assumptions for beginning of year valuations

Did the IRS issue some sort of guidance or notice in 2017 effective for 2018 that restricted what assumptions could be used in a beginning of year valuation? Specifically did they state that for a participant you must assume 2018 expected compensation and expected hours must be the actual 2017 compensation and hours?

No, there was no new guidance issued that I am aware of.

2018 expected compensation should be a reasonable expectation.  Generally, that would be 2017 w/ a salary scale adjustment, or pro-rata adjustment if they worked less than a year.  

What is the basis of your question?  What would you like to use?

I, too, always thought of compensation as an assumption. But then IRS issued Rev Proc 2017-57 describing the procedure to request approval of a change in funding method. In that RP, IRS describes a change in certain "data elements" as a method change requiring approval. This is one of their examples of a change in method requiring approval: 

Example 5 – The plan year is the calendar year and the valuation date is January 1. For the prior plan year, the data element used to project future compensation was the actual annual compensation (as reported on Form W-2, "Wage and Tax Statement"), for the plan year preceding the valuation date. For the current plan year, the data element used to project future compensation is the monthly rate of pay as of the valuation date.

The definition of target normal cost in 430 specifically says that you can include increases in compensation for the current year.

However if you are changing the data elements used to determine the current year comp, then that would be a change in method that requires approval as @digger said.

The original Q was about assumptions.  If you need to change your salary increase assumption, do it.  Keep a record of why and what data is used for your conclusion.  IMHO, you should also include reasonable (not necessarily detailed) discussion in your actuarial report.  Don't forget the 5500 attachment.

If my 2018 report disclosure of method and assumptions says expected compensation is last year's comp (with or without a scale) and the business owner reports he is paying himself less this year based on business projections, can I suddenly assume the scale is negative 50%?

Several times, I've changed my salary assumption.  (Example1, 2009 recession. Example2, immediately following a very good year in which sales commissions were unusually large and not expected to recur.)  It may also be valid to have different assumptions for different groups/locations/etc. 

Normally we would assume that for a 1/1/2018 valuation, for instance, we would assume 2018 compensation and hours of service will be the same as 2017. We may or may not have a salary scale assumption. But what if we WANT to assume that 2018 compensation and hours are significantly less that the 2017 experience - such that we are in essence assuming no accrual for 2018 even though the participant had an accrual in 2017. Rev Proc 2017-57 seems to indicate that is a change that requires IRS approval for a BOY valuation. Am I interpreting that correctly?

2017-57 is about changes in method. You have a change in assumptions.

See, for example, Section 3.02(c) Example 3 of the rev proc.