How to Determine Unfunded Vested Benefits
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Example – Plan A first makes an election to use the Alternative Premium Funding Target for a plan year that
begins on April 1, 2023. In this case, the Alternative Premium Funding Target must be used to determine UVBs
for all plan years beginning before April 1, 2028. The plan may revoke the election first effective for any plan
year beginning on or after April 1, 2028, but unless the election is revoked, it will remain in place.
This is the case even if the plan year subsequently changes. For example, if the plan year is changed to the
calendar year first effective January 1, 2028, the Alternative Premium Funding Target must be used for the Short
Plan Year April 1, 2027 – December 31, 2027 and for the January 1, 2028 – December 31, 2028 plan year. The
first plan year for which the Plan Administrator may revoke the election is the 2029 plan year.
The election (or revocation) must be made by the premium filing due date. An election to use (or revoke) the
Alternative Premium Funding Target is made as part of the Comprehensive Premium Filing. If an election (or
revocation) is not made as part of the Comprehensive Premium Filing, it may be made as part of an amended
filing only if the amended filing is made on or before the due date.
Vested Benefits
Only vested benefits are taken into account when determining the Premium Funding Target. For this purpose, a
benefit does not fail to be considered vested solely because it is not protected under Code section 411(d)(6) and
thus may be eliminated or reduced by the adoption of a plan amendment or by the occurrence of a condition or
event. Such a benefit is vested for premium purposes (if the other requirements for vesting have been met) so
long as the benefit has not actually been eliminated or reduced. In addition, certain benefits payable upon a
Participant’s death do not fail to be considered vested solely because the Participant is still living. The benefits to
which this rule applies are a qualified pre-retirement survivor annuity (QPSA), a post-retirement survivor annuity
such as the annuity paid after a Participant’s death under a joint-and-survivor or certain-and-continuous option,
and a benefit that returns a Participant’s accumulated mandatory employee contributions. The following
examples illustrate these concepts:
▪ Example 1 – Under Plan A, if a Participant retires at or after age 55 but before age 62, the Participant receives
a temporary supplement from retirement until age 62. The supplement is not a qualified social security
supplement (QSUPP) as defined in Treasury Reg. § 1.401(a)(4)-12 and is not protected under Code section
411(d)(6). The temporary supplement is considered vested, and its value is included in the Premium Funding
Target, for each Participant who, on the UVB Valuation Date, is at least 55 but less than 62, and thus eligible
for the supplement. The calculation is unaffected by the fact that the plan could be amended to remove the
supplement after the UVB Valuation Date.
▪ Example 2 – Plan B provides a QPSA upon the death of a Participant who has five years of service, at no
charge to the Participant. The QPSA is considered vested, and its value is included in the Premium Funding
Target, for each Participant who, on the UVB Valuation Date, has five years of service and is thus eligible for
the QPSA. The calculation is unaffected by the fact that the Participant is alive on that date.
A Participant’s pre-retirement lump-sum death benefit (other than a benefit that returns accumulated
mandatory employee contributions or a QPSA paid as a lump sum) is not vested if the Participant is living.
Similarly, a disability benefit is not vested if the Participant is not disabled.