727 - $6,961) divided by $47,766)

Is this the percentage that is entered in line 14 and 15 of 2014 Sch SB? My initial thought is 114.57%.

Q2. My reading of the 2014 Sch SB instructions lead me to believe that line 2a and 2b (Asset Values) are $0. Item 3 Funding Target is also $0. Is this correct?

The answer to Q2 leads into the answer to Q1.

So Q2 - yes, your asset value in 2a and 2b is $0 since (per the SB instructions) you do not include receivable contributions for the current plan year.

Therefore, for Q1, your FTAP is 0/0 which the SB instructions also state is 100%.

Your AFTAP is a different story since it is already known. I don't have the link in front of me, but this is not technically defined in the regs. However, standard practice says that your AFTAP is equal to

(AVA + discounted receivable contribution)/[(FT + TNC) x (1 + EIR)]

If this is over 100%, then done. If not, then

[AVA + discounted receivable contribution - (COB + PFB)]/[(FT + TNC) x (1 + EIR)]

[rew]

Thanks Hojo.

Follow up question re:your last sentence.

If AFTAP <100%, then you adjust for PFB (no COB in this situation). Is the PFB = $0 or $6,961 as shown above?

[Hojo]

Thanks Hojo.

Follow up question re:your last sentence.

If AFTAP <100%, then you adjust for PFB (no COB in this situation). Is the PFB = $0 or $6,961 as shown above?

That depends if they have elected to add to their prefunding balance. If so, then what is the prefunding balance as of 1/1/2015 (again, look at the SB instructions).