Under PPA law type, if a contribution schedule is used or if contribution timing is specified as pay quarterlies and final contribution when due, ProVal discounts contributions to determine if the minimum required contribution is satisfied.

ProVal discounts contributions from the payment date to the beginning of the plan year reflecting the actual dates of contributions and the actual number of days in the discount period.  For discount periods less than one year, ProVal uses the formula (1 + Rate)^(days/365). If the plan year is a leap year, 366 is used. For periods greater than one year, ProVal uses the formula [(1 + Rate) x (1 + Rate)^((total days-365)/365)]. If the plan year is a leap year, the fraction becomes (total days - 366)/365. If the year following the plan year is a leap year, the fraction becomes (total days-365)/366.

Discount the 7/1/2020 contribution to the valuation:

• $100,000/[(1 + Rate)^(182/366)]
  • 182 is the number of days between 7/1/2020 and 1/1/2020.
  • A denominator of 366 is used since 2020 is a leap year.

Discount the 7/1/2021 contribution to the valuation:

• $100,000/[(1 + Rate) x (1 + Rate)^(181/365)]
  • Since the discounting of this contribution is greater than one year, ProVal reflects one full year of discounting from 1/1/2020 to 1/1/2021 and a partial year from 1/1/2021 to 7/1/2021. 
  • A denominator of 365 is used since 2021 is not a leap year.

Calculating Late Interest

For required contributions paid late, ProVal calculates penalty interest by splitting the discounting period into the period between the valuation date and the due date and the period between the due date and the payment date. 

Example: 1/1/2020 plan year with a $100,000 contribution due on 1/15/2021 but paid on 7/1/2021. 

The penalty amount is then calculated as ($100,000/A)-($100,000/(BxC)) where A, B, & C are defined as follows:

• Discount from the payment date of 7/1/2021 to the valuation date of 1/1/2020
  • A=(1 + Rate) x (1 + Rate)^(181/365).​​

• Discount from the payment date of 7/1/2021 to the due date of 1/15/2021 with penalty interest
  • B=(1 + Rate + .05)^(167/365)
  • Since the discounting is during the 2021 plan year, 365 is used as the denominator.​​

• Discount from the due date of 1/15/2021 to the valuation date of 1/1/2020 
  • C=(1 + Rate) x (1 + Rate)^(14/365).