Offset Plans

[Gary]

Can a DB offset plan that is not a safe harbor plan offset the actuarial equivalent benefit from the DC plan, inclusive of the 401k employee deferral account? As long as the plans pass non discrimination of course.

Thanks.

[Andy the Actuary]

Why would a participant want to contribute to the 401(k) plan since he would likely not gain anything? That being said, you can't use the 401(k) employee deferral balance to offset the DB benefits. See 1.401(k)-1(e)(6).

[mwyatt]

Ah, the old "heads I win, tails you lose" plan design. Reminiscent of the pre common sense TH regs where you could provide the TH minimum allocation/benefit on the salary after deferral reduction.

[Gary]

I agree with your responses.

A challenge occurs since the plan has two sub accounts for each participant; a 401k account and a profit sharing account.

The 401k account includes the elective deferral portion and the 3% non elective safe harbor portion.

This means that we will have to determine the portion that is based on the 401k deferral and exclude it when determining the account balance that is subject to the offset.

Thank you.