unit benefit formula

[jtpa]

DB plan valuation and plan document with the following non-integrated formula

Unit Benefit for Past and Future service

85% of the participants average annual/monthly compensation multiplied by the participant's years of credited service prior to 12/31/2025 limited to a maximum of 25

Plus:  0% of participants average annual/monthly compensation multiplied by the participant's years of credited service subsequent to 12/31/2025 limited to a maximum of 25

Plan effective 01/01/2025

Owner only, but may add a couple non-hce's in the future.

Question, is this formula doable?

[Effen]

Maybe.  It seems to me that it would default to the maximum 415 limit, which would be 10% of high 3 ave comp as of 12/31/25. The question would be how to handle YE 12/31/26.  

Are they trying to give NHCEs $0 benefit because they would be hired after 12/31/25?  That might work if the HCE accrues no benefit after 12/31/25 (ie 10% max), but there are rules about who is benefiting even in a frozen plan.  

There was a time when IRS wanted all formulas expressed over 25 years, so it was common to see 250% of comp over 25 years (ie: 10%/year).  I think they have backed off that now, but not sure.  

Maybe if we knew what you were trying to accomplish, we could be of more help.