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End of Year Additional Contribution

The End of Year Additional Contribution Parameters dialog box, accessed from the Forecast Analysis dialog box, pertains to deterministic and stochastic forecasts and has no effect on Valuation Sets. Its parameter settings determine the amount of additional contributions needed to reach a targeted funded ratio, for a particular liability, by the end of each year of the forecast. Any such determined amount is in addition to, not in lieu of,

  1. employer contributions computed according to the selected plan contribution policy and

  2. for the baseline year of the forecast, an amount entered for the Additional Contribution parameter of the Contribution Policy topic of the Asset & Funding Policy, and for later forecast years, amounts entered for the Additional Contributions parameters of deterministic and stochastic assumptions.

Important Note: Specifying an end of year additional contribution has an implication for the length of your forecast period. If N years of forecast results are desired, you must run your Core Projections and forecasts for N+1 years, because the contribution amount for the Nth year depends on experience occurring (the receivable contribution paid) in the (N+1)st year.

End of year additional contributions are determined using liability information for the plan year after the plan year for which the contributions are being made.  In the U.S. qualified mode, if the law type is "PPA", ProVal supports an “end of year” contribution that actually is made anywhere between the last day of the plan year (or last day of the fiscal year if the targeted funded ratio is based on an accounting liability) and 8.5 months after the end of the plan year. For other law types and in other modes, an “end of year” contribution is considered actually paid on the last day of the plan year (or the last day of the fiscal year).  Also, if the targeted funded ratio is based on an accounting liability, end of year liability and asset values are determined at the end of the fiscal year.  Note that the end of the plan year is determined by the value of the Fraction of year from Valuation Date to end of Plan Year parameter of the Contribution Policy topic and the end of the fiscal year is determined by the value of the Fraction of year from Valuation Date to end of Tax Year parameter of that topic.  Also note that under the “PPA” law type, the year beginning on the valuation date is synonymous with the plan year, because only a first day of plan year valuation date is supported for this law type.  

Contribution amounts typically are selected to meet some kind of funded ratio target, such as to avoid at-risk status in the U.S. qualified mode or to achieve 100% solvency liability funding in the Canadian registered mode.

In the U.S. qualified mode, if the law type is “PPA”, then, under the Make additional end of year contribution to parameter, select whether you wish to make an additional end of year contribution to Meet a funded ratio of a user specified amount (parameters coded as discussed below for other law types), or to Avoid At-Risk status by meeting an 80% Not-At-Risk or 70% At-Risk funded ratio. If the latter option is selected, ProVal will generate an employer contribution that includes an additional amount to avoid at-risk status in the following year. This contribution amount will be the lesser of the amount needed to raise the actuarial asset value to 80% of not-at-risk target liability or the amount needed to raise this asset value to 70% of at-risk target liability. Check Avoid 4010 reporting by meeting an 80% Max Tax UC funded ratio to generate an employer contribution that is the greater of the initial selection or the amount needed to raise the actuarial asset value to 80% of the Max Tax UC liability in the following year. This option is only accessible if your initial selection is to either contribute to Avoid At-Risk status or to meet a funded ratio based on a funding liability type and actuarial asset value.

For other law types in the U.S. qualified mode and for all other ProVal modes of operation, under the Make additional end of year contribution based on parameter, select the Liability Type, to specify the liability whose value will be compared to the targeted asset value (i.e., the liability to use as the denominator of the funded ratio).

The available liability types are:

Then define the Asset Value (i.e., the numerator of the funded ratio) as either Market Value at the end of the plan or fiscal year, Actuarial Value at the end of the plan year (if a funding liability type has been selected) or Market-Related Value at the end of the fiscal year (if an accounting liability type has been selected). For accounting liability types in the U.S. public pension mode, the sole available option is to define the asset value as Market Value, because a market-related value does not pertain to GASB accounting standards.

Next, under the To meet a funded ratio of parameter, specify whether you wish to vary the targeted funded ratio over (at least) some of the years in the forecast period. Fill in the parameters as follows:

To achieve a funded ratio that is the same percentage of the selected liability each year of the forecast, select the Constant option and enter the desired percentage (do not enter a decimal fraction – for example, enter 90, not 0.9, for an asset value each year equal to 90% of the desired liability amount).

To achieve a funded ratio that is not the same percentage for all years in the forecast period (for example, to reach 92%, then 94% and finally 96% over a period of three consecutive forecast years), then select the Variable option and complete the spreadsheet. Enter the desired target percentages for the funded ratio and the plan years to which they apply.  For example, for a calendar year plan year with a baseline Valuation Date of 1/1/2007, if you enter 92, 94 and 96 in the first three rows of the Target % column and you enter 2008 and 2009 in the second and third rows of the From column, the spreadsheet will look like:

From To Target %
-- 2007 92
2008 2008 94
2009 -- 96

ProVal fills in the To column automatically and the percentage in the last row will be used for the last year entered and all years thereafter. Similarly, if your baseline Valuation Date is prior to 1/1/2007, the first percentage will be used for years prior to 2007. Thus the 2007 end of year contribution will target 92% of the 2008 valuation liability, the 2008 end of year contribution will target 94% of the 2009 valuation liability and the 2009 end of year contribution will target 96% of the 2010 valuation liability (the 2010 end of year contribution will target 96% of the 2011 valuation liability, and so forth for any later years in your forecast). Note that the From box in the first row cannot be completed. Our example involved only three target percentages: if your scenario has several funded ratio targets, you may need to press the ENTER key, to create a new row, when you get to the bottom of the spreadsheet.

If the plan year is not a calendar year, enter the calendar year of the first day of the plan year (that is, the percentage entered in a row is presumed to be the desired funded ratio at the end of the year).  For example, if the plan year begins on July 1 and the desired funded ratio is 92% as of 6/30/2008, that is a contribution at the end of the year beginning on 7/1/2007, so you enter 2007 in the From column of that row.  If the funded ratio is based on an accounting liability type and the fiscal year is not the same as the plan year, complete the spreadsheet based on the year in which the plan year begins, even if the fiscal year begins in the next calendar year.  For example, if the plan year begins on July 1 and the fiscal year begins on April 1, if you enter 100% in the row containing 2007 in the From column, ProVal will generate the contribution necessary to attain a funded ratio of 100% of the selected accounting liability as of 3/31/2009, the end of the fiscal year beginning 4/1/2008 (because the accounting liability is rolled forward from the plan year beginning date of 7/1/2007). 

For modes other than U.S. qualified and, in the U.S. qualified mode, for law types other than “PPA”, as previously noted, ProVal considers the end of year additional contribution as paid on the last day of the plan year for a funding liability selection and on the last day of the fiscal year (year beginning on the measurement date) for an accounting liability selection.  

In the U.S. qualified mode, if the law type is “PPA”, the Timing of contribution parameter lets you either (1) select end of year additional contribution timing as described in the preceding paragraph or (2) specify a later contribution date, up to 8.5 months after the end of the plan year:

  1. To reflect an additional end of year contribution made on the last day of the plan year, select the End of plan year option for a funding Liability Type.

  2. For an accounting Liability Type, the sole timing option is End of fiscal year (or 8.5 months after end of plan year), that is, the earlier of the fiscal year end and 8 1/2 months after the plan year ends.  Thus if the Measurement Date is later than the Valuation Date, ProVal will constrain the contribution to be paid between one day after the end of the fiscal year (which is later than one day after the plan year ends) and the 15th day of the ninth month after the plan year ends (which is earlier than 8.5 months after the end of the fiscal year).   

  3. For a funding Liability Type, to specify a contribution date after the end of the plan year, select the Specific date option and enter a date, in month/day (mm/dd) format, between the month and day of the valuation date and the 15th day of the ninth month after the last day of the plan year. For example, (1) for a calendar year plan year, you may enter a date between 1/1 and 9/15 inclusive, (2) for a plan year beginning on June 1st, you may enter a date up to 2/15, and (3) for a plan year beginning on December 20th, you may enter a date up to 9/3.

In the U.S. qualified mode, if a contribution schedule is reflected, the end of year additional contribution is not assumed to to be used to satisfy quarterly contributions, even if the date made is before a quarterly due date.

 If you wish to reflect the additional end of year contribution only if the goal can be fully achieved and the stated target amount reached – that is, only if the additional contribution will not be limited to a maximum tax deductible amount or by application of a full funding limit, then check the Do not make contribution if funded ratio cannot be met box. In our “pre-PPA” example at the beginning of this article, if the maximum tax deductible limit for the 2005 plan year would constrain the end of year additional contribution such that the highest attainable funded status is 88% of the gateway current liability, instead of 90%, then a check in this box tells ProVal to forego this additional contribution altogether (resulting in a funded ratio of 86%). If the box is not checked, ProVal will reflect a contribution up to the deductible limit (resulting in a funded status of 88%). Similarly, if under a “PPA” law type, you have selected the option to avoid at-risk status, the not-at-risk funded ratio next year would be 70% in the absence of an end of year additional contribution, the at-risk funded ratio next year would be 60% in the absence of this end of year additional contribution and the maximum tax deductible limit for the current plan year would constrain the end of year additional contribution such that the highest attainable funded status next year is 78% of the funding not-at-risk liability and 65% of the funding at-risk liability (instead of 80% and 70%, respectively), then a check in this box tells ProVal to forego this additional contribution altogether (resulting in at-risk status not being avoided next year, with funded ratios next year of 70% on the not-at-risk basis and 60% on the at-risk basis). If the box is not checked, ProVal will reflect a contribution up to the deductible limit (still resulting in at-risk status not being avoided next year but with higher funded ratios: 78% on the not-at-risk basis and 65% on the at-risk basis).


If you wish to reflect the additional end of year contribution only if it is below a threshold, then check the Do not make contribution if greater than box and enter, in the spreadsheet, the desired thresholds and the plan years to which they apply. For example, if the Threshold entered for 2014 is 1 million, the end of year additional contribution for the year beginning in 2014 will not be made if it exceeds 1 million.  For details about entering values in the spreadsheet, see the discussion above about completing the spreadsheet for a Variable funded ratio.