Cash balance plan conversion - plan does not provide for lump sums pri

[Gary]

A plan converts to cash balance plan. Opening balance is equal to present value of accd ben. The plan does not provide for lump sums prior to being converted. Is plan required to use 417(e) rates as a minimum? Any thoughts?

[Guest]

As a minimum for what? For the establishment of the initial "cash balance"? NO.

But when the benefit is paid, the applicable 417(e) rate will apply. The "cash balance" for any employee will often be lower than the lump sum value of the benefit if the Plan is not using 417(e) rate for crediting interest and benefit conversions.

[Guest]

Gary, Read IRS Notice 96-8. It contains the answers to most of your questions

[Gary]

Keith I did read it and I am still trying to sort things out and solidify my understanding. I will say that I thought it implies that the opening balance did need to incorporate 417 rates as a minimum balance if plan did not provide for lump sum prior to conversion.