General Tested Cash Balance Plan

[Blinky the 3-eyed Fish]

When whipsaw was around, I always had both AE and the interest crediting rate equal to 417(e) rates. Now that they can be different, what is considered the benefit to general test? Here's an example (just assume it's a first year plan for simplicity):

AE: 6% post/pre

Interest crediting rate: 5%

Plan defines the SLA normal form solely on AE (no reference to interest crediting rate)

That of course means that as time passes, the SLA decreases, but I digress.

For determining the benefit for general testing do you think it's:

A) The CB converted to a benefit using AE

B) The CB increased to NRA at 5% and then divided by AE post-retirement mortality

C) Something wacky that I can't think of

[Effen]

Why would it be different than what you were doing before? Your plan doc should tell you how to convert the CB into an annuity for testing. Just because you might not be using the 417(e) rate for the interest credit, doesn't really change the math.

Seems to me you would just accumulate the CB to NRD at the current accumulation rate, then convert it to a benefit using the AE. (As always, watch out for "most valuable accruals")

Are you saying you are going to use a flat 5% for the accumulation rate? If so, I don't think that gives you whipsaw relief since it isn't a market related rate.

[AndyH]

Ditto.

[Blinky the 3-eyed Fish]

It's a hypothetical question so there is no plan document. I have reservations about the plan documents I have used previously for CB plans although each has an FDL.

Again 5% is just hypothetical for the question's sake, but of course the rule is "not greater than a market rate of return" which is undefined. I don't think you can say that 5% is acceptable or not at this point without further defining market rate of return.