DB Top Heavy offset by DC balance

[Blinky the 3-eyed Fish]

1.416-1 M-12, states that the 2% DB minimum can be offset by the DC balance to determine if TH is met. A literal reading is that the cumulative DC balance can be used. Thus, if the DC plan was around for years and years and the DB is new, a large offset is available for many. It's almost as if the DC TH is doing double duty and it doesn't make entire sense to me, but...

Anyone disagree or know of a Gray Book answer either way?

[himt4]

I guess its the same logic if you were talking about a DB plan that's been around for years and years.

If the person already had ten years of participation in a TH DB plan he is maxed out at 20%. So he is also

not getting a TH min in his 11th and subsequent years in a TH DB plan. So I guess the sense is once you get a big enough benefit in a DB or DC plan, you dont have to be given TH minimums anymore (as long as your in a DB plan or DB/DC combo). So what is inconsistent is that if your only in a DC plan, you get TH minimums every year and never max out.

[david rigby]

I read it slightly differently.

- First, note the phrase in A12 "... four safe harbor rules..." Thus, there may be other methods (although I'm not sure what).

- Second, it appears Blinky is referring to the first sentence that begins "Another approach..." I agree that a literal reading refers to the entire DC account balance; but that implies that "defined benefit minmum" (in the same sentence) refers to the cumulative DB minimum, rather than the 2% as Blinky states.

I skimmed the GrayBook, and found nothing on point.

[Blinky the 3-eyed Fish]

You are getting technical on me pax. First, "deductions" and now cumulative. By 2% DB minimum, of course I mean the 2% per year of participation up to 10 years. I just didn't want to type all that.

I didn't understand what you read differently though.

[Belgarath]

Blinky, I agree that this should be acceptable. I think your position is supported by the second condition in the Rev. Ruling, which states that, "the offset to the benefit otherwise payable is equal to the amount deemed provided on the determination date by the vested portion of the account balance in the profit-sharing plan (plus the additional amount that would have been provided by any prior distribution from the account balance)." The fact that this refers to account balance rather than annual contribution seems to agree with your approach.

I do note that the Revenue Ruling states, "In particular, the defined benefit plan must provide the actuarial basis that will be employed to determine the benefit deemed to be provided by the profit sharing plan." Is this language common? Just curious.