Rate Banding

[Archimage]

It is my feeling that rate banding should almost never be used with small plans but rather with plans with a minimum of around 20 HCEs and minimum of around 100 employees. I can't find much support for this so I am turning to you for some guidance and/or feedback.

[Tom Poje]

this issue is getting much out of hand

the regs allow you to do a rate band

all that being said

you could end up dead

if the bands are too much, do you understand

yes the regs allow you to rate band, but only as long as "the accrual rates within the range are not significantly higher for the HCEs than the NHCEs"

I asked about that years ago. What gives, the regs say I can use a 5% band, then they turn around and say I can't.

This was the example I was given.

NHCE 5.25

HCE 5.00

NHCE 4.75

This is ok to rate band, with a midpoint of 5% because you are bringing one nhce up and one nhce down

HCE 5.25

NHCE 5.00

NHCE 4.74

this would not be ok to band with 5% midpoint because you are bringing one NHCE up and bringing one HCE down. Clearly a case where the HCE is significantly higher.

OK, so I live with that example. seems reasonable interpretation of the regs to me.

[Archimage]

I don't remember the IRS ever writing their code in the form of limericks...

[Tom Poje]

really?

My copy says "Alice in Wonderland through the Looking Glass of Pensions"

you mean I shouldn't be relying on that copy?