Safe Harbor design question- help requested

[AndyH]

"Q. A plan has two normal retirement benefit formulas. One is 40% of AAC for any employee with at least 25 years of service at normal retirement and the other is $30 per month per year of service. At normal retirement, the employee gets the benefit produced by the greater of the two formulas. Prior to normal retirement, the accrued benefit is the greater of 1) the 40% of AAC flat benefit projected to normal retirement age and then prorated by service, and 2) $30 per month per year of service to date. Can this plan meet a safe habor?

A. No. The accrued benefit is not calculated in accordance with the fractional rule safe harbor method, nor is it eligible for the unit credit safe harbor."

I've been puzzled since I read this several years ago and I've got at least a couple of these that I'm trying to determine whether or not they need to be general tested. I cannot quite understand this answer. Can anyone explain it?

From RIA "Understanding Defined Benefit Safe Harbors" article by Peter Christensen, F.S.A. Reprinted in ASPA's "Current Topics for the Retirement Plan Consultant (C4 Exam required reading)

[AndyH]

ok, this is about to drop off the page 1 news so I'll try and ask the question a little differently.

Plan provides that all employees get the greater of (a) and (b)

(a) 1.5 x years of service, max 30, accruing on all years of service

(b) $18 x years of service, max 18

Someone convinced me that this did not meet the safe harbor requirements for some reason, now I do not recall why. Is it the 133% rule?

Another plan provides a benefit equal to the greater of the following:

© 1% x Yos, max 35

(d) $15 x Yos, max 30

Is there problem with the safe harbor status of this?

[Mike Preston]

Don't have time to look it up, but don't the SH rules require that EACH of the formulas satsify the rules of being a SH if they stood on their own (which they do); and that the participant gets the SUM of the two (which they don't).

You don't have a "SUM" set of formulas, but a "greater of the two" set of formulas, which are not eligible for SH treatment. The only exception to the "greater of the two" formulas that satisfies SH is TH.

I think.

[AndyH]

Actually the rule is that "The plan provides that an employee's benefit under the plan is the greater of the benefits determined under two or more formulas, or is the sum of the benefits determined under two or more formulas. This paragraph ... does not apply to a plan unless each of the formulas under the plan satisfies the requirements of ......

(B) Sole Formulas. The formulas must be the sole formulas under the plan.

© Separate Testing. Each .... must separately satisfy the uniformity requirements .....and also separately satisfy one of the safe harbors......

(D) Availability....."

There is a subtle issue with either uniformity or the accrual rules that I cannot put my finger on. I believe this was the subject of a either a Q&A in the Grey Book or some type of position paper produced by the Academy a few years ago. I'll do some digging; I guess I was hoping that someone could recall it off hand.