Participation under 415(b)(5)(A)

[Guest pension222]

This is a follow-up to the thread "Which governs, frozen accrued benefit or indexed 415 Dollar Limit?" posted on 4/30/2001 by David MacLennan.

The final entry to this thread (by sdolce) indicates that the amendment can (but need not) be written to freeze the benefit at the amount calculated prior to application of 415, and in this case future increases in the dollar limit will increase the frozen accrued benefit.

Do we still all agree on this or must the frozen accried benefit be the benefit after application of section 415?

And here is my question:

Suppose benefit accruals are frozen the end of the 2002 calendar plan year. The plan is not terminated.

Before application of 415, the participant's accrued benefit is $6,000/mo.

This participant has only 3 years of plan participation when the plan is frozen so his accrued benefit at that time is limited to 3/10 of the 415 dollar limit or $4,000.

Assuming this participant is still a full-time employee at the end of 2003, would his accrued benefit now be limited to 4/10 of the 415 dollar limit ($5,333.33)?

The question comes down to, what counts as a year of participation under 415(B)(5)(A). Can a participant earn a year of participation for 415(B)(5)(A) purposes after future accruals have been frozen. I suspect not.

[AndyH]

Jim Holland has repeatedly said that you cannot accrue a benefit which exceeds 415.

What did the resolution freezing benefits say? If it had the effect of saying that everybody is frozen except one person, then I think you have 401(a)(26), 410(B), and 401(a)(4) issues.

Benefitting means experiencing an increase in one's accrued benefit.

[Guest pension222]

This is pretty much the guidance I was looking for. It contradicts the conclusion from the earlier thread regarding frozen accrued benefits though doesn't it?

Does anyone have a specific citation quoting someone from the IRS that one cannot accrue a benefit in excess of the 415 limit?

The plan has been frozen and the freeze applied to everyone. This is a takeover situation and I did not assist in drafting the amendment to freeze benefits.

However, the plan was actually frozen in 2001 and depending on the plan document provisions, I do believe there may be an increase in the frozen benefit due to the EGTRRA increase in the 415(B)(1)(A) limit (I am waiting for a copy of the document).