What are the minimum benefit levels?
Enough people to meet the 50/40% rule above must get a “meaningful benefit”. For non-owners, the IRS considers this to be a benefit of at least ½% of pay at retirement for each year of service. That’s different from a ½% pay credit. Depending on participant age and cash balance interest rates, it might take a 2% or 3% pay credit to generate a ½% lifetime retirement benefit. We’ve seen designs that don’t comply with this rule — even by those that claim to be cash balance design leaders. Be careful out there.
