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Termination of CB Plan - employee help

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My company froze and canceled our CB plan. The payments are being distributed shortly, we were given a page to sign so we knew what $ we were each getting(it was the same amount for each person, 7 employees) minus the owner. But then, we were told there was “excess” funds and before distribution these excess funds would need to be figured out. 

what I don’t understand is this excess came out to $100,000 and it’s being split between all of us employees.. however, I am 27 and I am getting $300 of this 100k but someone whose 68 is getting $20,000 , someone whose 85 is getting $3,000 …. How does this make sense?? 

could I suggest they do an even split amongst all of us employees ? $300 seems ridiculous.  Seems age discriminatory.

I don’t understand all this CB stuff so bear with me, all I know is my boss put in $1k each year for EVERYONE 5% interest credit. I don’t see why the excess would be so randomly distributed 

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There is a lot here and it is difficult to address all the various issues you raised.

1)  If the plan is being terminated, you should have been given a lot more than "a page to sign".  You should have received a benefit election package which detailed your options on the distribution.  Assuming the amount of your lump sum is > $5,000, it would have explained your monthly annuity options, as well as your lump sum option.  It should have also provided tax information related to the distribution, and spousal consent forms.  

2) You have the right to request a benefit calculation worksheet that details your benefit amount.

3) You have a right to a Summary Plan Description that explains how the the plan works and the benefits are determined.  This should also define how any excess assets are allocated.  

4) Regarding the allocation of the excess assets, they must be allocated in a non-discriminatory manor.  Discrimination in this setting only looks at Highly Compensated Employees (owner) vs. Non-Highly Compensated Employees.  (These are defined terms under the law.)  Because the testing for a cash balance plan is typically done by looking at the benefits paid at Normal Retirement Age, older people often get more than younger people because younger people have longer for the money to accumulate.  Often the allocation is done based on age and compensation.  Older & higher paid get more $, younger & lower paid get less $.   

If you have a 65 year old making $200,000 and a 25 year old making $20,000.    The plan can give $50,000 to the 65 year old and $191 to the 25 year old and that would not be discriminatory because each would receive 25% of pay at 65, assuming 8.5% interest.  191 * 1.085 ^ 40 = 5000/20000 = .25     50,000/200,000 = .25.   This is just an example to illustrate the point that younger people will likely get less.  The actual allocation is often more complex, but this illustrates the method.  

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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