Takeover plan; change in funding method that must be disclosed?

[Guest]

Sec 4.04 of Rev. Proc 95-51 - Approval for Takeover Plans - states that if the net charge in the funding standard account produced by the new actuary does not differ by more than 5% from the net charge caclulated by the prior actuary, than it will not be deemed a change in funding method.

Does this technically mean that even though I may be within 1% of the prior actuaries liabilities, but because of FF limits, my required contribution may be 2 times or 1/2 of the prior actuaries "net charges", than I should disclose a change in funding method?

For example: If Plan expected EOY assets were $15,400 and the prior actuary determined the EOY OBRA CL to be $10,000 and I determined it to be $10,100 OBRA CL, this would actually increase my "net charges" by 255% (10,000 *1.55 - 15,400 = 100 vs. 10,100 * 1.55 - 15,400 = 255)

Would you say that I had a change in method? This particular plan is using FIL and has a UAL.

[david rigby]

Why is it that so many questions can be answered "Yes and No"?

Let's be a bit careful about Sec. 4.04(3). The reference to 5% states that this applies to the prior year. That is, it appears the new actuary is expected to reproduce last year's funding standard account as done by the prior actuary and the net charges to FSA should not be more than 5% off.

I do not read this to state anything about the total liability, but only about the funding standard account. Yes, a very small difference in the full funding calculation could have a strong leveraging effect on the funding standard account.

However, to me, "net charges" is the sum of all charges and credits applied for the year. I think it is all items in the funding standard account except for the credit balance.

Any other opinions?