Payout restrictions

[Guest pdam]

Defined benefit plan frozen 2005. employer let go of over 100 people over the past few years.

Actuary calculating new termination. Current salary would fall under the highly compensated. However, at the time of the freeze, this participant was no where near the HC level. recently paid out a participant who originally fell under the HC restriction, salary at 130. another at 125 another at 118k. Current person falling under the restrictions comp was only at 80 at the time the plan was frozen.

Actuary thinks should fall under restriction and ERISA attorney does not.

Plan is currently funded at 90.3%

Who is correct here?

[AndyH]

The fact that the plan was frozen is completely irrelevant. Consider the question if the plan had not frozen and you'll get your answer.

[ScottR]

Defined benefit plan frozen 2005. employer let go of over 100 people over the past few years.

Actuary calculating new termination. Current salary would fall under the highly compensated. However, at the time of the freeze, this participant was no where near the HC level. recently paid out a participant who originally fell under the HC restriction, salary at 130. another at 125 another at 118k. Current person falling under the restrictions comp was only at 80 at the time the plan was frozen.

Actuary thinks should fall under restriction and ERISA attorney does not.

Plan is currently funded at 90.3%

Who is correct here?

The 110% Rule restriction applies to HCEs or former HCEs as of the proposed distribution date. But it can be limited to the 25 highest paid HCEs...

FINAL-REG, PEN-REGS, §1.401(a)(4)-5. Plan amendments and plan terminations

(ii) Restricted employee defined. —For purposes of this paragraph (b), the term restricted employee generally means any HCE or former HCE. However, an HCE or former HCE need not be treated as a restricted employee in the current year if the HCE or former HCE is not one of the 25 (or a larger number chosen by the employer) nonexcludable employees and former employees of the employer with the largest amount of compensation in the current or any prior year. Plan provisions defining or altering this group can be amended at any time without violating section 411(d)(6).