benefit for funding

[Gary]

i picked up a plan and the formula is 100% AMC pro rata participation.

only owner in plan, though not a safe harbor formula

owner AMC is 20,000 per month

owner has 5 years participation and will have 15 at NRA

valuation computed AB as 16,250 * 5/15 = 5,417.

well i dont have a problem with the above and pre PPA with a funding mehtod using projected benefit I would think the above projected ben of 16,250 (415 limit) is required.

Now post PPA we live in the world of the AB.

It seems acceptable for AB to be = 20,000 * (5/15) = 6,667, as 415 limit after 5 years participation is 8,125, so no problem.

Opinions re: the pro rata of 20,000?

plan provides that AB is the ret ben participant would receive at normal ret multiplied by participation/part at NRA.

thanks

[ScottR]

Some plan documents (e.g. the Relius DB prototype) give the option of applying 415 limits BEFORE the AB fraction. Check your plan document to see if it contains such a provision. If so, then I think the AB = $16250 x 5/15. Otherwise, it would be $20,000 x 5/15 (assuming that the plan's benefit formula is 100% of AMC reduced for < 15 (or less) YOP).

Best!

Scott

[shERPA]

Yes, RTFD. In our document it has the normal retirement benefit section, then the accrual language. 415 is in a separate section that basically says no matter what the benefit paid can't exceed 415.

So in your example we'd use the $20K times the accrual fraction, then limited by 415 as necessary.

[david rigby]

What do you want the answer to be? Amend NRA?

[SoCalActuary]

Gary, I don't know who created your documents, but this issue was resolved long ago.

The 415 limit applies to the accrued benefit and the amount distributed. The projected benefit is affected by the 415 limit only when you get there.

If your document voluntarily chose to limit the projected benefit to the 415 limit, that is an option taken but not required.

Look carefully at the language in your plan. Does it limit the projected benefit to the 415 limit before the accrual fraction is used?

[Gary]

all good points.

it is a document matter.

the precedent set by prior adminstrator/actuary limited proj ben by 415 then pro rated. not to say that was correct per se.

thanks