Target normal cost

[FAPInJax]

Are there any circumstances where a negative target normal cost is possible?? Should a participant be floored at zero or should the floor be at the plan level?

This goes back to the IRS position where they do not particularly care for negative costs.

[david rigby]

Does a negative NC mean a negative accrual in the benefit? That seems unlikely.

- If your software is giving a negative NC, it may be prudent to investigate why.

- If the negative arises due to data corrections, I think that should show up in the funding target rather than the NC.

[Mike Preston]

In the context of an offset plan, it is perfectly normal to have a benefit payable from the defined benefit plan be greater at the beginning of the year than at the end of the year.

I think it is irrational NOT to allow a negative normal cost in that circumstance.

I don't think it makes sense to arbitrarily include the reduction in the BOY benefit (which reduces the FT arbitrarily, I would think) because one's AFTAP's may be questionable.

So, until we get specific guidance saying it can't be done, I think it must be allowed.

[Guest greybeard]

If in 2010 the 415 limit decreases and someone was at the limit in 2009 at say 62 what would he be expected to "accrue" in 2010? Who trumps 415 or 411?

[Mike Preston]

I think that is one of the issues that the IRS is grappling with as they decide whether the limits are subject to deflation or not. We'll all just have to wait and see what they come up with.