415(b) Calculation

Can someone please point me in the direction on where I can get a basic idea of how to calculate the 415(b) limit for a Cash Balance Benefit?  I just want to have an understanding of it.

Thanks in advance!

Not to be snarky but... you can read IRC 415(b) and the 1.415(b)-1 in the regulations

https://uscode.house.gov/view.xhtml?req=(title:26 section:415 edition:prelim)

https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR686e4ad80b3ad70/section-1.415(b)-1

In short, the 415(b) limit is equal to the lesser of:

a) 100% of average compensation, or

b) the dollar limit in effect for the year.

The compensation limit is prorated for less than 10 years of service with the employer. The dollar limit is prorated for less than 10 years of participation in the plan.

Average compensation is defined as the highest 3 consecutive years' compensation.

The dollar limit is actuarially adjusted for benefit commencement before age 62 or after age 65. The adjustment is done using either plan factors, or the 417(e) applicable table and 5% interest, whichever produces a smaller result. The compensation limit is not adjusted for age.

Forms of benefit other than a single life annuity are adjusted to a single life annuity for purposes of applying the 415 limit. However the QJSA need not be adjusted. Lump sums are limited to the amount determined using plan factors, or the present value using the 417(e) applicable table and 5.5% interest.

This should be enough to get you started, but there is a lot of subtlety and special circumstances and other "gotchas" that I left out! Like I said, you should read the code section and the regulations if you really want to understand this.

And if you have a way to access things like past ASPPA conference session slides on 415 limits, they tend to contain practical examples where you can actually see the text in action with actual numbers.

Those limitations apply to the benefit - so in a CBP you need to convert the account balance into the NRB per plan terms. 

Also, you then need to look at maximum lump sum versus the account balance.