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Help on Target Benefit Plan Calculation

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I’m seeking some help on Target Benefit Plan, important plan provisions and preliminary calculations are provided in the tables below.

Would you please check my calculation?

Target Benefit =  ((Average Annual Compensation *0.45 + (( Average Annual Compensation –Covered Compensation)*0.0052*6))/12)*(6/20)

 VBRA =  (Change TB) *(APR), the APR is 130.8344

Individual Level Premium = PMT(7%,5,0,-1*VBRA,1), for number of years I used 5 because the expected total year of service is 6 years and the participant waited one year to enter the plan. I'll be reducing the number of year each year by one.

Eligibility Requirements: upon reaching age 21 and being credited with 1 Year of Eligibility Service.

Normal Retirement Age: The term Normal Retirement Age means age 65. There is no mandatory retirement age under the terms of the Plan.

Calculation of Level Funding Amount of Target Benefit: The Level Funding Amount for each Participant as of his effective date of participation in the Plan shall be determined using the cost produced by the Individual Level Premium funding method. The Level Funding Amount shall remain constant unless there has been a change in a Participant's Target Benefit.

 Target Benefit: Each Participant's stated benefit under the Plan will be equal to the Participant's Target Benefit (as described in Section 3.1(c). Each Plan Year prior to the time required by law for filing the Employer's federal income tax return (including extensions), the Employer shall make contributions to the Employer Account of each Participant who has a Year of Service for Accrual of Benefits for that Plan Year, which, when added to the Forfeitures occurring during the Plan Year, shall be an amount equal to the Level Funding Amount as calculated under Section.

 3.1(c)     Benefit Formula:  The Target Benefit payable at Normal Retirement Date for each Participant shall be equal to the sum of 45.00% of such Participant's Average Annual Compensation; plus.52% multiplied by the Participant's total number of Years of Service, multiplied times the Participant’s excess Covered Compensation, computed to the nearest dollar. The Target Benefit is reduced one-twentieth (1/20) for each Year of Service less than Twenty.

 

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Hi

Sorry if I am not seeing it but why age nearest is 62? At 12/31/19, age should be 54? NRA is 65 from what you provided.

I concur the calculations all the way to VBRA but cannot back into the 57k figure.

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Also, is this the first year i.e. you have no theoretical accumulation?

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They are but not always as favorable, all depends on the past salary history, benefits, accumulation and the demography.

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Jakyasar, thank you for your reply. 

I made an error on the DOB, which should have been 1/31/1958.

This is how I got the 57K figure, I converted the VBRA to Individual Level Premium as follows
 

                    VBRA                                 

   {[  (1+0.07)5  -1 ]  / (0.07)} (1+0.07)

 

How would you calculate the Individual Level Premium to determine the very first contribution for 2019 plan year for the participant?

 

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