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Frozen DB - testing for 401a26 using accrued-to-date method

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3 year old DB plan (combo tested with a PS plan) hard frozen early 2021 (before 1000 hours accrued) with no accruals and no further new participants. EOY val.

Top heavy and PBGC covered.

Assume that 401a26 will need to be tested. Any reason why I cannot use acc-to-date method for 401a26? I just cannot seem to find one but wanted to confirm.

Will not test together with the PS plan for 2021 as I do not handle the administration of the PS plan i.e. not sue if historic data is correct or not - to use acc-to-date method.

Thank you

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"401(a)(26):  In general. In the case of a trust which is a part of a defined benefit plan, such trust shall not constitute a qualified trust under this subsection unless on each day of the plan year such trust benefits at least the lesser of ..."

I don't know how you could satisfy the "on each day of the plan year" requirement using an accrued to date method.  I don't use accrued to date for any of my testing, so there might be a way, but without doing a lot of digging, I can't see how it would work.


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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§ 1.401(a)(26)-3 Rules applicable to a defined benefit plan's prior benefit structure

(c) Testing a prior benefit structure -

(1) General rule. A plan's prior benefit structure satisfies this paragraph if the plan provides meaningful benefits to a group of employees that includes the lesser of 50 employees or 40 percent of the employer's employees. Thus, a plan satisfies the requirements of this paragraph (c) if at least 50 employees or 40 percent of the employer's employees currently accrue meaningful benefits under the plan. Alternatively, a plan satisfies this paragraph if at least 50 employees and former employees or 40 percent of the employer's employees and former employees have meaningful accrued benefits under the plan. 


Isn't the alternative of having meaningful accrued benefits imply accrued-to-date?

Also, there is the simplified testing method that can use any single plan day during the plan year.


§ 1.401(a)(26)-7 Testing methods.

(a) Testing on each day of the plan year. A plan satisfies section 401(a)(26) for a plan year only if the plan satisfies section 401(a)(26) on each day of the plan year. An employee benefits on a day if the employee is a participant for such day and the employee benefits under the plan for the year under the rules in § 1.401(a)(26)-5.

(b) Simplified testing method. A plan is treated as satisfying the requirements of paragraph (a) of this section if it satisfies section 401(a)(26) on any single plan day during the plan year, but only if that day is reasonably representative of the employer's workforce and the plan's coverage. A plan does not have to be tested on the same day each plan year. 

[all underlined and bolded is mine]

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I remember hearing a veteran speaker at an ASPPA meeting about ten years ago opine that accrued to date testing could be used for determining whether a plan satisfies 401(a)(26). I don't recall whether it was strictly related to the prior benefit structure and if he had a cite. The -c(3)(2) caveats seem potentially ominous with a small group of employees and a short duration period for the accruals.

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