Multiple formulas / Restructuring

[Guest calcu]

We have a situation where we acquired an organization and maintained the DB formula for those employees at that particiular entity. We therefore have two formulas in our DB plan. It is feasible that an employee could transfer from the other entity to our entity. Upon final termination, I assume that I am OK calculating the employee's retirement benefit by taking into account the benefit accrued at the other entity and adding it to the benefit accrued at our entity? Does anybody have any guidance on this, though? Do the restructuring rules get us there? Essentially since we are permitted to test as two plans, we treat the benefit as coming from two plans? Any input will be greatly appreciated!

[Effen]

This is really a document issue. There are a number or ways this can be done.

Some plans credit all service (past and future) in the purchasers plan and then offset the benefit with the old accrued benefit in the sellers plan. Some freeze the old accrued and treat them as new hires. Some freeze the service under the old plan, but let the old benefit increase as the participant's compensation increases. These are just a few.

The document should define how the ultimate benefit is calculated. Did the plan's merge? It is also likely that it was discusses at the time of the sale. You should probably ask someone involved in the sale to see if there was some agreement related to transferred participants.

[AndyH]

Agreed. The testing methodology has nothing to do with the issue. The issue is what does the document say, and if it is unclear you must perhaps view it in the light most favorable to the participants.