Accrued to Date Method

[AndyH]

This does not seem to be available when testing a DC on a contributions basis. Seems to be plan year only. Is that right?

And a similar rule seems to apply when testing a DB plan on a contributions basis. Seems to limit you to the current plan year.

[Guest DFerrare]

True. 1.401(a)(4)-2©(2) defines allocation rates for testing on a contribution basis; only plan year allocations are considered and only plan year comp is used.

[FAPInJax]

There have been several presentations (by Deutsch and Groszkiewicz) dealing with this issue.

Their presentations illustrate that it can be done BUT it does require division by average compensation (not one year)

There is even a demonstration of where it is advantageous to use the 'fresh start' method (using only years from a specific date).

[Tom Poje]

Any examples I have seen from Deutsch and Groszkiewicz have involved cross testing (converting a DC allocation to an accrual)

but not on a contribution basis

A review:

DC plans tested on allocations (or contribution) basis - current contribution only DFerrare noted the reg

DB plans can be tested on either current accrual, accrued to date, or projected. 1.401(a)(4)-3(d)(iii)

DC plans tested on accrual basis - same as DB except no projected method available 1.401(a)(4)-8(B)(2)

[AndyH]

That's what it looks like to me from reading the regs.

It doesn't make a lot of sense to me that you could cross test accrued to date DC data , but not test that same data on a contributions basis. But it seems to be so.

Thanks for the comments.

[FAPInJax]

Sorry, misread the original posting about accrued to date testing. It did ask about contribution basis testing.

It may still be possible with a judicious use of testing assumptions to prove that the DC plan is OK without going to contribution basis testing (depends on demographics)