Existing Solvency Bases

For each existing solvency liability amortization base, enter the following: 

Description, which is the name you choose to describe this base.

Date established is the date the existing base was established and is optional.

Date of first payment. Enter the date the first payment was due (e.g., 1/1/2023 for a 2022 plan year loss).  This parameter is optional unless you have checked the box to defer special payments by 1 year on the Ongoing Amortizations topic, the base you are entering was established on the Valuation Date that was entered under the Initial Asset Values topic, and the first payment is due 1 year after the Valuation Date.  

Initial amount of the base on the date it was established.

Initial Amortization period (years) as of the date the base was established.

Remaining years as of the later of the Schedule date entered under the Ongoing Amortizations topic and the Date of first payment (in the case of a payment deferred by 1 year), including the current plan year (year beginning on the Valuation Date entered under the Initial Asset Values topic).

Outstanding balance. Enter the unamortized amount of the base as of the Schedule date entered under the Ongoing Amortizations topic, based on the funding interest rate, and include the amount to be amortized during the current plan year. This input is optional for solvency bases.

Annualized amortization amount (total amount of amortization payment made over the year) as of the beginning of the current plan year.

Select the Initial source of the base: a "Technical (e.g., actuarial loss)”, which is an actuarial deficiency (sometimes referred to as an actuarial loss); the “Initial unfunded liability”; or an “Improvement (e.g., plan change)”, sometimes referred to as an amendment. 

For a Solvency liability base, the Plan Sponsor is obligated to fund a specific annual payment; therefore the required entries are the Remaining years, the Annualized amortization amount and the Initial source of base. ProVal directly calculates the outstanding balance.

Future Solvency Bases

Enter the amortization period for new solvency bases.

Select the desired Methodology for applying solvency gains when a solvency valuation gain is created:

• Pro-rate existing payments will pro-rate the outstanding balances and amortization payments of each solvency base by the ratio of the gain to the total outstanding balance. Thus, when a solvency gain is created, existing amortization bases will be pro-rated down by an amount equal to a portion of the total gain.

• Offset applies the gain to one solvency base at a time, based on the parameters selected in the drop-down boxes. Select Offset first scheduled payments to apply the gain starting with the base with the shortest remaining amortization period, or select Offset last scheduled payments to apply the gain starting with the base with the most recently scheduled payments (i.e., the longest remaining amortization period). You must also select whether to hold payment constant or hold period constant when applying the gain. When the payment is held constant, the remaining amortization period is adjusted down. When the period is held constant, the amortization payment is adjusted down. For example, if you select “first” and “period”, then the gain will be applied as an offset to the amortizations that were scheduled first, in successive order, until the gain is completely offset. The gain will be applied first to the base with the shortest amortization period and, if that base can be completely offset, the remaining gain will be applied to the base with the next shortest amortization period. If a base can be only partially offset, the outstanding balance and amortization payment will be reduced pro-rata, while the amortization period remains unchanged.

Check the Allow amortization periods to reduce to 0 years if possible box to permit an amortization base to be completely eliminated if there is a sufficient gain. Otherwise (if the box is not checked), amortization periods will not be reduced to less than 1 year, unless they can be eliminated because there is no longer a solvency deficiency. This box is available only if you have selected the option to hold payments constant and are therefore adjusting amortization periods.