Asset Valuation Methods under ERISA

By Paulette Tino and Edward Sypher · Society of Actuaries · 2002

A paper submitted by Paulette Tino and Edward Sypher and published as the whole of The Pension Forum, Volume 14, Number 1 (September 2002). It describes a variety of methods, called asset valuation methods, used to set the value of a plan's assets at a figure other than fair market value when calculating the required contributions for a plan subject to ERISA's minimum funding requirements, and discusses the statutory and regulatory requirements for those methods under ERISA.

On the syllabus

Exam RET-201 — Outcomes 1d; Chapters 1, 3, 4 and 5 (the regulations are background only).

1 Introduction

2 Statute and Regulations

Code Section 412(c)(2)(A)
Reg. 1.412(c)(2)-1
Revenue Procedure 2000-40
Code Section 412(c)(2)(B)

3 Scheduled Recognition Methods (with Linear Recognition)

Approval 11: Average market value without phase-in
Approval 15: Smoothed market value without phase-in
Algebraic Equivalence
The Recursive Algorithm
Approvals 12, 16 and 17: The phase-in rules
Concluding Comments

4 Scheduled Recognition (with non-linear recognition)

Recognition Using Annuities-Certain
Regulation Example (7)
Rev. Proc. 2000-40: Approval 17 (revisited)

5 Other Methods

Regulation Example (1)
Regulation Example (2)
Regulation Example (3): The unit method
Regulation Example (5): Reserve account
Present Value Methods

Appendix A Academy Standard of Practice

Appendix B Annoted Outline of Reg. 1.412(c)(2)-1

Appendix C Regulations under Code Section 412(c)(2)(B)

Appendix D Automatic Approvals under Rev. Proc. 2000-40

Appendix E Further Reading

Sources

The Pension Forum, September 2002, Volume 14, Number 1 (SOA) — the document: abstract and the paper's table of contents, read from the page images because the PDF's text layer is garbled (sha256 95a5bf75a3634175…); the contents does not number its divisions; chapter numbers 2 to 5 are taken from its page-number prefixes (2-1, 3-3, 4-1, 5-1) and Introduction is chapter 1 as the syllabus's chapter list implies, and the entries beneath them are left unnumbered, and it spells the Appendix B title "Annoted"
RET 201 Syllabus, Mar 2027/Jul 2027 (SOA) — the citation (Asset Valuation Methods under ERISA, Pension Forum, Sep 2002, Ch. 1, 3, 4 and 5) and the assigned outcome (1d)
RET 201 Course Strategy Guide, Nov 2026/Mar 2027/Jul 2027 (SOA) — that the reading is old and U.S.-specific but gives the mathematics for common asset valuation methods