FAQ 477: BOY accrued benefits for EOY valuations

Problem:

The BOY accrued benefit for both participants should be $250. I entered this amount under prior AB, but ASC calcs $333.33. I also tried forcing it, but that didn't work either. Any suggestions?


Solution:

In end-of-year valuations, the beginning of year accrued benefit is recalculated to be the greater of (a) the accrued benefit calculated using current average compensation, accrual service at the beginning of the year, and the applicable formula in the current plan year, or (b) the participant's top heavy minimum benefit, if applicable. This benefit is limited by the participant's 415 maximum benefit as of the first day of the plan year. The program then treats the greater of this value or the prior accrued benefit as the beginning of year accrued benefit. The reason for this is to "pick up" the increase in the prior accrued benefit due to 415 limit increases, or average compensation increases. This increase in the prior accrued benefit occurs whether or not a benefit is accrued this year and is therefore not treated as a current accrual for reporting purposes.