Unit Credit Funding Method & Frozen Plans

[LIBOR]

What funding method are you using for a frozen plan? Is unit credit preferable? why? Is unit credit required? Why? (i.e. do the reasonable funding method regs require the unit credit funding method for a frozen plan?)

[david rigby]

I'm not aware of a requirement to use UC (I assume you are referring to the method sometimes known as "pure unit credit") in a frozen plan. It is probably "reasonable" to use it. If you have been using PUC, then it should automatically degenerate to UC upon plan freeze.

In my opinion, it would be inappropriate to use any individual method (entry age, UC, PUC, etc.) in a fashion that generated a normal cost. Since there is no more benefit accrual, an individual method should have zero normal cost.

However, you still could use a method such as FIL or aggregate to generate a normal cost. In fact, it might be easiest to use aggregate: if the plan is underfunded, you get a contribution; if overfunded, you get a zero contribution.