415 Limit Determination - Cash Balance Plan with old DB Frozen Benefit

[Rolf Trautmann]

The following is a detailed calculation of the 2013 415 limit for a sample participant:

10 Years of Service

7 Years of Participation - 4 years in prior DB Plan and 3 in CB Plan

GAR94 for the plan mortality table

5.50% for the plan interest rate

Normal Retirement Age of 62

Frozen DB accrued benefit of $2,896, which is due from the Plan

Single Life Annuity as normal form of benefit

RP2000 projected to 2013 for applicable mortality

5.00% for applicable interest rate

12/31/2012 CB hypothetical account balance of $276,635.

5.00% CB interest credit

415 Comp Limit

3-Year Average Salary of $250,000 x (10 Years of Service/10) = $250,000

415 Dollar Limit

Step 1 – Adjust for Age

- Plan assumptions = $205,000 x [N⁽¹²⁾@62/N⁽¹²⁾@51&7/12] x (1.055)^(62-51&7/12) {using no pre-retirement mortality, GAR94 post-retirement mortality, and 5.50% pre/post retirement interest} = $98,413

- Applicable assumptions = $205,000 x [N⁽¹²⁾@62/N⁽¹²⁾@51&7/12] x (1.050)^(62-51&7/12) {using applicable mortality (RP2000 projected to 2013) and 5.00% interest with no pre-retirement mortality since benefits are non-forfeitable} = $102,329

Step 2 – Adjust for Participation

Lesser of Plan and Applicable from Step 1: $98,413 x (7 Years of Participation from 2007 to 2013/10) = $68,889

Step 3 – Reduce for Frozen DB benefit already earned

Value of DB Accrued Benefit payable at age 51 years, 7 months = ($2,896 x 12)* [N⁽¹²⁾@62/N⁽¹²⁾@51&7/12] x (1.055)^(62-51&7/12) = $16,683

415 Dollar Limit after DB AB offset = $68,889 - $16,683 = $52,206

Step 4 - Convert to Present Value

Lesser of:

$52,206 x a⁽¹²⁾@51&7/12 using plan rates/mortality = $773,442

$52,206 x a⁽¹²⁾@51&7/12 using 5.50% interest and applicable mortality = $774,246

Step 5 – Reduce for Cash Balance benefit already earned

Final 415 Dollar Limit = $773,442 – $276,635 x 1.05 (Project 1/1/2013 Cash Balance to 12/31/2013 since limit determined at end of year) = $482,975

Final 415 Limit is lesser of Comp Limit of $250,000 and Dollar Limit of $482,975, which is $250,000.

Per the Plan, participant receives a Contribution Credit of 100% of pay limited to the DB 415 limit of $160,000 (as adjusted), which is $205,000, so the 2013 415 limit would not apply. Do you agree? If not, then where would you change the calculation?

Thanks in advance for any help!