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Plan sponsor has active defined benefit and profit sharing plan. At present time both plans are safe harbor (same accrual rate/allocation for all participants) Starting 2016 the DB plan will amend the formula to 5% X avg comp X years of service for the HCEs and 0.5% X avg comp X years of service for NHCE. All benefits accrued tio the date of change will be preserved (frozen), etc. Using the fresh start with wear away, some of the participants will not accrue any benefits until the benefits accrued under the new formula will equal the frozen accrued benefits. The DB and PSP will be aggregated for testing purposes. The profit sharing allocation for NHCEs will be whatever is needed to pass the aggregate discrimination tests. Question: In the discrimination tests; should the participants that do not accrue benefits due to the wear away be considered as benefiting (0.5%) or non-benefiting due to the fact that practically they do not accrue a benefit during the year? We are using current year accrual method for discrimination testing. Help is greatly appreciated.
