cash balance plan design

[Gary]

1) Lump SUm Distributions

My understanding is that 411(a)(13)(A) and regs provide that a cash balance plan can pay a lump sum equal to account balance and satisfy 417e without being required to project account to NRA, convert to annuity and determine PVAB using 417e segment rates or do whipsaw calculation.

So if a new cash bal plan designed properly the lump sum can be the account balance.

Agreed?

2) Projected account to compute Accrued Benefit

Accrued Benefit is annuity at NRA.

In order to project account balance if plan uses actual return on assets and return for year is:

a) less than 0 (i.e. negative) it is acceptable to project balance using a negative annual return until NRA, but for backloading testing you can use a future rate of 0.

b) say 10% (i.e. some high rate) then future interest credits to project balance to NRA would use 10% per year? And could result in an employee's AB exceeding the 415 limits if they were already at or close to the limits.

Agreed?

Thank you.

[Guest Quagmire]

1) Lump SUm Distributions

My understanding is that 411(a)(13)(A) and regs provide that a cash balance plan can pay a lump sum equal to account balance and satisfy 417e without being required to project account to NRA, convert to annuity and determine PVAB using 417e segment rates or do whipsaw calculation.

So if a new cash bal plan designed properly the lump sum can be the account balance.

Agreed?

2) Projected account to compute Accrued Benefit

Accrued Benefit is annuity at NRA.

In order to project account balance if plan uses actual return on assets and return for year is:

a) less than 0 (i.e. negative) it is acceptable to project balance using a negative annual return until NRA, but for backloading testing you can use a future rate of 0.

b) say 10% (i.e. some high rate) then future interest credits to project balance to NRA would use 10% per year? And could result in an employee's AB exceeding the 415 limits if they were already at or close to the limits.

Agreed?

Thank you.

1. Agreed. See http://www.regulationdocs.com/regulations/...)(13)-1/#(b)(1)

2. I disagree. The Accrued Benefit cannot be determined as a dollar amount until there is an annuity starting date, at which time the 415 limits will apply. Also the cumulative minimum return is 0%.