We are establishing a new cash balance plan that provides for full and immediate vesting and immediate benefit accruals. Also, some participants will have opening account balances based on previous service. For the initial short plan year the beginning asset balance will be zero even though the plan will be fully funded by the end of the plan year with respect to accrued liabilities.

I think it is clear that we must pay a variable rate premium as well as the flat rate premium for the initial plan year. Does anyone agree or disagree? Are there any exceptions I am missing (the plan is not a 412(i) plan)?

Thanks for your help.

I can't find any exception. However, if this is a "continuation" or spinoff of another plan, there might be an exception.

It escapes me why anyone would design a plan with the seeming intention of maximizing the premium. So many ways to avoid this.

Even though you think they have an "opening account balance", I think 415(b)(5) prohibits it. If they have 0 years of participation, the numerator of your 415(b)(5) fraction is 0 so your maximum benefit is $0.

Effen,

415(b)(5)© says that the fraction cannot be less than 1/10.

David

Your right, I don't think I ever noticed that before.

Thanks for the correction.