Frozen DB plans and New Comp DC

[buckaroo]

I work exclusively with DC plans. I have virtually no knowledge of DB plans. I do know that if a plan sponsor is needs to run the ABT, the DB accruals are required to be included with the DC conts or EBARs when calculating the ABPT. One of my new clients just informed me that they have a frozen DB plan. My understanding is that when plan sponsors elect to freeze a DB plan they are still required to contribute to it. Therefore, I would assume that the contributions to the DB plan must still be included when calculating the ABPT. Is this correct? Is it correct all of the time? Is there any time when this would not be correct? Is there anything else I should know about frozen DB plans and their effect on the DC plan that I work on?

Any help is greatly appreciated.

[Tom Poje]

I'm not a DB person, but I don't think that is correct.

if the DB plan is truly frozen, then no one is accruing anything new.

therefore, any contributions made to the plan are simply to fund prior benefits. (for all practical purposes, $ owed to the plan, but that is ok in the DB world because you fund things over time)

and when you test, you are testing only current 'increases' in benefits or contributions.

[John Feldt ERPA CPC QPA]

In a DB plan, employer contributions are not tested for nondiscrimination. Instead, the benefit accruals are tested.

For the average benefits percentage testing:

1) Annual Testing. If the annual testing method is used, then the annual allocations in the DC plan and the annual accruals for the DB plan are both included. The DB figures are all zero so they don't change the results.

2) Accrued-to-date testing...yeah...hmmm. Well, I am not so sure what happens if you are trying to test using the accrued-to-date approach. If that is the case (it probably isn't), then I have not looked up this answer - maybe this will drum up additional comments. I would guess that you must include the DB plan's accrued benefits with the testing of the DC plan's account balances.

[My 2 cents]

Trying to remember - can you use the accrued to date method when cross-testing with a DC plan?

[Lou S.]

Trying to remember - can you use the accrued to date method when cross-testing with a DC plan?

Yes. I've seen it in seminars and such but never though I've never presonally used it in practice.

[John Feldt ERPA CPC QPA]

1.401(a)(4)-8(b)(2)(i) indicates that the accrual rates are the result of normalizing the increase in the account balance divided by the number of years in the measurement period in which the employee benefited.

1.401(a)(4)-8(b)(2)(ii) allows you to just use the current year as the measurement period and to ignore gains/losses/expenses.

I think a frozen DB plan with accruals that occurred during any part of the measurement period would be included in such accrued-to-date testing.

[AndyH]

I think a frozen DB plan with accruals that occurred during any part of the measurement period would be included in such accrued-to-date testin

I'm not sure this is true if the participant did not benefit during the current year. Or at least this is what I think Mike Preston argued a while back in one of the DB Board discussions within the context of accrued to date testing, if I remember correctly. So in my mind it's an open question.