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Showing results for tags 'nc allocation-benefit accrual'.
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I find I am having trouble with the benefit accrual rules in 430(d). A client started a pension year in year X. Unit benefit formula is High 3 x5% per year of service ( including prior service). High 3 is computed based over all years of service. In year X there are 7 years of prior service and high 3 is $8000/month. Accrued benefit follows method under 430(d)-1(C)(1))ii)(C); at beginning of year X accrued benefit is 5% x 7 x $8000=$2800 for the FT, and $400 for TNC. We are now in year x+2 and due to a huge bonus of $500000, High 3 is now $22,000. Accrued benefit for FT is then determined as 5% x 8* $22,000=$8800 and benefit for TNC is only $1100. Thus the big change in average comp is being spread over all years of service rather than applied in year X+1. Is this correct? And if the benefit accrual method were changed to where the increase in pay is fully applied in year X+1, is that a change in funding method? My old brain is having trouble understanding if this is correct. Also, is there a way to change the benefit accrual method that doesn't require a change in the funding method. Appreciate any help understanding this rule.