For the Annuity Payable at Testing Age, ProVal displays the Termination benefit(s) from plan definition, according to the Plan Definition selected under the U.S. Nondiscrimination Accrual Rates command. ProVal will use the listed termination benefit(s) to calculate normal accrual rates, adding together benefit values from multiple termination benefits that apply to a participant. Typically, a Plan Definition different from what was referenced to perform the valuation of plan liabilities is needed (see the discussion in the next paragraph).

ProVal also displays the Testing age (deferral age of benefits above), or attained age if later, which is the benefit payment commencement age indicated by the Normal form of payment of the termination Benefit Definition. This payment form must be defined as the “life annuity” Type and must be deferred (presumably the deferral parameter has been set to, or references, the testing age); otherwise, the Tool will not run. If there is more than one termination benefit, all must reference a Normal form defined as the “life annuity” Type and their payment forms must specify the same deferral age for all termination benefits; otherwise, again, the Tool will not run. Note that if there are multiple termination benefits and the deferral ages are not all the same, ProVal displays Testing age <undefined due to inconsistent deferral ages in termination benefits> (below the Annuity Payable at Testing Age parameters in the Normal Accrual Rates dialog box). If the plan participant’s attained age is older than the testing age, the attained age will be used as the testing age (consistent with ProVal’s use of attained age for evaluating a payment form when the attained age is older than the payment form’s specified deferral age).

The testing age marks the end of the measurement period under the Projected Calculation Method (selected in the U.S. Nondiscrimination Accrual Rates dialog box) and is also used for most valuable benefit normalization (see the discussion of the Most Valuable Accrual Rates topic).

If any Optional forms of payment are defined in the termination Benefit Definition(s), they are ignored for normal accrual rate calculation purposes.

If the Apply eligibility selection expression from benefit definition(s) box is checked, only those termination Benefit Definitions for which a participant meets the criteria of the Selection Expression of the Eligibility section of the Benefit Definition are included to calculate the participant’s normal accrual rate. Thus, for example, if you have separate termination Benefit Definitions for participants in two plant locations and have coded the Selection Expression of the Eligibility section of each Benefit Definition accordingly, you can include these Benefit Definitions in the Plan Definition referenced by this Tool and check the Apply eligibility selection expression from benefit definition(s) box, to tell ProVal to process only one Benefit Definition for each participant (and to whom each Benefit Definition applies). If the Apply eligibility selection expression from benefit definition(s) box is not checked, all termination Benefit Definitions will be included for calculating a participant’s normal accrual rate, regardless of whether the participant meets the criteria of the Selection Expression in the Eligibility section of every Benefit Definition.

All other eligibility requirements of termination benefits are ignored; that is, accrued benefits are calculated regardless of whether a participant meets those requirements (i.e., is vested). The Benefit formula of the Benefit Definition is used, of course, to compute accrued benefits. The 415(b) Maximum Benefit Limit parameters are used if you chose to apply 415 limits under the Benefit Calculation Assumptions topic.

The remaining parameters of this topic pertain to the Accrual Rate Denominator.

You must specify the Testing Service field, either 1) a numeric field that contains the amount of testing service (per §1.401(a)(4)-3(d)(1)(iv) of IRS regulations) as of the Data Effective Date indicated under the Census Data topic or 2) a date field containing the start date for measuring testing service. The testing service field should reflect total service; ProVal will determine how much of this service occurs during the measurement period. Note that this parameter does not apply if the Rate Basis selected in the U.S. Nondiscrimination Accrual Rates dialog box is Contributions.

In the case of a measurement period that is the current plan year (i.e., the Calculation Method selected in the U.S. Nondiscrimination Accrual Rates dialog box is Annual), testing service during the measurement period always equals one (1 year), per §1.401(a)(4)-3(d)(1)(iv)(B)(2) of IRS regulations. However, for calculating the permitted disparity factor, testing service in excess of 35 years is ignored, per §1.401(a)(4)-7(c)(4)(iii)(B)(2) of IRS regulations. Thus, for example, if the employee completed 35 years of testing service prior to the beginning of the current plan year, the permitted disparity factor under the annual method is zero (0).

You must also specify a Salary Definition to determine Testing Compensation, either the Valuation salary (from census specifications) or an Alternative salary definition. Note that testing compensation is limited to the maximum compensation per §1.401(a)(17)-1(c) of IRS regulations.

The last parameter indicates the number of (integral, or whole) years to use as the averaging period when determining the employee’s Average Annual Compensation. This period is typically not fewer than 3 years but might be fewer if you select the Annual option for the Calculation Method parameter of the U.S. Nondiscrimination Accrual Rates dialog box (see §1.401(a)(4)-3(e) of IRS regulations for more information). To calculate this average compensation, ProVal selects the specified number of Highest consecutive years of Testing Compensation and totals the salaries of those years for the numerator; ProVal uses the specified number of years as the divisor (denominator). Then ProVal expresses the accrual rates as a percentage of this average compensation. Note that this parameter does not apply if the Rate Basis selected in the U.S. Nondiscrimination Accrual Rates dialog box is Contributions.