Lump sum calc for J&50 Normal Form

[Guest Keith N]

I am looking at a plan that uses a J&50%S as the Normal Form. I am not the signing actuary. The document states that "For purposes of determining the joint and survivor benefit, the Normal Form of Benefit will be caclulated assuming that the Participant is married to a spouse the same age as the Participant. However the form of distribution of such benefit shall be determined pursuant to the provisions of Article 7." Article 7 describes the optional forms of benefit, including lump sums, but does not contain the actuarial equivelances.

My question is, shouldn't the lump sum include the value of the spousal death benefit? If I remember my EA-1 exam, to determine the value of the deferred J&S, you need to value each component seperately. Which would mean value a deferred life annuity to him, 50% defferred life annuity to her and subtract 50% joint deferred annuity if they are both alive at RA.

I don't think its as easy as determining the J&50 factor at NRD (assuming both same age) and hitting it w/ a Dra/Daa (based on the participant) to get the lump sum. It's much more complex, isn't it?

Does anyone else work with plans using J&S as the Normal Form?

[Blinky the 3-eyed Fish]

I think you are making it more complex than it is.

The lump sum value of the joint and 50% survivor benefit at normal retirment age would simply be the benefit times the purchase rate (based on actuarial equivalents). Therefore, to get the lump sum value at attained age you would simply discount the lump sum at normal retirement age backwards.

Of course whether or not there is pre-retirement mortality is based on the plan document.

Keep in mind the 417(e) minimum lump sum requirements apply.

[David]

Just answering the part of your question regarding the value of a deferred J&S, if there is pre-ret mortality, taking each piece seperately would work. Remember to discount the .5 a ra:ra with joint-life D's or do (lr/lx)(lr/lx)(v^r-x).