Aggregate 415 Limitation Question

[VeryOldMan]

Assume an employer sponsors 2 defined benefit plan, running concurrently, and the Plan document for Plan A states that "the aggregate 415 limitation for all pension plans shall first be applied to Plan A"; and Plan B also says the aggregate 415 limitation shall first be applied in Plan A". 

Assume further that in Plan A that the computation of the Annual Accrued Benefit, before taking into account the "aggregate 415 limitation", would be X. And in Plan B it would be Y.

The aggregate 415 limitation is  Z, and assume further that X+Y > Z. In preparing the valuation and  benefit computation, including lump sums payable,  my interpretation of this provision is that X is limited to Z-Y. Is this correct? Is there another possible interpretation?

[VeryOldMan]

As a followup, it seems unclear how to amend another db plan that might come into the controlled group and also require special limiting language. Should each plan state that the aggregate 415 limitation would first be applied in their plan? If any have experienced this issue, esp with predecessor employers/controlled group issues and written special language, it would be instructive us all.

[Larry Starr]

21 hours ago, VeryOldMan said:

Assume an employer sponsors 2 defined benefit plan, running concurrently, and the Plan document for Plan A states that "the aggregate 415 limitation for all pension plans shall first be applied to Plan A"; and Plan B also says the aggregate 415 limitation shall first be applied in Plan A". 

Assume further that in Plan A that the computation of the Annual Accrued Benefit, before taking into account the "aggregate 415 limitation", would be X. And in Plan B it would be Y.

The aggregate 415 limitation is  Z, and assume further that X+Y > Z. In preparing the valuation and  benefit computation, including lump sums payable,  my interpretation of this provision is that X is limited to Z-Y. Is this correct? Is there another possible interpretation?

I'll save (what I think is) the obvious question for your second post; here, the answer is "apply the document language".  It clearly says Plan A is the plan to be LIMITED.  Plan B is NOT Limited. I do have one problem with your math:  X + Y CAN'T be greater than Z since X is (by definition) limited.  If you meant to say "if not limited, X + Y is greater than Z", then you have a correct statement.

Since X is plan A's benefit, X is limited to the maximum (Z) minus the plan B accrual (Y). Noting that we have not seen the actual language of the plans, I would say you have made the correct interpretation and since that is CORRECT, by definition nothing else would be a correct interpretation.

[Larry Starr]

19 hours ago, VeryOldMan said:

As a followup, it seems unclear how to amend another db plan that might come into the controlled group and also require special limiting language. Should each plan state that the aggregate 415 limitation would first be applied in their plan? If any have experienced this issue, esp with predecessor employers/controlled group issues and written special language, it would be instructive us all.

Why do you have multiple DB plans covering the same individuals?  Perhaps you can shed some light on why that is necessary for your situation.  Though I can't imagine having this situation (we would design the employer's plans to AVOID this very issue), writing the language for multiple plans should be a trivial issue. You would need to establish a hierarchy for all the plans and incorporate the same language in each plan, identifying the plans by name and number.

[Effen]

sounds like his prior "theoretical" question turned into reality.

 

[VeryOldMan]

Thanks to all for your input.