Cash Balance Formula Question

I just wanted to make sure my thinking was right in terms of a formula for a Cash Balance contribution for an HCE.  I know you can put either a percentage or a dollar amount as the set benefit, but does a formula like this work:

20% of compensation up to a maximum of $50,000?

It would only be for the HCE, I just wanted to make sure that it was OK to put the cap on the benefit like that.

Thanks in advance!

As long as the plan document allows it, why not?

1 hour ago, Jakyasar said:

As long as the plan document allows it, why not?

The document leaves it open ended, I was just making sure the IRS wouldn't have an issue with it.  Basically our document software allows us to input a dollar amount, a percentage or "other" which says:

"Describe how pension credit is determined using objective criteria that are not subject to employer discretion"

It is defined in the plan language and not open to employer discretion, so it should be ok.

Is it compensation or the 20% credit that is limited to $50,000? You might want to see if the document has other options that would accommodate the objective rather than using an "other" selection.

15 hours ago, metsfan026 said:

I just wanted to make sure my thinking was right in terms of a formula for a Cash Balance contribution for an HCE.  I know you can put either a percentage or a dollar amount as the set benefit, but does a formula like this work:

20% of compensation up to a maximum of $50,000?

It would only be for the HCE, I just wanted to make sure that it was OK to put the cap on the benefit like that.

Thanks in advance!

Many pre-approved documents have language to support just this type of formula so it's allowable by the IRS from a document standpoint. I think in our document the question in the AA is written something like "the lessor of X% of pay or $Y".

Do not remember but cycle 3 may have some adjustments/limitations to certain formulation.

Just because it was allowed in PPA document does not mean it is in cycle 3.

Check with the vendor.

yes, it is OK.   Just did a post-PPA plan document.  Datair supports that design.

The FIS Corbel Cycle 3 document also has it.Though FIS seems to be lagging on putting the Cycle 3 DB document on their document system which is starting to irritate me.