415 Limit-Grandfathered AB

[JAY21]

Trying to apply the Final 415 regs section 1.415(a)-1(g)(4) regarding grandfathered benefits and would appreciate any input.

I have an HCE with over 20 years of service as of 12/31/07 and compensation greater than the 401(a)(17) Comp limits in just one big year (2006) with the following history:

2007: $210,000 (comp limit $235,000)

2006: $250,000 (comp limit $220,000)

2005: $210,000 (comp limit $210,000)

2004: $200,000 (comp limit $205,000)

This is a calendar year plan so I "think" I have a grandfathered 415 limited AB on 12/31/07 of:

($210,000 + $250,000 + $210,000) / 36 = $18,611.11

The final regs state I can grandfathered the AB as of the end of the limitation year that ends immediately prior to the effective date of the final regs. Based on the calendar year the application date of the final regs would start 1/1/08 so I can see an interpretation that allows me to grandfather as of 12/31/07 (i.e., $18,611).

However, the formal effective date of the regs is 4/5/07 which if I use the end of the limitation year that ends before THAT date I can only grandfather as of 12/31/06.

Either approach will cover my big 2006 year but since 2007 comp was larger than 2004 comp I'd like to be able to do my High-3 for the 2005-2007 years and grandfather as of 12/31/07 if that is a reasonable interpretation.

Any thoughts opinions ? Is this a grey area of intepretation or is it black-and-white to most of you out there.

[AndyH]

One issue to consider is what the plan document said. Some documents say that 401(a)(17) applies. Period. If so, and you want to use something higher, best to run that by ERISA counsel. I know one that says that is the end of the calculation.