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Fully accrued benefits - 401a26 related


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Hi

Having a brain freeze for a change. I have not had the following situation for many many moons.

Also having a discussion with an actuary.

DB plan, covering husband and wife, both HCE and both key. Both way past NRA/NRD and in their 70s.

Both are at 100% of pay and fully accrued in prior years. Low average salaries, in the 30k range.

My software tells me that I am failing 401a26 and actuary agrees.

I tried to use accrued-to-date method but the software does not allow me to do so. I was told that for 401a26 to use accrued to date, plan must satisfy 410b.

What am i missing/not seeing here, sorry cannot think straight today.

Thanks

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Why isn't the plan passing 410(b)?

Are the husband and wife the only participants?

A participant is considered to be benefiting for purposes of 401(a)(26) if they are benefiting within the meaning of 1.410(b)-3(a) - see 1.401(a)(26)-5(a). An employee in a defined benefit plan is benefiting for 410(b) even if they do not accrue a benefit because of the 415 limit (1.410(b)-3(a)(2)(ii)(A)) or because they reached the maximum number of credited years in the plan (1.410(b)-3(a)(2)(iii)(B)).

The 0.5% accrual per year comes from an IRS memo and does not actually appear in the law or regs. I would have a hard time believing that a participant who is at their 415 limit is not "meaningfully benefiting" under the plan.

Regardless of all this - what does the actuary think you should do?

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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I agree with you.
 

No suggestions so far.

I am trying to understand if the software has an issue. I will continue to pursue this.

Plan covers only husband and wife I.e. only HCEs and key.

Thank you 

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