"Pre-PPA" and "Pre-PPA and PPA" law types

This topic pertains to single-employer plan funding calculations under the law as in effect prior to PPA; it is relevant for the “Pre-PPA” (excluding Cooperative and Small Employer Charity (CSEC) plans) and “Pre-PPA and PPA” law selections. Under this topic, you furnish detailed information needed to calculate the additional funding charge according to RPA ’94 and the Pension Funding Equity Act of 2004 (PFEA ’04), including prior year funded ratios and various types of legislated amortization bases. This information is then used during execution of a Valuation Set, Deterministic Forecast, or Stochastic Forecast.

For guidance, see the applicable sections of the Internal Revenue Code and related Regulations, IRS Notices, Revenue Rulings and Revenue Procedures, as well as the instructions for completing Schedule B of Form 5500.

Check the Reflect Alternative Deficit Reduction Contribution box to apply, for plan years beginning in 2004 or 2005, the alternative deficit reduction contribution calculation, available to certain, steel, airline and other companies under PFEA ’04.

Historical gateway current liability funded ratios are used to determine possible exemption from the additional funding requirement for plans funded at less than 90% of gateway current liability. Enter the funded ratios for the plan year immediately preceding the current plan year (i.e., for the year immediately preceding the year beginning on the Valuation Date) and for the three years prior to that year. For example, if the RPA ’94 gateway current liability percentage was 90% last year, then enter 0.9 in the text field for the parameter for the Ratio for Year -1. If the Ratio was 80% for 2 years prior, enter 0.8 for Year -2, and so forth.

The Schedule of Amortization Bases Schedule date is the “as of” date for unamortized amounts, i.e., outstanding balances of amortization bases for various liabilities that impact the calculation of the additional funding charge. This date should be the same as that entered for the Valuation Date under the Initial Asset Values topic. If a different date is entered, a warning will be issued upon execution of the Valuation Set or forecast utilizing this Asset & Funding Policy and the bases will not be adjusted. Thus all unamortized amounts must be as of the beginning of the year.

Enter the Remaining Years over which the base will be amortized and the Unamortized Amount (outstanding balance), both as of the Schedule date, for each base created because of Unfunded Mortality Increases, i.e., liability increases caused by prescribed changes in the mortality tables used to compute current liability. Currently, there should be only one base entered (one row of the spreadsheet completed), for the mortality tables prescribed by Internal Revenue Service Regulation 1-412(l)(7)-1.

Enter the Remaining Years over which the liability will be amortized and the Unamortized Amount (outstanding balance computed under RPA ’94 actuarial assumptions), both as of the Schedule date, for the Internal Revenue Code Section 412(l) Unfunded Old Liability.

Enter the Remaining Years over which the liability will be amortized and the Unamortized Amount (outstanding balance computed under RPA ’94 actuarial assumptions), both as of the Schedule date, for the Internal Revenue Code Section 412(l) unfunded existing Benefit Increase Liability for benefit increases under collective bargaining agreements ratified before October 29, 1987.

Enter the Remaining Years over which the liability will be amortized and the Unamortized Amount (outstanding balance), both as of the Schedule date, for the Assumption Change Liability, that is, the additional unfunded old liability for changes required in actuarial assumptions by RPA ’94.

Click the UCEB Parameters button to access the parameters needed to compute the unpredictable contingent event amount, if any, to be included in the additional funding charge for unpredictable contingent event benefits. The ensuing dialog box contains a spreadsheet for entering, for each unpredictable contingent event benefit, the Remaining Amortization Years (i.e., number of years remaining in the amortization period) at the Schedule date and the Unamortized UCEB liability, i.e., the outstanding balance as of the Schedule date. There is also a spreadsheet for entering the Expected UCEB Cash Flow, i.e., the total of benefits expected to be paid during the current and the following 6 plan years for all existing unpredictable contingent events.