FAQ 887: AFTAP for EOY Valuation

Problem: How does one prepare the 2022 AFTAP, based on the 12/31/2021 valuation?

Solution: In general, AFTAPs for plans with EOY valuation dates are run in the prior year's ASC file. For valuation purposes, you should input the carryover and prefunding balances as of 1/1/2021 in your 12/31/2021 file - the balances reported on line 13 of the 2021 SB. For AFTAP purposes, however, you must first update the 1/1/2021 balances to 1/1/2022, taking into account amounts used to offset the minimum contribution, deemed or elected burns, etc. Before running the AFTAP for 2022, using the 12/31/2021 valuation file, you need to change the COB and PFB so that the 1/1/2022 balances will be used. To do this, you need to input the 1/1/2022 balances as they would be reported on line 13 of the 2022 Schedule SB divided by 1+ the 2021 EIR in the appropriate balance fields on the CONTRIB screen. Running the 2022 AFTAP in the 12/31/2021 valuation file: - Target liability = 12/31/2021 FT + 12/31/2021 TNC - Assets = 12/31/2021 assets plus the present value at 12/31/2021 of any contributions made in 2022 for the 2021 plan year. - Contributions made in 2022 for the 2021 plan year before the date the AFTAP is certified are included in the AFTAP assets. Enter the contributions to be included on the PLANCNTB screen using 'Plan Cntb Categ' = C, and run the Quarterly Interest program (Calculations>Actuarial>Quarterly Interest) to store the discounted value of the contributions using the current effective interest rate (without the additional 5% interest that applies if the plan has late quarterly payments) in the 'Quarterly Int/Rcvbl Contribution' field on the CONTRIB screen. - Carryover & prefunding balances. The 1/1/2021 balances were input when running the 12/31/2021 valuation. These balances must be adjusted as of 1/1/2021 for any increases or reductions attributable to the 2021 plan year, and then brought forward to 1/1/2022 using the actual rate of return for 2021. When you run an AFTAP report in ASC for an EOY valuation, the carryover and prefunding balances are brought forward to the end of the year using the effective interest rate for the current year. Therefore, before running the 2022 AFTAP report, you must enter the actual 1/1/2022 carryover and prefunding balances divided by the 2021 EIR to have the correct amounts used for the 2022 AFTAP. - Effective Interest Rate (EIR). Be sure that the correct EIR for 2021 is entered on the Values\VALPPA screen in the 'Effective Interest Rate' field. - Annuity purchases = amount entered in the 'Annuity Purchases NHCE prior 2 Years' field on the Costs\BASIS screen on the Distributions tab. Amounts entered in this field are added to the numerator and denominator to determine the AFTAP percentage. ASC does not currently have fields for you to enter the separate balances for funding and AFTAP purposes, and does not have a utility to bring the balances forward, so when running EOY valuations, you must be sure you have the correct balances in your file for the application you are running.