Calculation of Restricted/Unrestricted Amount in Underfunde DBPlan

[Guest sdolce]

I have an underfunded DB plan. An HCE wants to retire and take a lump sum. The plan does not meet any of the exeptions of 1.401(a)(4)-5(B)(3)(iv). The HCE's benefits are as follows:

annual benefit=$100,000 single life annuity

actuarial equivalent PVAB=$1,000,000

417(e) PVAB=$1,250,000

everything is within the 415 limits

I told him that he'have to post a bond or put up security based on the difference between his lump sum and his annual benefit,i.e.,$1,150,000. He went to another actuary who told him the bond/security only had to be baesd on the difference between the PVABs,only $250,000.This is a new approach. Anyone have any comments?

[Blinky the 3-eyed Fish]

You are correct. Otherwise, what is the point of having a bond that doesn't cover the difference between the distribution and the restricted amount?