415 limits and amendment to freeze

[Belgarath]

Ok, now I've got a question.

Suppose you have a DB plan where for a given plan year, let's say 2005, the participant would accrue an additional benefit of 50x, but due to 415(b) limitations, the participant hits the limit at 30x. The plan provides that 415(b) benefits will increase automatically for the 415(d) cost of living increases. What does this person accrue for 2005? If the plan is frozen for future years, is the benefit frozen at the 30x limitation, or did the participant "accrue" the full amount up to the 50x, and will thus receive increases even though plan has frozen all accruals?

I lean toward the former, but would appreciate opinions. Thanks!

[AndyH]

I'm not following what you mean by 30x or 50x but my opinion is that if the plan is frozen, then the accrued benefit does not increase in the future regarless of 415 indexing unless there is a bonafide COLA that applies to retirees. If it does, then I think you have something other than a frozen plan and that such person would be benefiting for a(4), 410(b), and 401(a)(26) purposes; therefore you have testing issues.

[Belgarath]

Thanks Andy. The "x" was just a feeble attempt to allow for units, dollars, whatever anyone wanted to plug in. And I agree on the COLA - the situation I was envisioning wasn't a COLA.

[JAY21]

I'm not sure if you'll get a consistent answer on this issue. I've seen it applied both ways (e.g., an AB pop-up the next year when 415 limit increases even though plan frozen).

[AndyH]

Agreed. There are wrong opinions

Kidding aside, doesn't it depend first on what the definition of frozen is. Second is the issue of whether a benefit in excess of 415 can be accrued-I agree there are different opinions on that one but I know that Jim Holland's is no and that is good enough for me.

[rcline46]

Had a nice long reply killed because of board activity.

Freeze up to 12/31/05 - 30x no increase

Freeze 1/1/06 or later - AB increases due to COLI even if no more accrual years.

[AndyH]

Well, thats what makes horse racing.