Additional numerical testing

Reference no: EM13167184

Due to a profitable year, a plan sponsor would like to enhance its qualified defined benefit plan for a select group of participants. The current NRB and AB formula provides 1% x FAE x years of participation/65/life only or J&S. The early retirement reduction factor is 3%. The sponsor would like to enhance the benefit annual accrual rate to 1.5% for a select group of participants only.

a. What additional numerical testing is required to be satisfied in order to maintain the plan’s qualified status. Briefly describe how the tests would be satisfied.

b. Assume the change is made in 2006 for a select group of participants and, as a result, the plan fails to satisfy the applicable discrimination tests for 2006. What recourse would the sponsor have in order to avoid disqualification?

Reference no: EM13167184

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