Cash Balance Plan Design

1. Cash Balance Plan Design 2008 Western Benefits Conference July 15, 2008 Andrew W. Ferguson, Altman & Cronin

2. 2 Agenda Background Plan Design Vesting Interest Crediting Valuation Issues Age-Discrimination Appendix: Conversions & Non-Discrimination

3. 3 What is a Cash Balance Plan? Defined benefit plan Benefit = Notional account Assets are not divided into accounts Account is on paper only Could be established as part of conversion Interest credit on notional account E.g., 5% annual interest credit Assets invested independently of interest credits E.g., could invest in equities

4. 4 Cash Balance Example 1/1/2008 Account balance: $50,000 Annual �contribution� credit: $4,000 Annual interest credit: 5% 2008 interest: $50,000 * 5% = $2,500 12/31/2008 Account balance: $50,000 + $4,000 + $2,500 = $56,500 Note: assets may or may not have earned 5%

5. 5 Why Cash Balance? Cash Balance resembles Defined Contribution: Why not just have a DC plan? DC: Fewer regulatory hassles DC: More popular with participants Even so, Cash Balance offers advantages�

6. 6 Why Cash Balance? Advantages of Cash Balance: Tax shelter Higher IRS limits than for DC plans E.g., $200,000 per year, instead of $50,000 Cost control Lump sum not subject to interest rate volatility Could defray cost of fixed-income interest credits by investing for higher returns Benefits are comprehensible

7. 7 Why Cash Balance? Advantages of Cash Balance: Flexibility in benefits Can provide annuities, extra benefits & features Unforeseen circumstances, such as early retirement windows (more popular in today�s economy?) Transition from traditional db plan Wind-down of defined benefit program Any surplus gives contribution holiday, and avoids excise taxes on reversions

8. 8 Why Not Cash Balance? Disadvantages of Cash Balance: Legal uncertainties Cured by PPA and proposed regulations? Lack of PPA valuation / AFTAP guidance Mismatch of contributions and benefits Unlike DC plan, contributions not the same as contribution credits Investment gains and losses might cause dislocation

9. 9 Cash Balance Plans Prevalence of Cash Balance Plans HR Exec Online (3/10/2008): �great amount of interest in plan-sponsor community about cash balance�design� �Two years ago...employers were just freezing their old defined-benefit pension plan and going on with only a 401(k) plan� �within the last six to nine months�large employers� have started to consider alternatives�

10. 10 Cash Balance Plans Prevalence of Cash Balance Plans (con�t) Louis Kravitz & Associates (6/11/2008): 300% increase in new cash balance plans 2002 to 2006, versus 1997 to 2001 51% of cash balance plans: 25 or fewer active participants

11. 11 Plan Design Types of Designs Considered: Cash Balance: Hedge Fund Cash Balance: Variable Interest Variable Annuity Plan

12. 12 Plan Design All Plan Designs: Contribution credits: target dollar amounts E.g., $100,000 for owner If multiple owners, vary by ownership % Staff: �401(a)(26) amounts (if required)

13. 13 Plan Design Cash Balance: Hedge Fund Borrow from owners at fixed-income rate Interest credit: safe-harbor fixed-income Invest borrowed proceeds at firm�s direction Traditional: equities & fixed income Synthetic stable value funds Absolute return funds

14. 14 Plan Design Cash Balance: Hedge Fund (con�t) What if investment LOSS? Fund the loss immediately Too high a burden for some owners? Nice tax deduction, though No unfunded liability Defer and amortize Unfunded liability problematic for departing partners, firm merger & acquisitions Top-25 lump sum restrictions?

15. 15 Plan Design Cash Balance: Hedge Fund (con�t) What if investment GAIN? Amend plan to soak up increase Owner tax deduction = contribution credit 412(d)(2) treatment of amendment Can�t amend repeatedly Reduce funding obligation Owner tax deduction decreases

16. 16 Plan Design Cash Balance: Hedge Fund (con�t) What if investment GAIN? (con�t) Defer gain to following year E.g., offset 2008 loss by 2007 gain Assumes 404(o) cushion is sufficient Owner tax deduction = contribution credit Overfunded plan: problematic for departing partners, merger & acquisitions

17. 17 Plan Design Cash Balance: Hedge Fund (con�t) Results of Hedge Fund Design: Interest credit: irrelevant to participant Over multi-year period, owner credited with actual return on plan assets Less whining about low return Tax deduction: volatile If investment loss, too high If gain without amendment, too low

18. 18 Plan Design Cash Balance: Variable Interest Not a Hedge Fund Invest to match fixed-income return Variable interest rate Rate = return on plan assets Floor of zero (no annual loss) Ceiling of safe-harbor rate (no age discrim)

19. 19 Plan Design Cash Balance: Variable Interest (con�t) Results of Variable Interest Design: Tax deduction: stable & predictable Unexpected funding only if negative return or if return in excess of safe-harbor rate Return crediting: �low� Because plan assets invested to match fixed-income yields, returns will be perceived as low Harder to sell to owners?

20. 20 Plan Design Cash Balance: Variable Interest (con�t) Instead of actual return on plan assets, refer to target indices from investment policy? E.g., 25% S&P, 10% MSCE, 5% REIT, etc. Avoids complications if plan assets misstated or unavailable Combine: Hedge Fund + Variable Interest Variable Interest adds downside protection Still have gains and losses to address

21. 21 Plan Design Problems with Designs 1 & 2: If investments are desirably positioned, tax deduction is volatile (Hedge Fund) If tax deduction is stable, investments are conservatively positioned (Variable Interest) Solution (?): Variable Annuity Plans

22. 22 Plan Design Variable Annuity Plan Similar to cash balance plan Implied notional account balance E.g., 15% of IRC �415(b) limit as lump sum E.g., implied interest credit = 5.5% Monthly adjustment of implied account balance Replaces implied interest credit with investment return on plan assets

23. 23 Plan Design Variable Annuity Plan: Example Plan assets invested in equities, bonds, etc. 1/1 implied balance = $100,000 Implied contribution credit = $50,000 Investment return of 10% 12/31 implied account balance = $160,000 Note: if investment loss, implied balance decreases!

24. 24 Plan Design Variable Annuity Plan: Advantages? Stable tax deduction Investment returns don�t impact funding Not a hedge fund Interest crediting = investment returns Investments not constrained Invest pursuant to firm�s policies

25. 25 Plan Design Variable Annuity Plan: Disadvantages? Less established legal basis than Cash Balance Contributions must escalate with age To demonstrate age non-discrimination, contribution credits within each participant classification must increase with age (5% per year at a minimum) Can mitigate escalation with additional classifications (service, hire date, etc.)

26. 26 Plan Design VAP: Legal Concerns after PPA Benefits whipsaw Whipsaw: taking present value of future benefits by a discount rate different from projected interest VAP provides that future implied interest credits are assumed to be fixed-income yields If plan invested in equities, could this assumption be challenged as reasonable?

27. 27 Plan Design VAP: Legal Concerns after PPA Definitely determinable benefits PPA + IRS regulations (and RR 185, RR 78-403, and 401(a)(9) regs) explicitly confirm concept Accrual rules Could high investment return cause backloading of benefit accruals? Not if all future return adjustments treated as accrued when implied contribution credit earned

28. 28 Plan Design VAP: Legal Concerns after PPA Top-25 Limits With Cash Balance plans, funding whipsaw can understate liabilities to avoid Top-25 limits VAPs: no funding whipsaw VAPs: either overfund plan by 10% or use restricted IRAs for lump sums

29. 29 Vesting Full Vesting after 3 Years Participant by participant determination Within same plan, some participants may be subject to 3-year vesting, and some not But consider ease of uniform vesting schedule 3-year vesting triggered by hybrid benefits If any portion of a participant�s benefit is cash balance, entire benefit is subject to 3-year vesting

30. 30 Vesting Full Vesting after 3 Years (con�t) Applies to pre-PPA accruals Not clear whether inactive participants are subject to 3-year cliff vesting retroactively Pending legislation clarifies that only active participants subject to 3-year vesting IRS reserved this section of proposed regulations

31. 31 Vesting Vesting Non-Discrimination Typical: highly-paids in cash balance, lower-paids in DC plan Common situation with PPA Cash balance: 3-year full vesting DC: graded 2-6 year vesting Is this a non-discrimination issue? Vesting schedules appear to be equivalent But no hard guidance

32. 32 Vesting 3-Year Vesting Effective Date Plan started 6/30/2005 or later: from plan inception Plan in effect 6/29/2005: 2008 plan year (e.g., 1/1/2008) Plan sponsor can elect earlier application (to accelerate PPA legal shield for age-discrimination)

33. 33 Interest Crediting Current IRS Guidance: Allowable interest rates Preservation of capital requirement Equity crediting Fixed & minimum rates Timing and other issues

34. 34 Interest Crediting Allowable Interest Rates: Corporate yield: 3rd segment rate Funding segment rate, not 417e segment rate Average of 24 months of rates, so less volatile than all the other rate choices With or without transition (only affects 2008, 2009) Currently: 6.0% to 6.5%

35. 35 Interest Crediting Allowable Interest Rates (continued): Treasury yield + margin E.g., 1-year T-Bill + 100 basis points E.g., 30-year T-Bond (no margin) Identical to 1996 guidance Cost-of-living indices + up to 300 basis points

36. 36 Interest Crediting IRS Warning: �Plan sponsors should be cautious in adopting interest crediting rates other than those explicitly permitted in these proposed regulations.� Anti-cutback rule violated if interest credit is changed to a rate that �under any circumstance could result in a lower rate of return� Exceptions for rates explicitly permitted in regs (under some restrictions) Need wear-away grandfather of existing rate More IRS guidance coming on anti-cutback issues

37. 37 Interest Crediting Preservation of Capital: Cumulative interest credits cannot be negative Measured only at payment start date One-time determination No interim or annual requirement Appears to include pre-PPA periods Only in unlikely situations would pre-PPA interest credits have been negative, though

38. 38 Interest Crediting Equity Rates of Return: IRS concern: Preservation of capital rule triggers excess over market rate? Floor on cumulative return valuable enough to warrant explicit reduction in equity rate? IRS: if equity rate based on diversified portfolio, may avoid reduction Rely on plan fiduciaries to adequately diversify the plan�s own investments, allowing plan�s return to be the basis for the interest credit?

39. 39 Interest Crediting Fixed Rate (e.g., flat 5% interest credit): IRS concern: fixed rate exceeds market rate? Suggested future guidance: two approaches: Stated flat rate: 4% or 5% Market rate at time of adoption E.g., 3rd segment rate now apples as flat interest crediting rate for all years in future Problem: 1981 one-year T-Bills were 16.7%

40. 40 Interest Crediting Minimum Fixed Rate: Explicitly allowed by PPA But no current guidance from IRS IRS concern: exceeds market rate? Suggested future guidance: Stated minimum rate: 3% or 4% Need reduction in crediting rate to compensate for value of minimum interest guaranty Frequency of application (monthly? annually?) will influence level of reduction

41. 41 Interest Crediting Timing: Must credit interest at least annually Generally same rules as 417(e) lump sum rates Must update at least once a year Can look back up to five months prior Timing rules can differ from 417(e) lump sum timing

42. 42 Interest Crediting Other Issues: If pay credits increase with age, minimum interest credit may be required E.g.: age 40-44: 3% of pay age 45-49: 5% of pay, etc. Accrual rules fail without minimum interest credit? Lack of IRS guidance is problematic Be careful with age- or service-graded designs

43. 43 Interest Crediting Other Issues: PPA interest crediting rules don�t apply to ad-hoc interest credits by amendment E.g., due to investment gain in plan, amend to increase interest credit after year-end (by 3/15) Such interest credit would be subject to general non-discrimination testing (�401(a)(4)�)

44. 44 Interest Crediting Other Issues: PPA interest crediting rules don�t apply to interest credits contingent on employment E.g., minimum 4% interest credit while employed (and no such minimum after termination) Such interest credits would be subject to the accrual rules, which could constrain the period over which they apply (e.g., minimum 4% interest until earlier of termination and 10 years of participation) Such interest credit would be subject to 401(a)(4)

45. 45 Interest Crediting Other Issues: Credits for imputed service may cause age-discrimination failure E.g.: disability credits, pre-participation credits Regs: any increase in benefit not �conditioned on current service� is an interest credit If an imputed disability credit must be treated as an interest credit, plan could fail age-discrimination Will IRS modify this in final regs?

46. 46 Valuation Issues PPA Funding: Project & Discount Project: up to future payout date Project at assumed future interest crediting rate Discount: at mandated Segment Rates Current rates: 5.3% to 6.4% Result: funding requirement is different from sum of cash balance accounts

47. 47 Valuation Issues PPA Funding Example 1: Age 40 participant $10,000 account balance Projected distribution at age 62 Projected interest credits: 7.5% Projected age 62 account balance: $49,100 Segment Rate (9/2007): 6.0% Funding requirement: $13,600

48. 48 Valuation Issues PPA Funding Example 2: Age 40 participant $10,000 account balance Projected distribution at age 62 Projected interest credits: 5% Projected age 62 account balance: $29,300 Segment Rate (9/2007): 6% Funding requirement: $8,100

49. 49 Valuation Issues Suppose: Plan Assets = Sum of Balances Example 1: 74% funded ($10,000 / $13,600) Could not pay full lump sums Additional contributions required Participant statements: 74% funding Example 2: 123% funded ($10,000 / $8,100) Be careful on deductibility

50. 50 Valuation Issues Results of Funding �Whipsaw� Crediting equity returns not appropriate E.g., interest credit = S&P 500 return Forced to over-fund account balances Corporate fixed-income yields: also too high? Either over-fund account balances or trigger Top-25 lump sum restrictions Be careful with fixed interest rates Could later force overfunding and/or trigger Top-25 lump sum restrictions

51. 51 Valuation Issues Results of Funding �Whipsaw� (continued) If interest credit below Segment Rates (Example 2), be careful on deductibility If immediate lump sums on termination, then full-funding of account balances is deductible Achieved by �404(o)(2)(B): deductibility not less than at-risk liability + at-risk normal cost If lump sums at termination, at-risk liability equal (or nearly equal) to account balances

52. 52 Valuation Issues Valuation Assumptions Pre-PPA: individually reasonable, or which in aggregate result in equivalent funding Post-PPA: individually reasonable Can we still assume: No pre-retirement mortality? No pre-retirement termination? No early retirement?

53. 53 Valuation Issues Valuation Assumptions (con�t) Implications of pre-retirement decrements: Smaller funding whipsaw Higher Target Liability Harder to avoid Top-25 lump sum restrictions No more spreadsheet valuations?

54. 54 Valuation Issues End-of-Year Valuations Available if = 100 participants Many Cash Balance plans use end-of-year No guidance yet on 2008 AFTAP certifications Currently relying on presumed certification, using 2008-21 method for 2007 certification Can�t rely on presumption after 9/30/2008 What to do?

55. 55 Valuation Issues End-of-Year Valuations (con�t) Could impose restrictions at 10/1/2008 Notice to participants Restrict accruals and payouts Continue to wait for guidance� Good faith interpretation: use 12/31/2007 for 2008 certification (per 2008-21 for 2007 cert) This appears to be likely IRS position But what if no support from IRS for this?

56. 56 Valuation Issues Beginning-of-Year Valuations Would prefer to wait until after year-end Year�s experience is fully known Could adjust to accommodate investment return, new entrants, terminations, etc. Problem: what about AFTAP certification? Due by October 1st of current year Can�t do range certification Must valuation be done by 10/1 of current year?

57. 57 Valuation Issues Beginning-of-Year Valuations (con�t) For fully funded Cash Balance plans with interest credits not more than 3rd Segment Rate, AFTAP will usually exceed 100% Certify at October 1st to 100% AFTAP? And recertify the actual AFTAP with Schedule SB? Standards for actuarial communications: Will 100% AFTAP certification be sufficient?

58. 58 Valuation Issues Beginning-of-Year Valuations (con�t) IRS requirements: Are assumptions, methods and results locked in with first AFTAP certification? Proposed regulations indicate not Q24 of 2008 EA Gray Book: �The actuary should be prepared to defend changes between the plan�s final AFTAP and prior estimates.�

59. 59 Age Discrimination Two Age-Discrimination Standards: General Rule: rate of accruals can�t decrease due to attainment of any age Subject of much litigation (e.g. IBM) Pre-PPA Cash Balance plans not in violation per Circuit Courts in 2nd, 3rd, 6th, and 7th districts(2nd Circuit ruled last week)

60. 60 Age Discrimination Two Age-Discrimination Standards: PPA Safe Harbor: similarly-situated rule Younger, �similarly-situated� participant�s �accumulated benefit� cannot exceed older participant�s �accumulated benefit� For Cash Balance plans, accumulated benefit = account balance

61. 61 Age Discrimination Potential Issues with PPA Safe Harbor: Higher interest credits for certain participants Identify distinguishing factor unrelated to age (e.g., service), so that different participants can have different interest credits Decreasing contributions due to �gateway� Apparently acceptable if decrease only for HCEs See ERISA �204(b)(1)(H)(iv)

62. 62 Age Discrimination PPA Safe Harbor (continued): Higher contributions for certain participants Common among professional firms to �assign� benefit levels (e.g., 1/3rd, 2/3rd) to individuals Older participant at 1/3rd could be similarly situated to younger participant at 2/3rd Not an issue if partnership sponsoring plan allows elections before entrance to its plans Otherwise, informal expressions of preference?

63. 63 Questions & Answers Questions & Answers

64. 64 Cash Balance Conversions Popularity of Cash Balance Conversions Common protection for older employees: Identify �grandfather� group (e.g., age 50+) Existing benefit formula continues accruing Could apply sunset to grandfather (e.g., 10 years) Conversion attacked: Media: focus on prospective benefit reductions Litigation: focus on age-discrimination Regulatory: focus on conversion process

65. 65 Cash Balance Conversions Plans with greater of two formulas (e.g., existing formula + cash balance) create two concerns: If existing formula frozen, but greater than cash balance, no accruals until cash balance catches up Participants �march in place� Much anger about this (participants, IRS) When one formula provides greater benefit, and then other formula overtakes, inflection point may violate accrual rules

66. 66 Cash Balance Conversions Concerns about cash balance conversions spawned two rule changes: Hybrid conversion rules Modified accrual rules And litigation spawned a third: Age-discrimination rules

67. 67 Cash Balance Conversions Hybrid Conversion Rules: Options before PPA: Benefit = greater of (a) frozen existing formula, and (b) cash balance over all service Convert existing benefit to cash balance, and add on contribution and interest credits to retirement PPA: Approach (1) above is impermissible Approach (2) requires tracking of early retirement subsidies in existing benefit, on top of cash balance

68. 68 Cash Balance Conversions Hybrid Conversion Rules (continued): IRS indicates that rules may be liberalized Wait for better rules? Plan coordinations may now be entrapped Hourly transfers from traditional db plan to salaried cash balance plan M&A where buyer�s cash balance plan offset by seller�s traditional db plan

69. 69 Cash Balance Conversions Accrual Rules: Rules intended to prevent low or non-existent accruals to early leavers Protection is similar to vesting IRS has interpreted accrual rules to prohibit periods of low accrual, regardless of overall benefit level

70. 70 Cash Balance Conversions Accrual Rule Issues: If pre-Cash Balance formula is frozen, (i.e., plan is cash balance only), compliance easier Where �greater of� applies, must test annually Ironic that where plan sponsor trying to be nice by extending pre-Cash Balance formula, accrual rules more difficult!

71. 71 Cash Balance Conversions Accrual Rules (continued): IRS indicated informally in 2007 that �greater of� traditional formula and cash balance could violate accrual rules Revenue Ruling 2008-7: Limited relief through 2008 plan year Proposed Regulations under 411(b) Slightly different limited relief for 2009+

72. 72 Cash Balance Conversions Accrual Rules under IRS RR 2008-7: 133-1/3% rule: fails if transition from existing formula to cash balance has period of zero accruals If 133-1/3% rule failure, can switch to fractional rule May or may not pass under fractional rule Depends on compensation increases Could also fail cash balance if interest crediting rate too low to compensate for increasing pay and/or service credits

73. 73 Cash Balance Conversions Accrual Rules under IRS RR 2008-7 (con�t): Relief to plans with �greater of� formulas: Applies for any of: Plan has determination letter; or Remedial amendment period still open; or Is �moratorium plan� Each formula separately meets accrual rules Limited to plan years beginning before 1/1/2009 If separate formula fails accrual rules, can retroactively amend the plan

74. 74 Cash Balance Conversions Accrual Rules under Proposed 411b Regs: Relief to plans with �greater of� formulas: Applies only if conversion from formula of one type (e.g., final average) to formula of another type Each formula separately meets accrual rules Limited to plan years beginning 1/1/2009 or later

75. 75 Cash Balance Conversions Age Discrimination: Grandfather group cannot both be: Identified by age; and Covered only by existing formula Must either identify by non-age related factor, or extend cash balance to grandfathered group

76. 76 Cash Balance Conversions Pending Conversions: Recommendations Wait, if possible Otherwise, freeze the existing formula No coordination with cash balance Benefit = (frozen benefit at conversion) + (cash balance on future service) If existing formula cannot be frozen: Grandfather on service, with no sunset Grandfather: max [ existing formula, cash balance ]

77. 77 Non-Discrimination Issues CB Plan benefits must be non-discriminatory Cross-test to establish comparability between: Staff benefits Owner benefits How high can owner benefits be set? (Examples assume Owner at $230,000, staff at $40,000)

78. 78 Start with Defined Contribution Plan Staff: age 55 with 5% of pay (.05) (1.085) ^ [65-55] / 8 = 1.4% Owner: age 55 with 5% of pay (.05) (1.085) ^ [65-55] / 8 = 1.4% Result: $11,500 deferred Non-Discrimination Issues

79. 79 Adjust to reflect probable age differential Staff: age 35 with 5% of pay (.05) (1.085) ^ [65-35] / 8 = 7.2% Owner: age 55 with 13% of pay (.13) (1.085) ^ [65-55] / 8 = 3.7% Result: $29,900 deferred Non-Discrimination Issues

80. 80 Add Cash Balance Plan Staff: age 35 with 5% of pay: 7.2% Owner: age 55; 6.1% DC; 27% CB (.061) (1.085) ^ [65-55] / 8 = 1.7% (.27) (1.085) ^ [65-55] (10/14) / 8 = 5.5% Owner Total: 7.2% Result: $76,100 deferred No combined plans limit since SDC = 6% of pay Non-Discrimination Issues

81. 81 Reflect Taxable Earnings Test on pay net of deferrals (e.g., 401(k)) Staff: lower pay when deferrals removed Owner: pay w/o deferrals = $230,000 Staff accrual rate increases relative to Owner Can increase Owner CB IRS states that disparity cannot be imputed with taxable earnings Non-Discrimination Issues

82. 82 Reflect Taxable Earnings: Staff: age 35 with 5% of pay (.05) (1.085) ^ [65-35] / 8 / 93% = 7.8% Owner: age 55; 6.1% DC; 30% CB (.061) (1.085) ^ [65-55] / 8 = 1.7% (.30) (1.085) ^ [65-55] (10/14) / 8 = 6.1% Owner Total: 7.8% Result: $83,000 deferred Non-Discrimination Issues

83. 83 Reflect Past Earnings Testing comp is average pay, not current pay Staff: average pay < current pay Owner: average pay = current pay = $218,000 Staff accrual rate increases relative to Owner Can increase Owner CB Non-Discrimination Issues

84. 84 Reflect Past Earnings: Staff: age 35 with 5% of pay (.05) (1.085) ^ [65-35] / 8 / 93% / 90% = 8.6% Owner: age 55; 6.1% DC; 34% CB (.061) (1.085) ^ [65-55] / 8 = 1.7% (.34) (1.085) ^ [65-55] (10/14) / 8 = 6.9% Owner Total: 8.6% Result: $92,200 deferred Non-Discrimination Issues

85. 85 Check Gateway: Staff: 5% of pay in DC = 5.0% Owner: age 55; 6.1% DC; 34% CB 6.1% DC contributions 6.1% (.34) (1.055 � 1.085) ^ [65-55] * 8/13 = 15.8% Owner Total: 21.9% Result: Pass, since 5% buys 25% under Gateway Non-Discrimination Issues

86. 86 Increase Staff to 7.5% of Pay: Staff: age 35 with 7.5% of pay (.075) (1.085) ^ [65-35] / 8 / 93% / 90% = 12.9% Owner: age 55; 5.7% DC; 56% CB (.057) (1.085) ^ [65-55] / 8 = 1.6% (.56) (1.085) ^ [65-55] (10/14) / 8 = 11.3% Owner Total: 12.9% Result: $141,900 deferred Non-Discrimination Issues

87. 87 Increase Staff to 7.5% of Pay (continued) Owner DC reduced (6.1% down to 5.7%) to keep total DC below 25% of pay Eliminates combined plan limit Gateway automatically passed at 7.5% �415 limit: $158,000 at age 55 �401a26: staff would also have small CB benefit Top heavy: staff contribution = 5% of pay Non-Discrimination Issues