DB(k) plans

[Laura Harrington]

I do not work with DB plans, although I have some knowledge of them (enough to pass the ASPPA DB test anyway). I just want to make sure I am reading this wording from Notice 2009-71 correctly:

A special rule applies in the case of an applicable defined benefit plan that meets certain interest credit requirements under § 411(b)(5)(B)(i). Such a plan is treated as meeting the minimum benefit requirement with respect to any plan year if, for the plan year, each participant receives a minimum pay credit to his or her hypothetical account. The minimum pay credit must be not less than the percentage of compensation applicable to the participant in accordance with the following table:

Participant’s Age as of Beginning of Plan Year

30 or less: 2%

Over 30 but less than 40: 4%

40 or over but less than 50: 6%

50 or over: 8%

This is talking about a cash balance plan, correct?

Thanks!

Laura

[Dennis Povloski]

Yes. That is referring to a cash balance plan.

I'm curious as to what kind of client people think this type of plan might be great for. I'm in the small plan market, and it seems that it's not really something that I could run out and say "hey, you really need to do this!"

Any thoughts?

[John Feldt ERPA CPC QPA]

Maybe someday, long from now, when these are available in a prototype - then the 5-person plan market would benefit from these.

[Laura Harrington]

Maybe someday, long from now, when these are available in a prototype - then the 5-person plan market would benefit from these.

Thank you for confirming this for me!

Does anyone know if an existing 401(k) or DB plan will be able to be converted into this new type of plan? Or if a client already has a 401(k) and a DB plan, will they be able to merge them to become a DB(k)?

[JAY21]

I'm having a hard time seeing a big niche for these plans. Maybe a husband and wife only plan (need 2 employees for the DB-k), or with only rank-and-file 1 employee, but as soon as you get a few employees a better plan design than the DB-K will save more on employee costs than the purported reduced admin cost of the DB-K. I didn't see any commentary on the plan doc requirements so some type of prototype doc would certainly be helpful.

Seems to be about a half-step up from the SEP/SIMPLE level.

[Guest Deflector]

Owner and family only, maybe with family members (such as children) with lower compensation. I have not looked into it enough yet, but am keeping it in the back of my head for next year.