Restricted Benefit Calc-One Year Period Available ?

[JAY21]

Existing plan has its first restricted distribution for an HCE. Given this is the first restriction in the history of the plan obviously no prior method or pattern for determining current liabilities and assets have been established pursuant to Treas. Reg. 1.401(a)(4)-5(b)(3).

Is there a "consistent and reasonable" approach that would allow for this calculation to be performed ONLY annually (e.g., Jan. 1st of each year) that would apply to all subsequent HCE terminations for that plan year ? Or am I stuck re-doing this calculation multiple times during a given year at different dates if more than one HCE terminates and requests a distribution ? Thanks in advance for any opinions/thoughts.

[Effen]

412(l)(7) current liability should be used, and it must be 110% AFTER the distribution. Therefore, I think you need to look at each distribution seperately anyway.

Treas Reg § 1.401(a)(4)-5(b)(3)(iv)©;

(A) After taking into account payment to or on behalf of the restricted employee of all benefits payable to or on behalf of that restricted employee under the plan, the value of plan assets must equal or exceed 110 percent of the value of current liabilities, as defined in section 412(1)(7).

There are other exceptions if it is a big plan. Also, this should all be stated in your Plan Document.

[JAY21]

Thanks. What are the other exceptions if it's a big plan ? This is about 200 lives.

[Effen]

Probably not big enough. I think it can be paid if it is < 1% of the Plan's total liability.