; FAQ 887: AFTAP for EOY Valuation

FAQ 887: AFTAP for EOY Valuation

Problem:

How does one prepare the 2026 AFTAP, based on the 12/31/2025 valuation?


Solution:

In general, the AFTAPs calculated for a plan with an EOY valuation date, is the AFTAP for the plan year after the EOY valuation date. For case with a valuation date of 12/31/2025, input the carryover and prefunding balances as of 1/1/2025 - the balances reported on line 13 of the 2025 SB.

For AFTAP purposes, consider updating the 1/1/2025 balances to 1/1/2026, taking into account amounts used to offset the minimum contribution, deemed or elected burns, etc. Before running the AFTAP for 2026, using the 12/31/2025 valuation file, you can change the COB and PFB so that the 1/1/2026 balances will be used. To do this, due to current ASC programming, you would need to input the 1/1/2026 balances as they would be reported on line 13 of the 2026 Schedule SB divided by 1+ the 2025 EIR in the appropriate balance fields on the CONTRIB screen. The 2025 EIR will be used to move these balances forward a year.

Running the 2026 AFTAP in the 12/31/2025 valuation file reflects the following calculations and case preparation steps outlined below:

- Target liability = 12/31/2025 FT + 12/31/2025 TNC

- Assets = 12/31/2025 assets plus the present value at 12/31/2025 of any contributions made in 2026 for the 2025 plan year.

- Case Preparation Notes for Assets: Contributions made in 2026 for the 2025 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 Calculations > Valuation with Calc PV of Contribs set to Yes or Only 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 = 1/1/2026 carryover and prefunding balances.
The 1/1/2025 balances were input when running the 12/31/2025 valuation. Pursuant to 5500 SB Part II instructions, these 1/1/2025 balances must be adjusted for any increases or reductions attributable to the 2025 plan year, and then brought forward to 1/1/2026 using the actual rate of return for 2025.

There may be other steps that are appropriate. The following approach can be used if separate balances are updated to 1/1/2026 reflecting adjustments for increases, decreases, and rate of return application. Since ASC does not currently have fields for you to enter the separate balances for funding and AFTAP purposes, and does not currently have a utility to bring the balances forward pursuant to 5500 SB Part II, the balances input in plan specifications could be adjusted in such a way that the system will replicate the expected 1/1/2026 balance in the AFTAP report. That is, if you've the developed 1/1/2026 balances reflecting adjustments for increases, decreases, and rate of return, you would need to back up the developed balances to 1/1/2025 using EIR and input those values in plan specifications so that the system will replicate your developed 1/1/2026 balances for AFTAP purposes.

- Case Preparation Notes for Prefunding and Carryover Balances: When you run an AFTAP report in ASC for an EOY valuation, the current system default is to bring forward the carryover and prefunding balances to the end of the year using the effective interest rate for the current year. Therefore, before running the 2026 AFTAP report, take your actual developed 1/1/2026 carryover and prefunding balances divided by (1 + the 2025 EIR) and input these results in the Plan Specifications: Costs \ Contrib screen balances fields to have the system calculate balance amounts that match your developed 1/1/2026 balances for the 2026 AFTAP report.

- Effective Interest Rate (EIR) = 2025 EIR.
- Case Preparation Notes for EIR: Be sure that the correct EIR for 2025 is entered on the Values\VALPPA screen in the 'Effective Interest Rate' field.

- Annuity purchases = Annuity purchases are added to the numerator and denominator to determine the AFTAP percentage.
- Case Preparation Notes for Annuity Purchases: Annuity Purchase amount is entered in the 'Annuity Purchases NHCE prior 2 Years' field on the Plan Specifications: Costs \ BASIS screen on the Distributions tab.