What is an offset arrangement?

[fiona1]

So I'm filling out a Form 5307 - determination letter for a proto document. I'm not sure what question 3n is asking when it says: Is this plan an offset arrangment with any other plans?

Of course the 5307 instructions don't help. Anyone know how I would go about figuring out how to answer this question?

[QNPG]

So I'm filling out a Form 5307 - determination letter for a proto document. I'm not sure what question 3n is asking when it says: Is this plan an offset arrangment with any other plans?

Of course the 5307 instructions don't help. Anyone know how I would go about figuring out how to answer this question?

An offset arrangement is a type of defined benefit/defined contribution combination where the benefit being accrued in the defined benefit plan is being offset (or reduced) by the allocation being earned in the defined contribution plan. So, if a person had an accrued benefit of $600 per month at NRA and an account balance of $10,000, the account balance in the DC would be converted to a monthly benefit and that amount would reduce the benefit to be received from the DB plan.

Unless your employer sponsors a DB Plan, I think it's safe to answer no to that question. If a DB is sponsored, I would evaluate the compliance testing for further details.

[fiona1]

Thanks for the info. So it is always a DB/DC situation? Could you have 1 DC plan offset another one? In other words - could you have a Money Purchase plan and a 401(k) plan - where the account balance of the 401(k) may offset an allocation in a MP plan?

[QNPG]

Thanks for the info. So it is always a DB/DC situation? Could you have 1 DC plan offset another one? In other words - could you have a Money Purchase plan and a 401(k) plan - where the account balance of the 401(k) may offset an allocation in a MP plan?

No. An offset arrangement requires the existence of a DB and DC where the DC is offsetting the DB benefit. (Never the other way around)