Nondiscrimination testing

[FAPInJax]

A plan has a non-uniform NRA of 62. Therefore, the benefits must be normalized to the testing age of 65.

Does the normalization follow the AE in the plan document with respect to whether mortality is used? Does the normalization of the benefit and the most valuable benefit use the same rules. For example, if AE has pre-retirement mortality than the normalization occurs with mortality otherwise interest only.

The IRS came out and stated that normalization for the most valuable benefit must use mortality in the accumulation factor. It does not appear to make sense that the regular benefit testing would use a different methodology than the most valuable.

Thanks in advance for any all assistance.

[SoCalActuary]

What makes the age 62 retirement a non-uniform testing age? Do you have some extra issues like a service requirement above 5 years?

On the use of mortality, do you have a minimal death benefit? I would be curious if any of the actuaries from the large firms are using the value of the death benefit in their normalization?

[FAPInJax]

Sorry, this item should not have been raised as it is an old issue. I just found an old TAM which clarifies the calculations

[david rigby]

to educate the rest of us, can you post the result?

[FAPInJax]

This is what I found gathering dust <GG>!

[SoCalActuary]

On Page 11 of your IRS letter, they noted that you do not have a uniform retirement age because the two plans had a different NRA. This does not prevent age 62 as a uniform retirement age, assuming both plans had the same definition.

So testing at age 65 would be required only if the two plans had different rules. This is determined by the plan documents, which are presumably under the plan sponsor's control, and the actuary has the ability to influence this issue.