Annual Freezing of Accruals under a Cash Balance Plan Covering Partner

[Guest Edward McElroy]

May a cash balance plan freeze accruals on an annual basis to provide participants with the ability to elect in or out based upon what the cash balance contribution requirements are? I understand that this is a common approach. If partners are in the cash balance plan, how does this avoid the cash balance plan being considered CODA? Any thoughts? Thanks. Ed

[Guest Keith N]

I agree, it's a fine line to walk. They say the same thing about new comparibility plans and as far as I know, no one has had one challanged yet.

I have seen some documents that contain language that the cash balance allocation for a given executive in any given year will not exceed some factor times that year's "special bonus". The "special bonus" is determined annually by the company on an individual by individual basis and set by BOD resolution. In this way they can control the allocation in each year.

I don't know if it's any cleaner, but I heard that the IRS approved at least one document containing this type of language. (I have no first hand information that they did.)