Cash Balance - 411d6 related

Hi

Looking at a possible takeover and have a dilemma I did not deal with before.

Plan's AE assumptions are not great and need to be redone.

Currently, post AE is 5.5% with 2022 Applicable mortality table (yes, hard coded in the document as 2022).

I would like to amend it to a more favorable assumption that would reduce the AB for owner.

I checked the math and based on current assumption, AB is $1,888/month. If I change to more favorable assumption, AB drops to $1,503/month which is huge difference especially for testing purposes. In either case, the 415 limit stays the same.

If I change it now and the pay credit does not change, is this 411d6 violation because the AB drops but not the pay credit?

Thank you

Without digging into the rules on this, my gut feeling is that you are going to have to preserve the existing distribution options on the accrued benefit as of the date of the amendment. In other words, the life annuity (assuming the plan defines the normal form of benefit as a life annuity) amount at normal retirement age can't be less than $1,888. Likewise for any other optional forms of benefit. Chances are with one more year of accrual, the accrued benefit under the new definition of actuarial equivalence will be far more than $1,888 so you really won't have to worry about it ever.

yes, it would be 411(d)(6) violation.  You have to preserve the accrued benefit as well as optional forms based on the $1,888.   What is the reason you want to change the AE?  If it is to "solve" the testing, I believe you are "stuck" for 2022.  For 2023 you can change to 417(e) or GAR94 table before the Pay Credit is accrued and you should be OK (I am guessing the 2023 Pay Credit will bring you over $1,888).

Is there any requirement that the post-NRA actuarial equivalent adjustment be based on both interest and mortality?  I'm not aware of any such requirement.  Maybe this is a great opportunity to think outside the box.  My favorite is 1/2% per month, with compounding every 12 months.

Truphao - reason to change is to lower the AB especially for testing purposes, it is a huge difference between 5.5% 417e table vs 4%GAR94 where the pay credit is always limited to 415.

I agree with the facts that it is possibly 411d6 violation wanted to check out there this is a takeover plan needs to be redesigned anyway.

David's question is a different subject.