Bill3
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Nicely done. Even though it's out of date, you might look to notice 89-23 for an added measure of comfort.
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Keep in mind that not all plans are permitted to use the DFVC Program. For example, a plan that covers only partners is likely to be ineligible. In most/all of these cases, the $1100 per day DOL penalty would not apply anyway, but the $25 per day (up to $15,000) IRS penalty would, unless an acceptable explanation is provided to IRS at the same time the late 5500 is filed.
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If the 401(k) plan has a 401(a) profit sharing component (e.g., the 3% non-elective safe harbor is being used) then the 401(a) portions of the two plans can be tested together. It's not unheard of for a partnership to have a safe harbor 401(k) using the 3% approach (plus an additional 2% or 4.5%, as needed) and a separate DC plan for partners only, and these plans are aggregated for 401(a)(4) testing. There are some limits on what can be done with the 3% in that test, such as no imputed disparity.
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Simple General Testing Question
Bill3 replied to AndyH's topic in Defined Benefit Plans, Including Cash Balance
Whether the general test is used or a safe harbor formula is adopted, the requirements of 1.401(a)(4)-5(a)(3) need to be met. A red flag is that none of the NHCEs have any past service -- why is that? -
Most cash balance plans are "front-loaded interest credit plans" as defined in IRS Notice 96-8. Under these plans, the right to all future interest credits is earned at the same time the pay credit is added to the cash balance account. As a result, accruals are suspended by stopping pay credits and even though interest credits continue, as they must, no one is benefiting from the plan. There are cash balance plans that do not meet the Notice 96-8 requirements, often because the interest crediting rate is not on the 96-8 approved list, and the accrual for the year, under the annual method, may need to reflect the impact of the interest crediting rate changing from the end of the last plan year to the end of the current plan year. But if your plan is 96-8 compliant, then suspending pay credits would make all future accruals zero and no one would be benefiting.