133 1/3% accrual rule

[ishi]

I'm looking for opinions on whether the following situation violates the 133 1/3% accrual rules of 411(b)(1):

Final average pay plan has been around for awhile, providing 1.75% of FAP5 for each year of service. Plan amended 1/1/2010 to reduce future accruals (1.75% for each year of service up to 1/1/2010 plus 1% for each year of service after 1/1/2010 (proper 204(h) notice given)). Plan now wants to restore 1.75% piece effective for service after 1/1/2012 (i.e. amend the plan to provide 1.75% for each year of service up to 1/1/2010 plus 1% for each year of service after 1/1/2010 and before 1/1/2012 plus 1.75% for each year of service after 1/1/2012).

Since the formula is constant for all future years, I believe the 133 1/3% accrual rule of 411(b)(1) is satisfied, but looking for other opinions. Thanks in advance.

[SoCalActuary]

If you had designed the plan originally with the step-down and step-up formulas, you would violate the 133 rule, but these were separate amendments that were each intended to continue to retirement.

You are OK with this rule, assuming you don't have correspondence before the first amendment where you intended to take these steps.

[ishi]

SoCal - thanks for confirming. Reverting the formula was not contemplated before the first change.

[dan.jock]

What if a formula has a service cap and then increases the cap so the person could have a benefit increase in a current year of several times the accrual of last year due to the sudden inclusion of several back years? Does that violate 411(b)?

[Mike Preston]

No.