Cash Balance Termination

[Lou S.]

Plan has fixed interest credit credited at year end. Assume it satisfy's reasonable rate. Pay credits frozen in past so not an issue.

Plan terminates partial year, say 6 months.

How is intrest credit done in final year?

Though date of termination?

Through date of pay out?

Through end of Plan year, even if a futre date?

We don't want a prohibited cutback issue to crop up.

[Effen]

I have long said that interest on a cash balance, or any lump sum payment, should be calculated through the date of payment. I don't understand how anyone can argue for anything less.

[Lou S.]

I have long said that interest on a cash balance, or any lump sum payment, should be calculated through the date of payment. I don't understand how anyone can argue for anything less.

Thanks I agree with that position but was wondering if there is any specific IRS guidence I can fall back on if the client wants to take a different position.

[Effen]

Seems to me you just show him 411(d)(6) and the arguement goes away. If you don't pay the person the value of their benefit at the time of payment, you have improperly reduced their accrued benefit.

[Lou S.]

Thanks. That seems like a solid argument. I'm not expecting problems with this client, just want to have my ducks in a row so to speak if there are issues as another month or two of interest will likely increase their final deposit to make the plan whole by whatever that interest credit is.