Maximum accrual

[ombskid]

The maximum accrual in a year is 1/10 of the 415 dollar limit.

For a person well below the 17,500/mo 415 dollar limit, are they limited to 1/10 x 17,500 or 1/10 x 100% of their pay?

[Lou S.]

Max accrued benefit for participant less than 10 years = YOP / 10 * 415(b) $ limit

Max accrued benefit for service less than 10 years = YOS / 10 * 415(b) % of pay limit/

Max accrued benefit is lessor of 2 above.

You are not limited to accruing 1/10 of the 415 limit per year unless you only have 1 year of participant/service.

[My 2 cents]

Note that both amounts are with respect to life annuities deferred to the plan's Normal Retirement Age (if NRA is between 62 and 65). The limits do not apply with respect to contributions.

If you are talking about a cash balance plan, the limit is with respect to the benefit that can be provided by the pay credit. The limits do not apply directly to the pay credit. So the pay credit, while not providing an annuity of more than 1/10th of the 415 limit, can be larger than 1/10th of the 415 limit.

Depending on age, the pay credit could well be in excess of $60,000 for a given year.

[ombskid]

New plan one owner no employees

Age 52. NRA 62. 8 years past service

max accrual 1st year = lesser of

1 /10 x 17,500

or

8/10 x 100% of pay

Is that correct?

[John Feldt ERPA CPC QPA]

Seems right. The service piece might be 9/10 x 100% of pay - if 8 years is past service and one year is current service. Assumes life annuity form of benefit. No prior DB plan with that employer.

[ombskid]

Thanks all.

90% of pay just seemed too high!

[Effen]

Also remember that "pay" is the average of the highest 3 consecutive years.