FAQ 124: 401a4--Accrual rate looks wrong on a new entrant


I ran the 401a4 test and it doesn't look like the benefit accrual that is calculated for the new entrant is correct.


The difference is because of the compensation options in the a4 setup screen. If you deselect "Use Actual Mos" - you will get the results you expect (14.3%). This option creates a higher rate for new entrants. If you look at ASCs "401(a)(4) Training" document, in the Miscellaneous Notes section, you'll see how it is calculated. It is a bit different than you might be used to seeing as ASC's rates use a monthly comp and annuity figure. To get to the monthly comp from a participant's annual comp, we do calculations where we either divide by the actual months worked, or always by 12 months. We have clients who do it both ways, and we do our best to accommodate everyone. If you do not have this document, you can download it from our website.