Target Benefit Question

[jkharvey]

A new client for us has prior valuations prepared by another TPA for his Target Benefit plan using assumptions I have never seen. The interest rate used to compute the benefit is 5.5%. I know that the 401(a)(4) regs provide standard interest rates of no less than 7.5% nor greater than 8.5 percent. The regs provide that the Commissioner may change the defition of standard interest rate. Has this rate been changed to allow for 5.5 and I just missed it?

[Mike Preston]

If you feel the rates push the plan outside of safe harbor compliance, then running a general test with the actual allocations may work.

[AndyH]

The range has not changed.

Certainly Mike's comments are correct, and I will add that the use of an interest rate outside the 7.50-8.50% range usually indicates that design was not intended to be a safe harbor, so other provisions may not satisfy the safe harbor rules either.

You may need to general test it for reasons other than the rate.