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amending actuarial equivalence for terminated plan


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a one person defined benefit plan terminated 10/31/2017. the plan assets will be distributed during the 2018 plan year.  the participant who has more than 10 years of participation and average compensation in excess of 265,000 is at the 415 dollar limit (215,000/12 or 17,916.67).

the plans actuarial equivalence factors are 5% pre-retirement interest and 5% post-retirement interest and the 1994 GAR mortality table.

the maximum lump sum for the participant at the current date (age 65) is limited to the lessor of the pvab calculated using the plan's actuarial equivalence factors  or the 2018 applicable mortality table at 5.5%. 

the pvab using the plan rates is 2,535,730 (17,916.67*141.5291).  the pvab using the 2018 applicable mortality at 5.5% is 2,601,698 (17,916.67*145.2110). therefore the maximum lump sum is limited to 2,535,730.

although the plan terminated 10/31/2017, can an amendment be adopted in 2018 before the cashout date in order to change the plan's actuarial equivalence factors to a more current mortality table?  the goal is to increase the maximum lump sum to 2,601,698 and not have the plan's actuarial equivalence be the limiting factors.

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Can you accomplish your goal by "un-terminating" the plan, and then "re-terminating" in 2018?

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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Yes; the plan continues to exist; terminated does not mean GONE.  It is still in existence and still has to follow the rules.  There is nothing that prohibits additional amendments as long as your termination amendment didn't say you couldn't continue amendments, and if it did, just include language in your new amendment that eliminates that language.  

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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