Non-Discrimination Test

[Guest Astro]

Has anyone ever run a non-discrimination test on a DB plan with a cash balance component where employees hired after 1/1/xx are cash balance only but those employed as of all prior years are greater of cash balance or FAP (grandfathered)? The FAP was safe harbor.

Not sure how to run the test.

[SoCalActuary]

In both groups, you convert the cb to a benefit at the testing age, using the plan's actuarial equivalence assumptions. Then you test the benefit using regular non-discrimination techniques, just as you would with a db plan that provided a different benefit formula for each person.

You must convert both the beginning balance and the ending balance to a benefit amount, so you can test the annual accrual rates.

[Blinky the 3-eyed Fish]

Before you even run the nondiscrimination tests, is the cash balance allocation otherwise a safe harbor formula? If so, have you considered testing using component plans?