A has completed 12 years of participation in the plan of the M Corporation as of the close of the plan year. Under subdivision (i) of this subparagraph, the normal retirement benefit commencing at age 65 to which a participant would be entitled if he commenced participation at the earliest possible entry age (25) under the plan and served continuously until normal retirement age (65) is an annual benefit of $1,920 [40 * (12 * $4)]. Under paragraph (b)(1)(i) of this section, the plan does not satisfy the requirements of this subparagraph unless A has accrued an annual benefit of at least $691 [0.03 * ($1,920 * 12)] as of the close of the plan year. Under the M Corporation plan, A is entitled to an accrued benefit of $576 [(12 * 12) * $4] as of the close of the plan year. Thus, with respect to A, the accrued benefit provided under the M Corporation plan does not satisfy the requirements of this subparagraph.
Year | Compensation |
1980 | $17,000 |
1981 | 18,000 |
1982 | 20,000 |
1983 | 20,000 |
1984 | 21,000 |
1985 | 22,000 |
1986 | 23,000 |
1987 | 25,000 |
1988 | 26,000 |
1989 | 29,000 |
1990 | 32,000 |
If B separates from service on December 31, 1990, he would be entitled to an annual benefit of $2,530 commencing at age 65. Because the J Corporation's plan does not limit the number of years of compensation to be taken into account in determining the normal retirement benefit, B's rate of compensation for purposes of determining his normal retirement benefit is $23,600 [$18,000 + $20,000 + $20,000 + $21,000 + $22,000 + $23,000 + $25,000 + $26,000 + $29,000 + $32,000]/10.
Under this subparagraph, B's accrued benefit under the J Corporation's plan as of December 31, 1990 must be not less than $2,561 per year commencing at age 65 [0.01 * ($17,000 + $18,000 + $20,000 + $20,000 + $21,000 + $22,000 + $23,000 + $25,000 + $26,000 + $29,000 + $32,000 + ($23,600 * 10)) * 11/21]. Thus, the J Corporation's plan would not satisfy the requirements of this subparagraph.
Example.
26 C.F.R. §1.411(b)-1
Sec. 411 (88 Stat. 901; 26 U.S.C. 411 )