FAQ 936: Valuation Dates - Changing from EOY to BOY

Problem: How do I change from an EOY valuation to a BOY valuation in ASC?

Solution: Assuming a calendar year plan with a 12/31/2024 EOY valuation date is changing to a 1/1/2025 BOY valuation date, we will provide instructions for traditional plans followed by instructions for cash balance plans. At the end of this FAQ are a few additional considerations for either plan type. Before proceeding, we recommend making a copy of your original EOY valuation date plan as a precautionary backup. --------------------------------------------------------------------- For traditional DB plans: --------------------------------------------------------------------- 1. Save reports for comparison. Print the 12/31/2024 Reports > Valuation > PPA DB > Present Benefits report or export participants' Accrued Benefits to a file for later comparison. The 12/31/2024 benefits generally should equal the 1/1/2025 benefits when complete. You may also print any report you determine is appropriate to reconcile the results associated with the change in valuation date. 2. Run Calculations > Update to New Period to update the 12/31/2024 EOY valuation to 12/31/2025 EOY valuation. - In the Update to New Period menu check the option to Move Comp Rate to Last Year's Comp. This will move the 2024 compensation to the Current Compensation field in the 2025 file. - A 12/31/2024 history record will be created when the file is updated. This record will be ignored in the 1/1/2025 valuation and will be overwritten when the 1/1/2025 file is updated to 1/1/2026. There is no need to delete the 12/31/2024 history record. 3. Modify Plan Specifications. - For non-calendar year plans, update the 401(a)(17) compensation and 415 dollar limits as appropriate on the respective General \ Compensation \ COMPAVG and MAXBEN screens. - On the Funding \ FUNDMETH screen change Beginning of Year Valuation to Yes. - On the Funding \ PPAFASMP screen update the funding segment rates to reflect the 1/1/2025 BOY valuation date. - On the Values \ VALPPA screen review the amortization payments. - For plans with insurance, change the Insurance Issue Date to 1/1/2025. - On the Values \ CONTRBLY screen, remove any Receivable Contrib amount. 4. Replace Prior Accrued Benefits. - Use Grids and Set Column Data to copy the Accrued Benefit field from the 12/31/2023 Employee \ Basic Data \ HISTORY screen into the Prior Accrued Benefit field. Prior Accrued Benefits are generally used in compliance tests. 5. Import the 2025 Compensation Rates. - Populate the Current Annual Compensation Rate field as appropriate for the valuation. - The 2024 compensation is already stored in their Current Compensation fields and can be used for populating Current Annual Compensation Rates. - Enter a salary scale in the Funding \ PPAFASMP screen if appropriate. 6. Run Calculations > Valuation. Review the 1/1/2025 BOY valuation results. 7. Print the 1/1/2025 Reports > Valuation > PPA DB > Present Benefits report or export participants' Accrued Benefits to a file to compare it to participants' 12/31/2024 Accrued Benefits from Step 1. There may be some discrepancies due to an increased 415 or compensation limits. Review and resolve any discrepancies found. You may also compare the current reports with any other reports you printed from the 12/31/2024 EOY valuation date. --------------------------------------------------------------------- For Cash Balance plans: --------------------------------------------------------------------- 1. Save reports for comparison. Print the 12/31/2024 Reports > Valuation > PPA DB > Cash Balance Summary report or export participants' cash balance account fields to a file for later comparison. The 12/31/2024 account balances generally should equal the 1/1/2025 account balances when complete. You may also print any report you determine is appropriate to reconcile the results associated with the change in valuation date. 2. Remove current cash balance activity. - Use Grids to remove the following employee Costs \ CASHBAL screen fields: Earnings, Expected Contribution, Distribution, Distribution Date, and Distribution Earnings. - You may use Grids and Set Column Data to temporarily store the Distribution and Distribution Date fields in the ADDRESS screen User Text fields since these fields will need to be re-entered in a later step. The following example may help illustrate the effect of removing these field amounts and the impact of the changes when running the Update to New Period routine on a 12/31/2024 EOY plan year being updated to 12/31/2025: - During the update, the sum of the Prior Balance (the 12/31/2022 account balance), Earnings, and Expected Contributions minus the Distribution and Distribution Earnings amounts are stored as the Prior Balance as of 12/31/2023 in the 12/31/2024 EOY case. - By removing the values from the fields listed above from the 2024 case, the update to new period will have the effect of storing the 12/31/2023 account balance in the Prior Balance field of the EOY 12/31/2024 case. - Once the Beginning of Year Valuation field is set to Yes in a later step, this same Prior Balance field will accurately reflect the balance as of 1/1/2024. Do not run Calculations > Valuation until after the Update to New Period. 3. Run Calculations > Update to New Period to update the 12/31/2024 EOY valuation to 12/31/2025 EOY valuation. - In the Update to New Period menu check the option to Move Comp Rate to Last Year's Comp. This will move the 2024 compensation to the Current Compensation field in the 2025 file. - A 12/31/2024 history record will be created when the file is updated. This record will be ignored in the 1/1/2025 valuation and will be overwritten when the 1/1/2025 file is updated to 1/1/2026. There is no need to delete the 12/31/2024 history record. 4. Modify Plan Specifications. - For non-calendar year plans, update the 401(a)(17) compensation and 415 dollar limits as appropriate on the respective General \ Compensation \ COMPAVG and MAXBEN screens. - On the Funding \ FUNDMETH screen change Beginning of Year Valuation to Yes. - On the Funding \ PPAFASMP screen update the funding segment rates to reflect the 1/1/2025 BOY valuation date. - On the Assumptions \ CASHBAL screen, the Recalculate prior contribution for BOY Val to Pct Formula/ Hrs field is not activated in EOY valuations, but it is activated in BOY valuations. Since Prior Contributions are used in BOY valuations, using this Recalculate option will have ASC calculate Prior Contributions for percent formulas. Participants with other benefit formulas will need to have their Prior Contributions manually populated; this is included in step 7. - On the Values \ VALPPA screen review the amortization payments. - For plans with insurance, change the Insurance Issue Date to 1/1/2025. 5. Replace Prior Accrued Benefits. - Use Grids and Set Column Data to copy the Accrued Benefit field from the 12/31/2023 Employee \ Basic Data \ HISTORY screen into the Prior Accrued Benefit field. - If you are running compliance tests with this plan, use the Grid and Set Column Data to transfer the 12/31/2023 'EOY CB Accr Benf' from Participants' Extended History B screen to replace the Prior Accrued Benefit. - If cash balance conversion factors change each year, you may need to recalculate the Prior Accrued Benefit instead of using history. 6. Enter the prior plan year's Cash Balance Distribution activity. - Input any Cash Balance Distribution amounts and Distribution Date fields into participants' CASHBAL screens. Use Grids and Set Column Data if the fields were stored in the ADDRESS User Text fields in Step 2. - FYI - Earnings will be calculated during Calculations > Valuation based on the Prior Interest Rate field in the Plan Specifications \ Assumptions \ CASHBAL screen. 7. Enter Prior Contributions. - Percent of pay cash balance formulas will be recalculated with the Plan Specifications \ Assumptions \ CASHBAL screen \ 'Recalculate prior contribution for BOY Val' field set to 'Pct Formula/Hrs' during Calculations > Valuation in step 9. - If participants benefit from non-percent of pay cash balance formulas, set CASHBAL screen / 'Recalculate prior contribution for BOY Val' to No and enter participants' Prior Contributions. Grids or ASCript can be used to enter Prior Contributions in batch. 8. Import the 2025 Compensation Rates. - Populate the Current Annual Compensation Rate field as appropriate for the valuation. - The 2024 compensation is already stored in their Current Compensation fields and can be used for populating Current Annual Compensation Rates. 9. Run Calculations > Valuation. Review the 1/1/2025 BOY valuation results. 10. Print the 1/1/2025 Reports > Valuation > PPA DB > Cash Balance Summary report or export participants' cash balance account fields to a file. Compare this to the 12/31/2024 Cash Balance Summary report or exported data from step Step 1. In general, cash balance account balances as of 1/1/2025 should equal the 12/31/2024 cash balance account balances when completed. Review and resolve any discrepancies found. You may also compare the current reports with any other reports you printed from the 12/31/2024 EOY valuation. --------------------------------------------------------------------- Additional Notes: --------------------------------------------------------------------- For either traditional defined benefit or cash balance plans, there are miscellaneous considerations. These are: 1. You may use the 1/1/2025 BOY valuation date plan for the 2025 AFTAP as long as actuarial assumptions, assets, and contributions have been updated. 2. For frozen plans with participants with Entry dates after 1/1/2024 and before 12/31/2024 who earned an accrued benefit during 2024, to have their benefit valued as of 1/1/2025, make the following changes: (i) Change the participant's entry date to 1/1/2024 (ii) Enter the participant's Prior Accrued Benefit as an 'Add-on to' benefit in the Benefits \ PROJBENF screen. (iii) Change the General \ Compensation \ COMPAVG screen's 'Benefit Add-ons' field to 1 - Increase Benefit Depending on the case, other unique adjustments may be needed.