Yearly annuity to lump sum conversion multipliers for any interest rat

[Guest cff]

Can anyone tell me what the formula is, (if there is one,I'm new to this )for YEARLY annuity to lump sum conversion factors for any interest rate, in order to obtain the individual monthly (1/12ths)multipliers. (male /female& blended.) My employer has sent me several of these tables on occasion for a few various interest rates...I would like to be able to produce these "spread sheets" on my own if possible. ?

[Gary]

For an immediate annuity the formula is:

N(12)x/Dx, where x is current age. Of course you would need to know the specific mortality and interest assumption to compute this. Which is expressed in first principles as:

1+ vpx + v^2(2px) + v^3(3px) + ...

And for a deferred annuity to age 65 the formula is:

N65/Dx, where x is the current age. In first principles it is:

say x = 50,

v^15(15p50) + v^16(16p50) + ...

Of course one needs to know actuarial mathematics to follow this.

[FAPInJax]

Well, the general formula for a lump sum is as follows:

(Nx / Dx) * Annual benefit

The accepted approximation (used by most systems) for monthly lump sums is as follows:

((Nx / Dx) - 11/24) * Monthly benefit

Is this what you are looking for????

[Guest Len Diorio]

Question:

A plan provides an alternative lump sum based on the following language:

"The present value of the Participant's prior plan monthly pension benefit determined under the IRC Section 417 (e) as of the first day of the month (the "stability period") following the month in which employment ended. For purposes of this calculation the applicable interest rate shall be the yield on 30 year Treasury Constant Maturities as published..........for the third calendar month ("the lookback month") preceding the stability period. The applicable mortality table shall be that specified in Rev.

Rul 95-6....."

Employment ended March 2, 2001 for a male aged 55 years and eleven months. The age 65 single life annuity would be $4669.10.

Assume rate for January 2001 is 5.5 %

Can anyone help me calculate the lump sum?

'

[Gary]

lump sum of deferred annuity is

N65 / D55 11/12, using 5.5% and app mort table

[david rigby]

Well........

I think the lump sum will depend on the date of payment. The amount of the benefit is determined at the date of termination of employment.

Also, the reference to "prior plan monthly pension benefit" leaves me skeptical about whether the entire accrued benefit is subject to a lump sum optional form, or perhaps just part of it.

[Guest Len Diorio]

pax,

The date of payment is immediate, i.e on "commencement" of benefits on 4/1/01. The $4669.10 is the entire accrued age 65 benefit under a frozen transition benefit. Added to the lump sum would be additional cash balance credits since the plan was converted--I didn't want to confuse the facts any more than I had to. I am only trying to determine the present value of the transition benefit portion of the lump sum.

[Gary]

If that age 65 amount is the frozen benefit used for the opening bal to a cash bal plan, then it probably is the pvab of the age 65 ben, computed at time open bal is determined. SO if age at time open bal is calculated is say 55, then

PVAB = age 65 ben * (N(12)65 / D55), under open bal assumptions.