415 Frozen Benefit without Wearaway

[Guest Dumb & Dumber]

Let's say you have a participant whose benefit is limited by 415. The client wants to reduce future contributions but you want the participant to continue to accrue benefits so that the YOP's count towards 415. So you create a frozen accrued benefit plus future accruals at .5% of compensation. To put some numbers with it lets assume the following:

-at 12/31/2012 the participant has 6 YOP

-the participant has made $300,000 plus in compensation for all years and already has 10+ YOS

-the participants accrued benefit under the plan's formula is $145,000 at 12/31/2012

-plan AE is 5%/94 GAR (no pre-retirement mortality)

So an amendment is done which establishes a frozen AB at 12/31/12 plus a .5% of compensation accrual for 2013 and beyond.

Let's say there is no COLA in the limits for 2013. How would you calculate the PVAB at 12/31/2013? Could you argue that it is:

$120,000 * 5.5%/417(e)(3) mortality table

plus $1,250 * 5%/94 GAR

The arguement for this approach would be that you put in fresh-start / frozen AB language, which states the frozen AB is calculated as if the participant terminated employment. If this participant terminated employment on 12/31/2012 their benefit would have ultimately been limited by 415, thus that portion of their benefit is calculated under the $120,000 * 5.5%/417(e)(3) mortality table.