FAQ 918: Cash Balance - 401(a)(26) Minimum Accruals

Problem: I have a cash balance plan with 1% of pay credit for staff employees and have the minimum benefit set at 0.5% (General/Compensation/MINBEN). Is this the correct setting for calculating a minimum accrual in the event that a 1% pay credit will not produce the minimum accrual of 0.5%?

Solution: If the intent is to provide the 1/2% "meaningful benefit" for IRC Section 401(a)(26), code the Minimum Benefit screen as follows. Enter .5 in the "Minimum Percent" field and 50 in the "Reduce for Years Less Than" field. Set the "Unitized Minimum" field to 2 - Accrued to Date or 3 - Annual Accrual to tell the system which method you want to use for satisfying the 1/2% meaningful benefit requirement. You can also use option 4 - Minimum of 2 and 3 to if that is in the plan design. On the ACCRUAL screen, both "Accrual before Apply Maximum" and "Accrual before Apply Minimum" should be Yes. You can then run calculations. If the minimum benefit is greater than the benefit provided by the 1% contribution for an individual, that person's cash balance contribution amount will be increased accordingly. You can get more information on using the Unitized Minimum from the DB Reference Manual (Help>Manuals>DB Reference Manual, Chapter 3: Cash Balance Plans, Coding a Unitized Minimum Benefit section) and from Online Help by putting your cursor on the Unitized Minimum field and pressing F1 on your keyboard.