Impute Disparity - 35 Year Service Cap

[LarryDavid]

The rules for imputing disparity for employees with more than 35 years of service are a little confusing to me. It appears that an adjustment is required to the PDF if a participant's service is more than 35 years, but only if such participant benefitted under a DB plan in the measurement period. However I believe it's also true that DC participants (with no DB benefit) are limited by the 35 year rule when tested on a benefits basis.

Below is a quick summary of how I think the service adjustments are applied to the PDF under various testing methods. Can someone please confirm if my understanding is correct for each one? For simplicity I am assuming that the "base" PDF for Benefits testing is .0075 (i.e. for purposes of my question on the 35 year stuff, I am temporarily ignoring other adjustments for SSRA, etc.). Also, I am assuming that participants only have a DC plan benefit (no DB benefit).

-Benefits Basis, Annual Method: PDF is .0075 if Total Service as of testing date is <= 35; PDF is zero if Total Service as of testing date is > 35

-Benefits Basis, Accrued To Date Method: PDF is .0075 if Total Service as of testing date is <=35; PDF is .0075 x (35/Total Service) if Total Service as of testing date is > 35

-Benefits Basis, Projected Method: PDF is .0075 if Total Service as of NRD is <=35; PDF is .0075 x (35/Total Service at NRD) if Total Service at NRD is > 35

-Contributions Basis, all methods: PDF is .057, regardless of Total Service today or at NRD

Are my above interpretations correct?

[AndyH]

I don't know about "correct" or not, but FWIW I agree with your approaches. I don't think anything official gets into much detail about this. Correct as far as I know. Just one opinion.

[LarryDavid]

I don't know about "correct" or not, but FWIW I agree with your approaches. I don't think anything official gets into much detail about this. Correct as far as I know. Just one opinion.

Thanks Andy. Obviously the impact of these various methods is extremely minimal to the overall testing results. Just trying to cross all my t's, etc.