If the database used for the tests contains unadjusted average benefit percentages and normal and most valuable accrual rates (as would be the case if the database were prepared under the U.S. Nondiscrimination Accrual Rates command), you must check the Adjust rates for permitted disparity box if you wish to account for permitted disparity. If, however, the database used for the tests contains average benefit percentages and normal and most valuable accrual rates that have already been adjusted for permitted disparity (as might be the case if the database were prepared outside ProVal and then imported), do not check the box.

Select the Rate Basis, either a Benefits basis or a Contributions basis, that was used to calculate the unadjusted average benefit percentage and normal and most valuable accrual rates contained in the database. The basis chosen determines which of the calculations shown below will be used to adjust for permitted disparity (see §1.401(a)(4)-7 of IRS regulations). If the rates were computed using ProVal’s U.S. Nondiscrimination Accrual Rates command, the rate basis selected for that command should be used here.

If the unadjusted rates were calculated on a Benefits basis, select the database fields containing the Rate not subject to permitted disparity (i.e., the portion of the accrual rate percentage that should not be adjusted), the employee’s Covered Compensation (CVCP) as of the beginning of the plan year, the employee’s Average Annual Compensation (AAC) and the employee’s Permitted Disparity Factor (PDF). The permitted disparity calculation is as follows:

If AAC <= CVCP, the adjusted accrual rate is the lesser of the A Rate and the B Rate:

A Rate = 2 * unadjusted accrual rate

B Rate = unadjusted accrual rate + PDF

If AAC > CVCP, the adjusted accrual rate is the lesser of the C Rate and the D Rate:

C Rate = [AAC * unadjusted accrual rate] / [AAC - (CVCP/2)]

D Rate = [AAC * unadjusted accrual rate + (PDF * CVCP)] / AAC

Negative rates are not adjusted.

If the unadjusted rates were calculated on a Contributions basis, select the database fields containing the Rate not subject to permitted disparity (i.e., the portion of the accrual rate percentage that should not be adjusted) and the employee’s Plan Year Compensation (COMP). Also enter the (published) Social Security Wage Base (SSWB) in effect at the beginning of the plan year and the (published) Permitted Disparity Rate (PDR) in effect at the beginning of the plan year. The permitted disparity calculation is as follows:

If COMP <= SSWB, the adjusted accrual rate is the lesser of the A Rate and B Rate:

A Rate = 2 * unadjusted allocation rate

B Rate = unadjusted allocation rate + PDR

If COMP > SSWB, the adjusted accrual rate is the lesser of the C Rate and D Rate:

C Rate = [COMP * unadjusted allocation rate] / [COMP - (SSWB/2)]

D Rate = [COMP * unadjusted allocation rate + (PDR * SSWB)] / COMP

Negative rates are not adjusted.

In the above permitted disparity calculations, the rate not subject to permitted disparity is subtracted from the unadjusted rate before applying permitted disparity and is then added back to the adjusted rate.