| FAQ 953: Frozen Plan - Reflecting freeze date in Valuation Reports |
How can I reflect the plan freeze of benefit accruals in the PPA, FASB, and Pre-PPA reports?
There are three options: A, B, and C. These options are detailed below.
A. The following coding will allow the report to indicate that the benefit is based on provisions as of a certain date:
1. Run Calculations > Valuation to calculate the accrued benefits before the freeze. If these benefits are greater than participant's Prior Accrued Benefits, replace their Prior Accrued with their larger benefit. The prior accrued benefits will be used as their accrued benefits in a plan with no benefit formula.
2. Code a date in the General \ Identification \ ID screen in the Exclude Accrual Service field. For example, 7/15/2022.
3. Remove the plan formula from the formula screens
4. On the formula screen that corresponds to the General \ Identification \ ACCRUAL screen funding method selection, enter 5 - Fresh Start in the Red Prior to Acc Excl Dt field.
5. The Summary of Plan Provisions report page will read: 'Upon normal retirement each participant will be entitled to a benefit payable in the normal form equal to the following:
The accrued benefit as of July 15, 2022.'
B. Another option would be to use the 3rd line in the Plan Name field on the General \ Identification \ ID screen to enter text that will appear on every page, something along the lines of 'Accrued benefits were frozen as of July 15, 2022'. This approach will mean that every PPA Report page will include the text. This can be used in addition to the steps in option A.
C. The following coding would allow more customized wording in the Summary of Plan Provisions report page for a specific group of participants. This option is best suited to traditional DB plans that are frozen.
1. Run Calculations > Valuation to calculate the accrued benefits before the freeze. If these benefits are greater than participant's Prior Accrued Benefits, replace the affected participants' Prior Accrued Benefit with the larger benefit.
2. Create a DB/CB Formula table and code a 0-accrual formula in it, but use the Summary Description button (at the bottom right of the formula screen) to enter customized language referring to the frozen accrued benefits. For example, 'Accrued Benefit is frozen as of 7/15/2022. No additional accruals have occurred since that date.' With this approach, you could also show customized language for different groups, which might apply when different groups are subject to different freezes (hard freezes for some, soft freeze for others, for example). Each line has a character limit.
3. In the Plan Specifications \ General \ Benefits \ FORMBENF screen, enter the new table name.
4. The Summary of Plan Provisions report page will read: 'Group 1: Accrued Benefit is frozen as of 7/15/2022. No additional accruals have occurred since that date.'
For option C, since FASB results consider projected service, using a 0-accrual formula will still have projected service calculated which may require additional steps to remove that impact in the FASB liabilities. Setting Plan Specifications \ General \ Compensation \ COMPAVG \ Benefit Add-ons to 4 - Accrual Service Override and entering service overrides to their Benefits \ PROJBENF \ Add-on to: Projected Benefit for their Total Accrual Years and Accrued Benefit for their Years Accrued is an option.