Lump sum distribution

[Gary]

I am reviewing a participant's distribution.

He received an early out window lump sum.

I disagree with two items of lump sum calculation.

1) interest rate

2) age used to determine lump sum factor.

1) Interest Rate - section 5.22 includes "rate shall be App Int Rate ... 417(e) for the month of December preceding the first day of the Plan Year in which the distribution occurs ..."

This is a Plan amended for GATT (i.e. 30 year Treasury) with a calendar plan year.

What 30 year rate do you interpret this plan provision to mean?

2) Age - The window amendment provided for 5 additional years for purposes of the early ret factor and for additional credited service. Say a person is age 55 and the lump sum was based on the immediate annuity due him. Would you then compute the lump sum based on his age 55 or would you use age 60 (55+5) and use an immediate annuity factor based on that age?

Look forward to other observations.

Gary

[Mike Preston]

What is the payout date? What is the plan year end?

The answer to the second question depends on the exact language of the window benefit. If the increase called for determining both the erfactor and the age of the participant based on the additional five years, then what you describe would be consistent with the plan.

[AndyH]

Plus, does the document anywhere say that the lump sum is based upon the immediate annuity? I think most plans calculate the lump sum on the deferred benefit.

If somehow there is a reference to calculating a lump sum on an immediate annuity, I would think there would be a second minimum calculation based upon the 417(e) on a deferred basis.

Third question, is this benefit at the 415 limit, causing 5% to override the applicable interest rate?