Gary

MGB, your response makes total sense to me. to clarify my understanding of the rules. i believe you must determine the minimum as 1. computing the net accd benefit at age 65. 2. then the early ret benefit must be at least the act equiv. of this normal ret age 65 benefit. and act equiv. presumably would be the erf factors or application of the plan interest and mortality. 3. if there are both erf factors in the plan and act equiv interest and mort assumptions, then on what basis would an act equiv of age 65 be the required minimum? my initial reaction is that if there are erf factors for early ret then they must be what is applied. look forward to hearing vack. thank you.

I question the calculation of an Employer early ret benefit for an individual. Facts: Gross AB = $ 1,000 ERF age 55 = 0.75 net early ret payable = 500 Arguement: EE AB determined with projection of account to age 65 = 200 Net AB = 1000 - 200 = 800 Net early ret ben = 800 * 0.75 = 600 Result: Allege that the net early ben is too low. Plan apparently computed offset based on an immediate annuity using accum cont at time of benefit payment. Any thoughts, observations? gary

harry and mgb your responses are excellent. however, can you cite regs, etc. supporting your assessment? thank you. gary

if a plan provides an early ret supplement payable until retiree reaches age 62 is that considered part of the accd ben? in other words, the participant took a lump sum and ultimately the question is should the supplement be part of the lump sum? and if it is part of accd ben then it would follow that it would be part of lump sum. gary

if you can obtain or own the defined benefit answer book or the pension answer book, perhaps that would be a good place to start getting some summarized information. these books are published by aspen publications.

a participant gets divorced and a determination of the value of the non-qualified benefit is required. It is no problem to compute the present value of the accd ben. the couple is considering to just treat the non-qual. plan as an asset. the pvab = 100,000. however, the participant is not vested for another 8 years. it seems as if the pvab s/b payable at the time the benefits vest and not now, since participant may never vest. any thoughts on this? Non-qual plan does not address division of pensions due to divorce. thanks. gary

andy, i'm with you. i interpreted mike's piror thread as you did. and now after mike's last thread it seems we are back on track and cnsistent with what we thought all along.

it seems to me that the ONLY time there is an issue of maintaining anyhting for 12 months is if the time for determining the interest rate is changed. i.e. 1.417(e)-1(d)(10)(ii) of the reg. this seems to have nothing to do with if the amendment is adopted after 12/31/99. so if the plan adopts gatt say 7/1/2002, then either the pbgc basis is no longer applicable at that time or it is maintained for 12 months. however, i see no explicit indication that it would have to be maintained for 12 months. ************ another perspective was brought to my attention. the assertion was that a plan can operate as if the GUST amendment has been adopted prior to the time the amendment is adopted (if the amendment is made prior to the end of the remedial amendment period) and it would not violate 411d6. this seems to imply that the plan can replace pbgc w/ gatt before adopting the actual amendment. i must be missing something and i am going off on a tangent i don't want to be. curious to hear any comments on this.

mike, tell us what you mean by "alternative 411d6 relief". and from reading 99-23 it seems cleat that once the emendment is adopted, you no longer must retain the pbgc basis.

w/r/t mike's comments, i think alonzo's thread addresses it best. i.e. 99-23 seems to indicate (as did alonzo's thread) that 411d6 is given after the amendment is adopted, subject to the one yr transition in some cases. the reg in 1.417 does indicate a 12/31/99 deadline to amend and be afforded 411d6 relief. and i would have hoped that the reg were updated to be cocsistent w/ 99-23, but it isn't. so i do think that this issue isn't as definitive as i would hope, but it still appears that it can only be interpreted as mentioned above. i don't know if anyone would know w/ certainty why there is an apparent discrepency between the regs and what is indicated in 99-23. gary

meggie, that is exactly my understanding. in other words, it appears that prototype plans for eg. have until the end of 2002 for a calendar yr plan to amend for gust, inclusive of gatt. so you must use pbgc and gatt until the amendment is adopted and then if the amendment is timely, you can remove pbgc without violating 411d6. gary

ok, back to the future again with this subject. say a plan has not been amended for gatt yet and they decide to amend on 6/1/2002 for gatt. w/r/t 411(d)(6) protection. 1. clearly, until the plan is amended, the pbgc rates that are currently in the plan must be used as a minimum, along with gatt. 2. after the plan is amended. 1.417(e)-1(d)(10)(i) seems to indicate that 411(d)(6) protection is only afforded if the amendment is adopted before 1/1/2000 for calendar year plans. this is how the reg seems to read as of 1/1/2002. to me this seems to mean that if the amendment is not adopted by 1/1/2000, then the pbgc rates would need to be protected permanently. like to get other thoughts on this reg and why it seems to ignore rev proc 99-23. 99-23 that seemed to imply 411(d)(6) could be afforded if the amendment was made by 12/31/00. then there are those who say that once you adopt the gatt amendment, the pbgc rates are no longer required at all. then others talk about a 1 year transition after the amendment is adopted. any new thoughts out there on this? gary

pax, i agree with what you are saying. however, my question is in the event that the plan amendment is already adopted, but the participants received no SMM or revised SPD. true there is 411(d)(6) relief, which is probably sufficient for the plan sponsor's perspective. my understanding is that the 411d6 relief allows for the payment of the lump sum without preserving the pbgc rules. but the challenge or question is, should this 411d6 apply, if the participant receives no notification of such change? it sounds like the consensus is that the relief s/ still apply. but if the plan amendment is not yet adopted, then i certainly believe that the pbgc rates must be preserved too, until the amendment is adopted.

in response to mbozek's thread. i do not know when the amendment was adopted (as of now). but the participant claims to have NEVER received anything in that regard. i.e. revised spd or smm. the participant terminated in 1993 w/ a vested right and is now getting ready to begin distribution.

so my interpretation of what mike said is 1. that the plan can convert to gatt 2. even if the spd states the pbgc rates for lump sums, it is ok to use gatt if the plan has been properly amended (this is prior to 2000). and the plan does not even have to provide a SMM. of course it seems like a good idea to provide a SMM to participants. is my interpretation correct?

your points well taken. i have seen quite a few spd's that refer to the 417(e) rates. not a majority but many none the less. and i have come across participants that have actually understood the calculation under pbgc and gatt rates. so for them, it means something which basis is used. of course, i don't know that a case could be made that any of them actually relied on the pbgc basis to make a retirement decision, but possible. true 411 protection is afforded for the change to gatt. but i am wondering if it could be different if no SMM were provided in such a situation.

say a plan changes from pbgc to gatt. and that the spd stated that lump sums were based on pbgc. my feeling is that a SMM s/b provided as a result of this change. my question is say the company does not provide a SMM. would they be liable to pay max of pbgc or gatt basis? i.e. would that be the remedy to a participant seeking damages? for eg. if a 204(h) notice is not provided, the plan must continue accruing benefits under the old provisions. gary

i'm aware of cases on this matter. however, i am questioning if in this case the interest credit rate meets 96-8 safe harbors and thus enables a plan to pay the account balance. this issue probably rests in the interpretaion of 96-8.

the plan pays the account bal as the lump sum. the doc. may provide the same. however, i am referring to regulation compliance. i.e. is it legal in this instance to pay account or s/ it be compared to pvab using the 2 different 30 yr rates? i.e. is it a whipsaw violation or is it acceptable to pay the account in this situation?

a plan provides interest credits using the nov 30 yr rates and a lump sum based on the april 30 yr rates. thus it is possible for the interest credit rate to be higher than the lump sum rate. so in theory the pvab could be higher than account balance. can a plan pay lump sum equal to account bal, citing that the interest credit rate complies w/ a 96-8 safe harbor rate and thus automatically doen't violate 411 or 417(e)? any thoughts? gary

a plan makes an amendment to the early ret factors. the age 55 factor is changed at 1/1/95 from 0.5 to 0.3. a person retires on 1/1/02. the plan makes no specific provision for protecting the old subsidy. at retirement the plan compares the 1/1/95 accd ben with a erf of 0.5 v. the 1/1/02 accd ben w/ a erf of 0.3. it turns out that the 1/1/02 accd ben w/ an erf of 0.3 is the larger one. and thus the plan says that the old benefit was preserved. the question is that w/ no specific provision as to how to handle the protected benefit is it reasonable to use their technique or s/ the benefit be the 1/1/95 accd ben reduced at 0.5 plus the accrual after 1/1/95 (1/1/02 accd ben less 1/1/95 accd ben, thus giving the same total accd ben at 1/1/02) using the 0.3 factor. clearly this would produce the largest benefit, but the plan was silent as to how to handle this. any comments? gary

i will follow up with my formula. back to my earlier issue. that being, is it acceptable for a plan to provide (as in this case) a 50% j&s with pop up that is worth less than the normal form for an unmarried participant (i.e. a life annuity). the plan actually failed to say the 50% j&s was the normal form and only listed the life annuity, which to my knowledge is in itself a violation. but still want to address the issue above, which to me is that other forms must be at least the act equiv of the standard life annuity (normal form).

it is a private plan with the 50% j&s (no pop up) as the normal form. i arrive at a revised benefit of 1,147 as compared with your 1,133. with the pop up the annuity reverts back to the annuity of 1,248 if the participant survives the spouse. not sure if they received a determination letter.

you asked for it. participant: age 57 immediate annuity: 1,248 per month spouse's age: 54 act equiv int: 7% mortality for life annuity: up84 (-1) mortality for j&s annuity: up84 (0,-3) the plan determined the 50% j&s factor (with pop up feature) to be 0.8994. so if the participant outlived the spouse the pension would revert to 1,248. normal form is life annuity. it produces a higer pvab for the life annuity then for the j&s annuity. thus the alleged flaw. see what you all discover.

let me clarify a little. under the life annuity form and the up84 (-1) table the pvab was 155,000. under the chosen j&s form and the 0,-3 tables the pvab of the benefit wasonly 152,000. this occurred due to the j&s factor based on the 0,-3 tables. so the question is s/ the j&s factor be such that it produces a benefit that has a pvab of 155,000, to be the same value of the life annuity form? although a plan can have a 50% j&s benefit that is fully subsidized (i.e. no reduction), thus being worth more than the life annuity. but i'm not sure if a j&s benefit is allowed to be less than a life annuity (the normal form for unmarried participants).