Cash Balance-Gen Test-417(e)

[JAY21]

Has it become generally accepted that the 417(e) subsidy on a lump sums must be considered in the MVAR ? I generally do it to be safe but have a case with a proposal using a general tested cash balance plan where I'd like to use A.E. of 8.5% to help my discrimination testing, but if I have to include the 417(e) subsidy (whipsaw) effect it's too expensive to pass the general test. The client can live with the whipsaw effect, but not the additional contributions needed to pass discrimination testing if the 417(e) subsidy must be included in the MVAR. Any practioneers out there that still think this might not be required or at least a grey area ?

[Guest merlin]

Search this board for "MVAR". You'll find a lot of discussion.

[JAY21]

Good discussions those threads. They're helpful but since it seems to be issue that has been evolving over the past few years I was wondering if there was anything new or more definite on the subject, including any recent informal guidance from IRS folks. My "sense" of most of the posts from my search are that the majority of posters seem to have evolved towards thinking that 417(e) should be considered in the MVAR, but a healthy minority disagree and can point to IRS determination letters and/or IRS recognition that it's somewhat unclear. Yes, I realize that's why I should go in for an IRS approval letter on the discrimination testing.

I'd appreciate if anyone has heard anything new on the subject within the last 6 months or had any experiences on the issue via IRS submissions.

[AndyH]

Nothing new, and I have no experience testing cash balance plans so I can't help there. But I do wonder how such tests are properly done.

One troublesome aspect of this lack of guidance is that using 417(e) in the MVAR really isn't "safe" because it tends to inflate accrual rates for younger people who typically might be NHCEs. It just produces strange and inconsistent results.