New Plan - First Year Funding Inflexibility

[carrots]

Under PPA, once a new plan has been designed, there doesn't appear to be any first year funding flexibility, other than that caused by the timimg of contributions.

If using a BOY valuation date, the FT is $0 (415 $ limit, with no YOP). So, the cushion amount is $0.

So, the maximum contribution is equal to the minimum contribution (TNC), as adjusted for date of payment.

Comments, please!

For example, would it help to switch to EOY valuations?

[AndyH]

You are right.

There are going to be a lot of mad new clients who will be told very late that their deduction does not match their cash balance proposal, for first year plans in 2008, unless they use a interest credit above 6% to match the segment rates.

Some stopped doing them early on as a result. Others are still doing proposals that cannot be backed up without creating a problem for the client.

(Unless the law changes and creates a cushion, that is).

p.s. to my knowledge, there is currently no automatic approval to switch from an EOY val to a BOY val after 1/1/2008, so I'd tread cautiously on new EOY vals.

[david rigby]

Duplicate posting:

http://benefitslink.com/boards/index.php?s...c=40220&hl=