FAQ 884: Quarterly Contribution and Discounted Contributions - How to Run Calculations

Problem: How does the system calculate discounted contributions for PPA plan years, and what are the step-by-step instructions for running these calculations?

Solution: -------------------------------------------------------------------- OVERVIEW Prior to running Calculations > Valuation with Calc PV of Contribs set to Yes or Only to calculate the present value of contributions, it is recommended to check the Recalculate Quarterly Contributions option to calculate the required quarterly installment amounts and their due dates. Calculations > Valuation can be used to: 1. Determine the adjusted value of employer contributions in Schedule SB categories A, B and C on the appropriate plan valuation date for Schedule SB reporting. To print a schedule showing the dates and amounts of individual contributions for the Schedule SB line 19 attachment, select the appropriate report from the Reports > Valuation > PPA DB... menu. 2. For plans with end of year valuation dates, determine and store in plan specifications the amount of any pre-contributions and interest on pre-contributions. 3. For plans with beginning of year valuation dates, determine and store in plan specifications and add to the actuarial value of assets the discounted value on the current valuation date of prior year contributions made during the first 8-1/2 months of the plan year. 4. For plans with end of year valuation dates, determine and store in plan specifications the discounted value on the valuation date of current year contributions made after the valuation date and up to 8-1/2 months after the end of the plan year for inclusion in assets for AFTAP purposes. 5. Based on calculated discounted contribution amounts of the contributions input in the Costs \ PLANCNTB screen, generate a Target Contribution report (available from the Reports > Valuation > PPA DB... menu) which determines the contribution deposit amount (a Target Contribution) on a particular date to net to a designated total contribution value for the plan year. -------------------------------------------------------------------- DATA INPUT REQUIREMENTS PLANCNTB Screen Setup Calculations > Valuation uses the contribution information entered in the Plan Specifications Costs \ PLANCNTB screen. Enter the date, amount, and category (and additional input as noted) for all contributions where the following categories are available: A - Corresponds to line 19a of the Schedule SB Attachment for an unpaid minimum required contribution from a prior plan year. Additional Input: Enter the valuation date and associated effective interest rate for the plan year that would be applied to any remaining unpaid minimum required contribution. If unmet quarterly contributions remain for the plan year with the unpaid minimum, enter the quarterly contribution amounts and due dates for that plan year in the Plan Specifications Costs \ CONTRIB screen \ Quarterly Contribs tab in the Category A Contribs button. B - Corresponds to line 19b of the Schedule SB Attachment for the current plan year and represents a contribution made to avoid benefit restrictions under IRC 436. Additional Input: Enter the valuation date and associated effective interest rate for the plan year that the IRC 436 contribution is applied to. C - Corresponds to line 19c of the Schedule SB Attachment and represents a contribution made to satisfy the minimum required contribution for the current plan year. Additional Input: None because the current year's valuation date and effective interest rate are already stored in the plan specifications. R - For Beginning of Year (BOY) valuations only. These are contributions made during the current plan year that apply to the prior plan year. Only contributions made during the first 8-1/2 months of the plan year should be entered. Additional Input: Enter the valuation date and associated effective interest rate for the prior plan year that the receivable contribution is applied to. CONTRIBLY Screen Setup The CONTRIBLY > Minimum Contribution input is required (generally updated during Calculations > Update to New Period or manually input in takeover plans). -------------------------------------------------------------------- CALCULATIONS OPTIONS Two separate fields in the Calculations > Valuation menu control the calculation of quarterly contributions and discounted contributions as outlined here: Calculate Quarterly Contribution Requirements 1. Locate the Recalculate Quarterly Contributions checkbox and check the box to have the amounts and due dates of the plan's quarterly contribution requirement calculated. This is generally recommended when the benefits, liabilities, EIR, and assets are considered, reviewed, and final. 2. Click OK to run Calculations > Valuation. The system will calculate the quarterly contribution requirement, due dates, amounts, and store the results in the Costs \ CONTRIB screen \ Quarterly Contribs tab. 3. Uncheck the Recalculate Quarterly Contributions in the Calculations > Valuation menu if manual inputs for the quarterly contribution amounts and due dates have been input in the Costs \ CONTRIB screen \ Quarterly Contribs tab. Calculate Discounted Contributions 1. Locate the Calc PV of Contribs drop down menu to have the system calculate the discounted contribution amounts of the contributions input on the Costs \ PLANCNTB screen when either Yes or Only is selected. This is generally recommended when the benefits, liabilities, EIR, and assets are considered, reviewed, and final. 2. Click OK to run Calculations > Valuation. The system will calculate and populate the last column on the Costs \ PLANCNTB screen with the adjusted value of the contributions. 3. Additional calculation results, if applicable, are stored in the following fields on the Costs \ CONTRIB screen \ Contributions tab: Pre-Contributions, Interest on Pre-Contributions, Adjusted Pre-Contributions, Discounted Contributions, and Discounted B Category Contributions. Calculations > Valuation can be run with both the Recalculate Quarterly Contribs option checked and the Calc PV of Contribs set to Yes or Only. Running with both enabled is appropriate when the benefits, liabilities, EIR, and assets are considered, reviewed, and final. -------------------------------------------------------------------- SHORT PLAN YEAR CONSIDERATIONS The date before the first day of the short plan year must be entered in Plan Specifications on the General \ Identification \ ID screen in the PYE Hist 1 field. The program will use this date along with the Plan Year Begin and End dates to determine the number and amount of any required quarterly installments and their due dates. -------------------------------------------------------------------- BEGINNING OF YEAR VALUATION DATE PLANS Contributions input on the Costs \ PLANCNTB screen that were made after the end of a plan year are transferred during the Calculations > Update to New Period to the next year's Costs \ PLANCNTB screen as Category R contributions with the valuation date and effective interest rate for the prior plan year. When Calculations > Valuation is run with Calc PV of Contribs set to Yes or Only, the discounted value of category R contributions is calculated and stored in the Quarterly Int / Rcvbl Contribution field on the Costs \ CONTRIB screen and added to the Actuarial Value of Assets for PPA funding purposes. -------------------------------------------------------------------- ADDITIONAL DOCUMENTATION In the Calculations > Valuation menu, use the F1 key to access a complete explanation of how the Recalculate Quarterly Contributions and Calc PV of Contribs options work. Sample calculations are available in the DB Reference Manual in Chapter 7: Quarterly Interest Adjusted Contributions. Adjustments to the interest calculations due to CARES Act relief is outlined in FAQ 1100: Coding for Extended Funding Deadlines and AFTAP relief under CARES Act of 2020.