FAQ 932: Maximum Deductible - At Risk Loads

Problem: How are the at-risk loads on the PPAFASMP screen applied?

Solution: The at-risk loads can be applied to the liabilities of plans that are NOT in at-risk status under IRC 430(i), and those loaded values can then be used for determining the maximum deductible contribution for those plans. See IRC 404(o)(2)(B). The loads are applied to all plan participants - active, term vested, and retired. Current law provides for a load of 4% on the funding target and target normal cost and a per participant load on the funding target of $700. However, anticipating a possible change to these values, we did not hard-code them in the at-risk load fields; instead, the values must be input by the user. The examples below assume a "Percent Load" of 4% and a "$ per Participant Load" value of $700. For an active participant, the funding target with at-risk loads is equal to the funding target plus 4% plus $700. A participant with a funding target of $5,000 would have a funding target with at-risk loads of $5,900 (5,000 * 1.04 + 700). For a terminated vested participant, the funding target with at-risk loads would have a vesting percentage applied. A 40% vested term with a funding target of $5,000 would have a funding target with at-risk loads of $2,780 (5,000 * 1.04 * 40% + 700). If the $700 load is applied, it will apply to all participants by default, but we have included an option to apply it only to participants with non-zero funding targets. The target normal cost with at-risk loads is equal to the target normal cost plus 4%. A participant with a target normal cost of $2,000 would have a target normal cost with at-risk loads of $2,080 (2,000 * 1.04).