cash balance plan with switch in group

[Tom Poje]

plan has 2 classes. Class A = 10% class B = 5%.

person 1 works 1000 hours and switches from A to B.

how is the benefit determined?

is it the sum of the two parts?

document is silent, except for saying is you go from eligible to ineligbile you figure things up to the moment you became 'suspended' and start over once you become eligble again.

[Andy the Actuary]

If person had terminated employment on day before transferring from "A" to "B," how would benefit have been determined? Then, would suspect plan might have a non-duplication of benefits clause that would give you your answer.

[rcline46]

In my opinion, if it is a beginning of year valuation, group at beginning of year. If end of year valuation, group at end of year. IE. group at valuation date determines. Since the formula seems to be % of pay, which is determined at end of year, my guess it is using an EOY valuation.

The question as posed is whether 1000 hours 'locks' you into a group for part of a year. It seems that it does (no EOY requirement?) if the 'succeeding' group (ineligible) grants a -0- contribution. Of course if you move from A to B after 1000 hours, and then to ineligible, I am guessing the doc is silent on that issue also.

Unless the prior actuary/drafter/client has something they want, OR plan has been run splitting A and B as a practice, I would use 'ending' group.

[Tom Poje]

well, I think that was my logic. they were in class A, and for all practical purposes quit and now started in B so its the sum of the two parts. But the actuary boss is still the boss so I'm looking to see if someone has something in writing, etc. or other basis for this argument

[Lou S.]

While this doesn't help in this situation, sounds like something that should be addressed going forward in the plan document.

Question, has this ever happened before? Can you use what was done then as a guide for now?

I'd be leary of giving just the 5% on the whole year unless that as is spelled out in the document and SPD as you could have a prohibited cut back issue, especially if the participant was expecting a 10% contribution credit at least with respect to service he had while in group A.

I assume group A is something like "owners" and group B is something like "peasants". If you had people in the past move from B -> A mid year and get the full A benefit for the whole year that would support either "group at end of year" or "larger of two if you split groups" and I could see either being argued fairly successfully by a disgruntled participant absent language in the plan.