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liability may be accumulated no more rapidly than on a level basis
over the working lives of the covered employees, such that the
reserve with respect to an employee can be fully funded no earlier
than upon retirement of the employee. We conclude that the maximum
amount of the liability that may be satisfied by the reserve is the
amount at the time with respect to which the reserve is computed
that, together with future normal costs and interest, will be
sufficient upon retirement of each employee to pay future medical
claims of the employee when they become due. See, e.g., United
States v. Atlas Life Ins. Co., 381 U.S. 233, 236 n.3 (1965);
Travelers Ins. Co. v. United States, 303 F.3d 1373, 1380-1381 (Fed.
Cir. 2002); Natl. States Ins. Co. v. Commissioner, 758 F.2d 1277,
1278 (8th Cir. 1985) (a reserve is computed by calculating the
excess of the present value of future benefits payable over the
present value of future net premiums receivable), affg. 81 T.C. 325
(1983). That amount must be actuarially determined on a level
basis.
The actuarial present value of the projected benefit of each
covered employee should be allocated on a level basis to each year
commencing with the year in which the allocation is first
recognized and ending with the year the employee is expected to
retire. The funding of “a reserve funded over the working lives of
the covered employees” cannot begin until the reserve is created.
Thus, the allocation is first recognized on the later of the date
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