Frozen cash balance plan and floating equivalency rates

[AndyH]

Cash balance plan defines monthly benefit as the cash balance divided by annuity rate using 417(e) Applicable Mortality Table and Applicable Interest Rates.

Plan is frozen.

Do post-freeze changes in these rates create 411 issues? Should the accrued benefits payable at later age such as NRA be grandfathered based on AMT at time of freeze?

What about a vested terminee?

Does anybody think these equivalency factors present cutback issues?

[Effen]

No cutback issues prior to NRD - this is clear from the Regs.

Post NRD seems to still be a bit questionable. Current IRS direction is that there must be a reasonable adjustment and a simple interest credit is most likely not reasonable enough. 1.411(1)(13)-1(b)(2)

[AndyH]

Thanks Effen but my initial post may have been misleading. In my case the interest crediting rate is fixed at 5%. My question relates not to the interest crediting rate, but to the change in actuarial equivalency assumptions if in particular the mortality table changes due to a change in the 417(e) applicable mortality table.

You may still be saying this is addressed somewhere in the regs but I have yet to locate it. Can you point me in the right direction? Thanks.

[Effen]

I think as long as your methodology doesn't change, it isn't a problem. In other words, if your AE reference the current 417(e) interest rate and/or mortality table, than you are ok when that table/rate changes.

However, you may have a problem if you ever want to change the definition of AE to be something other than 417(e).