CB Freeze Amendment

[JBones]

In a cash balance plan that provides hypothetical contributions based on X% of pay, can the plan be frozen during a plan year after participants have completed the year of service necessary to receive a contribution credit? The intention is to draft an amendment that would provide a hypothetical credit for the year of the freeze but only based on compensation paid through the date of the freeze, and completely freeze hypothetical credits in future years?

Example:

2011 calendar year plan

1000 accrual requirement

Current formula: 10% of plan year comp.

Amended formula 0% of plan year comp effective 7/1/2011

Participant attains 1000 hours in June 2011. Pay is $10,000 per month - $60,000 through 7/1, $120,000 through 12/31

2011 hypothetical contribution = $6,000?

[SoCalActuary]

Done properly, with timely notice to participants, your math should be fine.

[Lou S.]

In a cash balance plan that provides hypothetical contributions based on X% of pay, can the plan be frozen during a plan year after participants have completed the year of service necessary to receive a contribution credit?

Do you really mean after or before? Once they have completed the accrual requirements you can't have an amendment cutting benefits for the year or you'll violate 411.

Otherwise I agree with SoCal's responce.

[SoCalActuary]

In a cash balance plan that provides hypothetical contributions based on X% of pay, can the plan be frozen during a plan year after participants have completed the year of service necessary to receive a contribution credit?

Do you really mean after or before? Once they have completed the accrual requirements you can't have an amendment cutting benefits for the year or you'll violate 411.

Otherwise I agree with SoCal's responce.

But a properly drafted amendment can stop counting compensation after the freeze date.

[JBones]

In a cash balance plan that provides hypothetical contributions based on X% of pay, can the plan be frozen during a plan year after participants have completed the year of service necessary to receive a contribution credit?

Do you really mean after or before? Once they have completed the accrual requirements you can't have an amendment cutting benefits for the year or you'll violate 411.

Otherwise I agree with SoCal's responce.

But a properly drafted amendment can stop counting compensation after the freeze date.

Thanks SoCal. That was the issue that I was focusing on. I didn't see a reason that I couldn't stop compensation after the required service was met, but wanted to be sure I wasn't missing something.

[Lou S.]

Well you learn something new every day. I thought for sure that would be a cut back in benefits but I guess not.

[david rigby]

I thought for sure that would be a cut back in benefits but I guess not.

Indeed. Pay attention to SoCal's very important phrase, "properly drafted".