Benefiting in the frozen DB plan under 410(b) and 401(a)(26)?

[Guest Victoria Pelletiere]

I have a frozen defined benefit plan. Benefit service and participation was frozen in 1996. The plan is not top-heavy. Benefits are increased each year based on revised average salaries for the participants. Average salary is based on the 5 highest years of service. There are 5 HCEs and 45 NCHEs. Only 15 of the NHCEs have benefits in the plan. All 5 HCEs have benefits.

The prior actuary indicated that no HCE benefited in the plan for 410(B). Is this correct given that the protected benefits are increasing each year as the average salaries increase?

:confused:

[RCK]

No.

According to 1.410(B)-3(a)(1): In general. Except as provided in paragraph (a)(2) of this section, an employee is treated as benefiting under a plan for a plan year if and only if for that plan year, in the case of a defined contribution plan, the employer receives an allocation taken into account under section 1.401(a)(4)-2©(2)(ii), or in the case of a defined benefit plan, the employee has an increase in a benefit accrued or treated as an accrued benefit under section 411(d)(6).

Unless of course the FAP for all of the HCEs failed to increase in the given year.

RCK

[david rigby]

I agree.

Here is a link to the reg.