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Amend out floor-offset language?

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If a plan sponsor wants to amend the floor-offset provision out of their calendar year CB plan, would that be a straightforward as using the 12/31/18 year end hypothetical account balance with offset as the 1/1/19 beginning balance and going forward without the offset?   

 

 

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No can do. If they want to do that they must terminate the plan.

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Not challenging, just questioning,..but why couldn't they amend the plan to remove the offset?

Would it be ok if you continued to apply the original language to the benefits earned prior to 12/31/18 and removed the offsets going forward?  Can you freeze a floor offset plan?

 

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You amend out the floor if you amend out the offset. No can do. Unless you're talking about eliminating the offset in entirely. In that case you give big benefit increases and you're fine.

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Thank you. I don't work on these plans currently, but this question came up for a takeover opportunity.

I wonder how many people that have entered the cash balance offset plan business are happy they did it, or regret it? 

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I recently wrapped up work on one of these plans that we took over towards the end of last year. Our software (ASC) doesn't support CB-FO plans so that was a challenge. There were other things that made this particular plan a challenge that I won't get into here. 

If you asked me would I take on this plan again, knowing what I know now, I would say yes, but only because it's a good client and I value the relationship with the advisor who brought us the plan. I wouldn't go seeking out this type of business in the future and I can't see myself recommending this plan design.

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Why can't the plan be amended to use a fresh start without wearaway? A participant's total benefit would be the sum of the net accrued benefit as of the fresh start date plus the new formula accrual after that date.

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On 9/11/2018 at 11:35 AM, Mike Preston said:

You amend out the floor if you amend out the offset. No can do. Unless you're talking about eliminating the offset in entirely. In that case you give big benefit increases and you're fine.

I wonder what would happen with employees who had previously terminated? Say someone terminated with no net benefit in the CB plan. If the offset is later eliminated entirely, do you have to go back in time and look at previous terms who had no net benefits? If so, how far back do you have to go?

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It would depend on the document, but most that I've seen have language saying that a participant who terminates with 0 accrued benefit is deemed to have received a distribution of their benefit. In that case, I think you would be ok, since once they've been paid out you're done with them.

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