When ProVal calculates normal and most valuable benefits, it looks to the Valuation Assumptions you select for the following specifications:

• the Salary scale that applies through the end of the plan year (i.e., for prior plan years and current plan year only).

• any Cost-of-Living Adjustments (COLAs) used to compute pvQJSA and pvQSUPP in the normalization factor for most valuable benefits. The pvSLA, however, does not reflect COLAs. See Example (5) in §1.401(a)(4)-3(d)(5)(v) of the 9/19/1991 IRS Regulations.

• Increase & Crediting Rates that you have associated with Benefit Formula Components and/or Accrual Basis Components (but not Regulatory Data ). For example, it is common for cash balance crediting rates, which are applied up to the payment commencement date in the determination of most valuable benefits, to be specified here.

• for Lump Sum benefit formula components, the Interest & Mortality applied to the underlying annuity to derive the (lump sum) present value.

• Regulatory Data (e.g., maximum compensation per IRC § 401(a)(4), wage bases for social security covered compensation and social security PIA, etc.) will be as of the beginning of the plan year. For example, if the plan year ending date is 12/31/2005, the regulatory data will be as of 1/1/2005.

All other Valuation Assumptions topics will be ignored. Instead, the nondiscrimination tests will be run as if the user had selected:

• a 100% retirement rate at testing age (or earliest retirement eligibility if later).

• beginning of year decrements . Benefits are calculated as of the testing date, not averaged to be “as of” the middle of the year.

• to compute pvQJSA, pvQSUPP, and pvSLA for the normalization factor for most valuable benefits, standard member mortality (as coded under the Most Valuable Accrual Rates topic) for retired members, vested terminated members and disabled members; standard spouse mortality for survivors & beneficiaries.

• 0% increase rates for Regulatory Items.

• to compute pvQJSA, pvQSUPP, and pvSLA for the normalization factor for most valuable benefits, a post-decrement interest rate equal to the standard interest rate (as coded under the Most Valuable Accrual Rates topic).

• marital assumptions (entered under the Other Valuation Parameters topic): 100% married and 100% of married population elects a J&S annuity.

• number of years husbands are older than wives is set equal to 0 (see §1.401(a)(4)-3(d)(5)(iii)(F) of the 9/19/1991 IRS Regulations).

Indicate whether to Apply 415(b) maximum benefit limits by selecting Yes, as specified in Benefit Definitions or No, ignore limits specified in Benefit Definitions. For determining accrual rates, generally, plan benefits are determined without regard to 415(b) maximum benefit limits but see IRS Regulation §1.401(a)(4)-3(d)(2)(ii)(B) to determine whether you may apply IRC Section 415 limits.

If the plan year ending date is not the last day of a calendar year, you need to specify which calendar year to use when setting Social Security limits for non-calendar year plans. This will determine what point in the plan year is used to reference the Taxable Wage Base and the National Average Wage for purposes of calculating Covered Compensation and PIA. For example, if the Plan Year Ending Date is 06/30/2006 and the plan’s benefit formula depends on Covered Compensation or PIA, select Use limits in effect on first day of plan year if the last Taxable Wage Base to be used for calculating the 06/30/2006 benefit is that in effect for 2005 (as the first day of the plan year is 7/1/2005) or select Use limits in effect on calculation date if the last Taxable Wage Base to be used is that in effect on the calculation date, i.e., the measurement date plus one day. Thus, for example, you would select this (second) option if the measurement date is the last day of the plan year, 6/30/2006, and the last Taxable Wage Base to be used is that in effect for 2006.