FAQ 826: Fresh Start - Coding a Valuation Pre-Effective Date Service

Problem: How should I code a new plan so that participants will have a year of accrual on the plan effective date, generating a funding target instead of a target normal cost?

Solution: In general, for granting past accrual service for a new plan, whether for granting a single year for the purpose of generating a funding target, or for granting 5 years of past service to satisfy the safe harbor requirements, or for granting the number of years provided by document provisions, do the following: ID screen - Exclude Accrual Svc field: Enter the date that will provide the desired number of years of past service. E.g., for a new plan with a 7/1/2023 effective date, enter 7/1/2022 if granting a single year of service for funding purposes, and enter 7/1/2018 if granting 5 years of past service. Adjust the date to provide the desired number of accrual years. ACCRUAL screen - Starting Date should generally be 2 - Plan Year. If the plan formula is a unit formula, Type of Accrual should be 5 - Unit per Formula, and Years for Full Accrual should be the same as the Maximum Years on the UNITBENF screen. MAXBEN screen - Starting Date should be 4 - BOY Entry, Days in First Year must be 1 in order for the service prorate applied to 415 $ or 415 % of Comp limits to be no less than 1/10th. PLAN FORMULA screen - Starting Date should be 2 - Plan Year, the same as the entry on the ACCRUAL screen, and the Reduction Prior to Acc Excl Date field should be 5 - Fresh Start. EOY VALUATIONS GENERATING A FUNDING TARGET - there are two coding options available: 1) Import or manually enter salary history for each employee. The system will then calculate a Begin of Yr Accrued Benefit and a BOY 415 Accrued Benefit and store them on the ACCRBENF screen. On the FUNDMETH screen in plan specifications, in the End of Year Valuations frame, set the Use BOY accrued benefit for funding target field to Yes. 2) Enter a value in the employee Prior Accrued Benefit field for all employees. This field is only populated manually or by running the Update to New Period program, so it must be entered manually in the first plan year. You may also need to enter values in the Prior Accrual Average fields on the Employee \ COMP screen for both Plan Benefit and 415 Maximum Benefit and in the Prior Funding and Prior Accrued 415 Limits fields on the Employee \ PROJBENF screen. Note that if salary history has been input for each employee, the system will calculate the Prior Accrual Average for the 415 Maximum Benefit in the COMP screen.