PS Shortfall in Floor/offset

[Guest Ddalk]

In a floor/offset arrangement, the DB plan's minimum funding requirements are affected by the performance of the PSP. Generally, if the PSP's returns are poor, then the cost to the DB plan will increase to make up the shortfall.

May an ER make an additional PSP contribution to cover the PSP's shortfall instead of tapping the DB plan to cover the difference?

The answer would seem obvious, granted a discretionary PS contribution, but I would still appreciate some guidance with this matter.

[Mike Preston]

It is allowable.

[Guest Ddalk]

As always, thank you Mr. Preston.

[IRC401]

Keep in mind that the p/s contirbution will be allocated in accordance with the allocation formula (in proportion to comp. ???), probably not in proportion to account balances.

[Mike Preston]

I had left it open because I can conjur up a number of ways to provide for an allocation that is not comp-to-comp. First, if the plan document already provides for cross-testing then the allocation would be based on the cross-testing language. Second, one might consider an -11g amendment that would be pretty flexible. But I agree that in the absence of alternative language, if the plan document's regular allocation method is comp-to-comp then that is what you get.