Average Benefit Percentage Test - Follow-Up Question

[LIBOR]

After reading Grey Book 2004 #27 it's evident that if the measurement period is "current and all prior" for all the plans being tested under the ABPT then for a "frozen plan" it's appropriate to use testing service as of the freeze date but current average compensation in the development of accrual rates - and that seems logical also.

But if the measurement period is the "current plan year" for all plans being tested then it seems that Andy's response to my earlier question would be correct - i.e. the accrual rate would be 0/(current average comp) or 0 .

Does everyone agree ?

[AndyH]

The fact that the plan is frozen in the question is perhaps causing some confusion.

If you do not benefit during the current year, you are a 0%, whether it is 0/$10,000/1 or 0/$8,000/2 does not matter. If you do not benefit, you are not an "employee" for purposes of the numerator. You are a 0% because you do not currently benefit. Do not pass GO; do not collect $200. You are a 0.

In a non-frozen plan, if you benefit, then your rate is the increase in your accrued benefit during the measurement period divided by testing comp divided by testing service, which is generally limited to years either considered under the formula or years you benefited for 410(b) purposes. So, when the plan is frozen you do not benefit, so your testing service does not increase, although if you work you still earn comp so your testing comp may change. So, your numerator is 0 but your denominator may change, but who cares since you are still a 0%.

[LIBOR]

Actually Andy there's no confusion !! using 0s all around is obvious for an annual measurement period! I was just curious if anyone would suggest not including the frozen guy at all ?

[AndyH]

If he is not statutorily excludable, then he must be in the test.