First of all; how low is the stock market going to go? 7000? 6000?

Anyway,

Say a one man plan is implemented where the individual has 5 years of past service at plan inception.

Let's assume we do not have prior years' compensation.

Say in year one he earns 50,000 and in year 2 he earns $0 (but is credited with a year of service). Therefore, the average compensation goes from 50,000 to 25,000.

Say benefit is 10% per year.

Then theoretically in Year 1 his AB would be 5 * .1 * 50k or 25k, limited to 415 limit of say 18,500.

Then after year 2 his AB is 6 * .1 * 25k or 15k.

And a negative accrual results in a negative TNC.

Any problem?

Thanks.

Maybe not now but someday. If you ask the IRS, based upon their history pre-PPA, they will say, "unh-unh" To quote myself, "the more words the IRS writes, the more they open the possibility for a convoluted or undesirable result." Throughout any past IRS pronunciations regarding reasonable funding methods, negative normal cost was verboten. See IRS Rev. Proc. 2000-40 Section 6.02(6).