FAQ 431: Frozen Plan - Benefit Accruals

Problem: I have a plan that freezes the accrued benefit effective 12/31/2024 . I am running the 1/1/2025 BOY valuation. How should I code the plan specs to reflect this?

Solution: Different steps are needed for BOY traditional and BOY cash balance plans to have participants' accruals from the plan year before the valuation date calculated but to not have future accruals calculated. Below the plan type-specific solutions are additional suggestions for all plan types for the following plan years and report considerations. ------------------------------------------------ Traditional BOY DB Plans ------------------------------------------------ There are three general options for Traditional BOY DB Plans: 1) Using Forced Minimum Benefits, 2) Using Force All Benefits, 3) Using Date Formula Change OPTION 1: Using Forced Minimum Benefits Before making changes, run Calculations > Valuation and review that each participants' Benefits \ ACCRBENF \ Accrued Benefit field is calculated as expected to reflect the prior benefit formula. Plan Specification Changes - General \ Compensation \ COMPAVG: set “Benefit Add-ons” field to 2 - Forced Minimum Benefit - General \ Benefits (and other screens as applicable): Remove all benefit formulas, including top heavy. Employee Record Changes - Benefits \ PROJBENF: Copy the participant's Benefits \ ACCRBENF \ Accrued Benefit field to each of the participant's three Add-on to fields. - Benefits \ PROJBENF: Copy the participant's Benefits \ ACCRBENF \ BOY 415 Accrued Benefit to the participant's three Benefits \ PROJBENF \ Forced Maximum fields if the plan freeze limits their 415 to their BOY calculated 415 limit. - Consider using the View > Grid > Set Column Data feature to make the above 2 edits for multiple employee records at once. Run Calculations - Run Calculations > Valuation to update the results. - Since no formula is input, ASC will not calculate an accrual for the plan year. - With the Forced Minimum Benefit setting in plan specifications, the Accrued Benefit will not be calculated to be less than the amounts in the participant's Add-on to fields thus preserving their accrual for the preceding plan year. - With the Forced Maximum inputs, the system will use these amounts as their 415 limit for limiting their PPA Fund to Lump Sum results. Run Reports - With this option, no description of the plan formula will be included in the Summary of Plan Provisions report. OPTION 2: Using Force All Benefits Before making changes, run Calculations > Valuation and review that each participants' Benefits \ ACCRBENF \ Accrued Benefit field is calculated as expected to reflect the prior benefit formula. Plan Specification Changes - None Employee Record Changes - Basic Data \ NAME: Set Force All Benefits to Y - Yes. After selecting, press F1 on your keyboard to view a list of all forcible fields that may need to be edited. - Costs \ LIABILTY: Copy the participant's Benefits \ ACCRBENF \ Accrued Benefit to the participant's EOY Accrued Benefit field. - Costs \ LIABILTY: Copy the participant's Benefits \ ACCRBENF \ BOY 415 Accrued Benefit to the participant's EOY 415 Accrued Benefit field to limit EOY results to BOY limits - Benefits \ FASB: Copy the participant's Benefits \ ACCRBENF \ Accrued Benefit to the participant's Projected Benefit field if an ASC-715 valuation is being run. - Consider using the View > Grid > Set Column Data feature to make the above 2 edits for multiple employee records at once. - Run Calculations > Valuation to update the results. - For PPA results, if a participant's EOY Accrued Benefit and EOY 415 Accrued Benefit fields are equal to their respective Accrued Benefit and BOY 415 Accrued Benefit field, their PPA normal cost will be zero. Print Reports - With this option, if any benefit formulas are coded in Plan Specifications a description of the plan formula will be included in the Summary of Plan Provisions report. OPTION 3: Using Date of Formula Change This option may be suitable for plans using the Plan Specifications \ Benefits \ UNITBENF screen for the benefit formula and the plan is not providing top-heavy minimum benefits in the Compensation \ MINBEN screen. This option will calculate the existing formula benefit up to the date before the valuation date and a zero-benefit formula thereafter. Plan Specification Changes - Benefits \ CARRBENF: remove the benefit formula in the UNITBENF screen and enter it in this screen. - Benefits \ CARRBENF: Enter a date that is a day after the plan freeze in the Date of Formula Change for Prior Unit Benefit field. For example, if the plan froze on 12/31/2024, enter 1/1/2025 in the Date of Formula Change for Prior Unit Benefit field. Employee Record Changes - Benefits \ PROJBENF: copy the participant's ACCRBENF \ BOY 415 Accrued Benefit to their three Forced Maximum fields. - Use the View > Grid > Set Column Data feature to make the above 2 edits for multiple employee records at once. Run Calculations - Run Calculations > Valuation to update the results. - When a date is entered in the CARRBENF \ Date of Formula Change for Prior Unit Benefit field, the formula on the CARRBENF will be used as a unit formula for service prior to this date. - When using the Date of Formula Change for Prior Unit Benefit field, the formula on the UNITBENF screen is used for accruals on service after that date. Since the formula was removed from the UNITBENF screen, no future accrual will be calculated. Run Reports - With this option, if any benefit formulas are coded in Plan Specifications a description of the plan formula will be included in the Summary of Plan Provisions report. ------------------------------------------------ Cash Balance BOY Plans ------------------------------------------------ Before making changes, review the participants' Costs \ CASHBAL \ Prior Contributions keeping in mind the following: - The Prior Contribution is used to calculate the participant's accrual for the prior plan year. - The Prior Contribution is stored during Calculations > Update to New Period. - For participants assigned to a Group Formula that uses a percent of pay-based Cash Bal Contribution, the Prior Contribution field will be recalculated during Calculations > Valuation if Plan Specifications \ Assumptions \ CASHBAL \ Recalculate prior contributions for BOY Val is set to Pct Formula/Hrs. If this field is set to Hrs < Required, the Prior Contribution for those that didn't meet the accrual requirements will be removed. If this field is set to No, the Prior Contribution will not be recalculated during Calculations > Valuation. Plan Specification Changes - General \ Compensation \ MINBEN: Remove Unitized Minimum Cash Balance Formula. If top-heavy benefits are provided, additional steps would be needed to force a minimum benefit for those top-heavy benefits. - General \ Benefits \FORMBENF: Remove all group benefit formulas. - Assumptions \ CASHBAL: Set Recalculate prior contributions for BOY Val to No. Employee Record Changes - Benefits \ PROJBENF: copy the participant's ACCRBENF \ BOY 415 Accrued Benefit to their three Forced Maximum fields. - Use the View > Grid > Set Column Data feature to make the above 2 edits for multiple employee records at once. Run Calculations - Run Calculations > Valuation to update the results. - Since Recalculate prior contributions for BOY Val field was set to No, the participant's Prior Contribution field will be used as input. - When the CB formula is removed from plan specifications, ASC will not calculate an Expected Contribution for their normal cost. Run Reports - With this option, if any benefit formulas are coded in Plan Specifications a description of the plan formula will be included in the Summary of Plan Provisions report. ------------------------------------------------ All BOY Plans ------------------------------------------------ For either traditional DB or cash balance plans, after Calculations > Update to New Period is run, a participant's Forced Maximum fi