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Lump Sums: GATT vs. PBGC basis


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Can I amend a DB plan definition of Actuarial Equivalent (for purposes of lump sum calcs only) by using the LESSER of:

the old 417(3) basis, or

the new 417(e) bais, such that the latter becomes the only definition when the transition period expires?

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Guest Keith N

I assume you mean 417(e) not 417(3), but that being said, as long as you are providing a lump sum at least as large as the one produced using the "new 417(e)" rate structure you should be ok. Remember, this is only a minimum, you can always pay a larger lump if you want (assuming you don't violate 415) I would watch out for other existing minimum lump sums. For example if you plan states 5.5% but not less than the 417(e) rate, then your still stuck with the 5.5%.

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Guest Harry O

I'm not sure what you mean. Once you amend your plan to adopt the GATT rules, this becomes the minimum lump sum required by law. Thus, if the "old" PBGC based lump sum is lower than the "new" GATT lump sum, you must pay the GATT benefit. Your minimum lump sum can't be the lower of the the old PBGC based lump sum or the new GATT lump sum.

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