I'm working on the premium filing for a brand new cash balance plan adopted 12/28/2006 and effective retroactivly to 1/1/2006. My premium snapshot date will be 12/28/2006. The plan includes the following provisions:

Years of service prior to effective date are included for vesting purposes.

1,000 hours during the plan year gives you the right to receive a contribution credit.

Contribution credits are credited on the last day of the plan year (12/31/2006 in this case).



Is there an accrued benefit on the pemium snapshot date? The participants have the right to receive the benefit, but as of 12/28/2006, no contribution credits have been credited. I've got an e-mail into the PBGC, but who knows when I'll get that back. I was hoping I could get some insight from all you bright folks out there in pension land.

Thanks!

It seems to me that the first PBGC premium for the year 2006 would show that no benefits have been earned.
The second filing as of January 1, 2007 would show that all the participants have benefits. You must then
convert the CB accounts in to monthly benefits, to be valued at the PBGCs interest and mortality rates.

I think, although I'm not entirely sure, that I'm going to disagree. If a participant became a participant on 12/28 and died at 5pm that day, would they have a benefit payable?

I think the crediting date is an accounting fiction and doesn't mean that there is no accrued benefit prior to that point in time. If it did, then the 1000 hour rule would be meaningless.

With a 12/28 snapshot date, you know you can pro-rate the premium to 1/12th of what it might otherwise be, right? Or have they changed that rule recently?

My great dilemma. I'm leaning towards Mike's response as that seems to fit the intent, but taking a very literal interpretation, I can se SoCal's point as well.

I did get a reply from PBGC saying that they had forwarded my question to their legal department for review, so I will post the reply when it comes back. That way we'll know what the "officials" have to say.

Thanks all!

For a new plan you can elect to make the premium snapshot date either the adoption date or the effective date. Thus, it's a no-brainer that you make the premium snapshot date the effective date of 1/1/2006 and you have no premium due the first year because no benefits accrued as of that date.

Blinky is right - it is right in the PBGC instructions: for a new plan that does not grant past service credits for benefit accruals, the premium would be zero. But they still want you to file the forms, even with zero premium - go figure.

I have this confirmed in writing by the PBGC.