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Section 415(b)(2)(C) adjustment for retirement age <62


Guest Michael Spaid

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Guest Michael Spaid

Rev.Rul. 98-1 Q&A7, Step 2, if ret age<62: in general sections 415(B)(2)(E)(i) & (v) require the $ limit is the min of that calculated using plan interest & mortality (or tabular factors) and that calculated using 5% and applicable mortality. 415(B)(2)(E)(i) says to use the greater of plan rate and 5%. Where does 415 mention the calculation usiing plan factors? If the plan interest rate is 7%, it looks to me that this equivalence should be calculated using 7% and the applicable mortality table with not calculations using plan factors. Can anyone clear this up?

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Michael Spaid

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Guest Harry O

The notion is that your plan can't use a better set of factors for section 415 limited employees than it uses for non-415 limited employees. You calculate the actuarially equivalent benefit using the normal plan factors. You then compare it to the benefit derived using the 415 mandated factors. You pay the smaller benefit. Bottom line: employees can't get a "better" benefit simply because the 415(B) mandated interest/mortality assumptions produce a higher number than the plan's normal interest/mortality assumptions. I think this makes sense . . .

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