Additional Contributions & 420 Transfers
Under this topic, you specify the assumed experience of the plan’s assets, over the period of the deterministic forecast, with respect to cash flow elements other than benefit payments, expenses paid from plan funds, employee contributions (if any) and employer contributions anticipated by the contribution policy, leaving as the possible “ins” and “outs” only employer contributions in excess of the amount determined by the employer Contribution Policy parameter of the Contribution Policy topic of your Asset & Funding Policy and plan fund transfers per IRC section 420.
You may specify the experience separately for each forecast year (up to 100 years, the number of years permitted in a Core Projection), starting with the first forecast year (year beginning on the first forecast valuation date), which is denoted as Year 1. The experience of the second forecast year, or year beginning on the second forecast valuation date, would be entered on the line for Year 2, and so forth. The experience of the baseline year, or year beginning on the baseline valuation date and ending at the first forecast valuation date, is entered in the Asset & Funding Policy: an additional employer contribution is entered under the Contribution Policy topic and a 420 transfer is entered under the Initial Asset Values topic.
Maximum Section 420 Transfer is the desired dollar amount (e.g., $150,000) of assets to transfer, subject to the availability of transferable funds. Hence, ProVal might transfer a lesser amount than the maximum amount entered here, or no amount at all if there are no excess assets at the forecast valuation date. Furthermore, if the limitation entered here exceeds the statutory limits (see relevant Internal Revenue Service pronouncements, including IRC section 420 (b) (3)), ProVal will reduce the amount of the assumed actual transfer accordingly. Note: Generally this parameter does not pertain to a plan year beginning before 1990 or after 2005. The timing of 420 transfers during forecast years is determined by the value of the Fraction of year when transfer will occur parameter of the Initial Asset Values topic of the Asset & Funding Policy.
Enter the dollar amount (e.g., $500,000) of Additional Contributions, which are amounts used to adjust the employer contributions determined by the Contribution Policy parameter of the Contribution Policy topic of your Asset & Funding Policy. These adjustments may be specified as either additional amounts or target amounts, by the option selected for the Additional contributions are treated as parameter.
If Additional amounts is selected, amounts entered as Additional Contributions are added to the plan year contribution determined by the Contribution Policy parameter.
If Target amounts is selected, amounts entered as Additional Contributions are the desired total contributions for the plan years. ProVal will solve for the additional contribution necessary (in excess of that determined by the selected option for the aforementioned Contribution Policy parameter) for the plan year contribution to equal the target amount. Note that any end of year additional contribution indicated (by the Calculate end of year additional contribution parameter of the Forecast Analysis topic) may further adjust the plan year contribution, based on the results of the valuation at the following forecast valuation date. Thus plan year contributions in excess of the target amount entered can result if attaining the end of year targets requires contributions in excess of those target amounts entered.
Note that the additional contributions (those entered directly and those determined by ProVal based on the target contribution amounts) may be negative; however, in the U.S. qualified and Canadian registered pension modes, ProVal will apply the minimum and maximum contribution constraints, thus limiting the additional amounts as necessary to avoid payment of a total employer contribution in excess of the maximum tax deductible amount.
The timing of employer contributions during forecast years is determined by the settings of the timing parameters of the Contribution Policy topic of the Asset & Funding Policy.