Avg. Comp. Definition

[Young Curmudgeon]

Can I switch from a high 5 career average to a "high 5 in the last ten years" average if I preserve the accrued benefits in place. Does anyone know a cite that backs this up?

[Andy the Actuary]

It's doubtful you'll find an example of this particular action. However, you would be protecting the accrued benefit and in so doing preclude violating 411(d)(6). You can always freeze plans. You can always reopen plans with a different benefit formula (provided no 401(a)(4) issues in respect of grants of past service). So, you should be able to accomplish your amendment which has the joint effect. You would need to provide a 204(h) notice that explains how benefits could be reduced for participants who sustain a prolonged reduction in compensation.

If only those who drafted the plans in the first place had any notion that many employers do not maintain comprehensive employee compensation records indefinitely!

[david rigby]

Not sure a 204(h) notice is required, but you can do it "just in case".

In general, the only other requirement is the 411(d)(6) clause in your plan amendment.

My guess is that your actuary will say the cost impact of this change is zero.