- 12 -
employees. Mercer determined that, because the retired employees
had no remaining working life, the present value of future benefits
for retired employees ($27,759,057) could be funded in 1991.
Mercer believed that Norwest’s resulting reserve for active and
retired employees ($30,689,717) would be within the section
419A(c)(2) account limit.
On the basis of the 1991 valuation report, Norwest contributed
$30,689,717 to the postretirement medical trust in 1991. On the
consolidated return for 1991, Norwest claimed a deduction for the
contribution as an addition to a “qualified asset account” pursuant
to section 419A(b).
2. Funding the Postretirement Medical Trust for 1992-94
At the request of Norwest, Mercer prepared actuarial funding
valuation reports as of January 1 for each year 1992-94, relating
to the funding of the postretirement medical trust (the 1992-94
valuation reports). In the 1992-94 valuation reports, Mercer
computed the end-of-year contributions to be $6,859,600,
$11,308,043, and $12,247,933, respectively. Mercer calculated the
contribution amount to be equal to a fraction. The numerator of
the fraction was the present value of future benefits for active
employees and retirees, reduced by the sum of the value of (a) the
postretirement medical trust assets and (b) the section 401(h)
account assets. The denominator of the fraction was the average
present value of future working lifetimes of the employees. The
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011