Frozen Defined Benefit( Aggregated): de minimus accrual

[rodin011]

Corporation sponsors a DB and PSP that are aggregated for testing purposes. Plan was effective 01/01/12 . The DB accrual formula was 5% per year of service for owners and 0.5% per year of service for all other eligible participants

• ​Plan is to be terminated in 2016 and was frozen effective 1/1/15 with no further accruals
• For 2015 the owners made a substantial contribution in order to bring plan assets as close as possible to the 417 termination liability.

Is there any problem with the above?

Can the IRS challenge if the average annual accrual rate in the DB is not at least 0.5% per year of service: in our case it is a little bit lower if no accrual are allowed for 2015.

Thank you for your help

[Mike Preston]

That font hurts.

Ughh.

Problem? Yes.

"Little bit lower"? How is it not 25% lower? More if comp in 2015 is big relative to prior years.

Ultimately, it is a judgment call as to whether whatever the plan provides satisfies the definition of "meaningful benefits".

Do you feel lucky?

[rodin011]

Sorry for the font. I'll be more careful next time

Back to my question: Is there any quantitative guidance regarding the "meaningful Benefits"? And are these meaningful benefits related - in the case of aggregated plans- pertinent only to the benefits provided by the DB? Do they take int account the equivalent benefits provided by the PSP in years when the DB was not frozen?

Still unsure if I feel lucky or not:)

Thanks for your help, Mike.

[Mike Preston]

The only quantitative guidance we have is the "Paul Shultz letter" which I would think you are already familiar with because you used the 1/2% amount in your original post.

No, you do not take into account anything other than the DB when dealing with 401(a)(26).

[rodin011]

Thank you.