mdmoose4

Thanks Calavera, Is there any notice, Q&A or regs (etc.) that verify this approach? This makes sense to me, but I am having trouble confirming. I assume if I want to test on a current year allocation basis, I can simply replace the CB account in your equation with the current year CB contribution amount? Thanks

We are in a situation where the owner/HCE is much younger than his employees/NHCEs. We usually always test on a benefits basis because the roles are reversed, but in this case testing on a contribution basis should work better.

I was hoping someone could explain how the Most Valuable Allocation Rate is developed when cross testing a cash balance plan.For the Normal Allocation Rate, I projected the cash balance to retirement age using the interest crediting rate of 2.80% (30-yr treasury rate) and then converted to a life annuity using the Plan’s Actuarial Equivalence (also 2.80% and the 2017 applicable mortality table (post-retirement only). I then converted this benefit accrual to a lump sum using the standard interest and mortality table (8.50% and UP1984) and then discounted it to their current age at 8.50%. This amount is divided by testing compensation to determine the Normal Equivalent Allocation Rate.Now because this plan pays immediate lumps sums, I am getting conflicting directions on how the most valuable equivalent allocation rate should be determined.Any help would be appreciated.